EXECUTION COPY

 

EXHIBIT 10.5

 

INDENTURE AND SERVICING AGREEMENT

 

 

Dated as of March 31, 2003

 

by and among

 

SIERRA 2003-1 RECEIVABLES FUNDING COMPANY, LLC,

 

as Issuer

 

and

 

FAIRFIELD ACCEPTANCE CORPORATION - NEVADA,

 

as Servicer

 

and

 

WACHOVIA BANK, NATIONAL ASSOCIATION,

 

as Trustee

 

and

 

WACHOVIA BANK, NATIONAL ASSOCIATION,

 

as Collateral Agent

 

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ARTICLE I

DEFINITIONS

 

 

Section 1.1

Definitions

 

 

Section 1.2

Other Definitional Provisions

 

 

Section 1.3

Intent and Interpretation of Documents

 

 

ARTICLE II

THE NOTES

 

 

Section 2.1

Designation

 

 

Section 2.2

Form Generally

 

 

Section 2.3

Interest and Principal Payments

 

 

Section 2.4

Determination of LIBOR

 

 

Section 2.5

Execution, Authentication and Delivery

 

 

Section 2.6

Registration; Registration of Transfer and Exchange; Transfer Restrictions

 

 

Section 2.7

Mutilated, Destroyed, Lost or Stolen Notes

 

 

Section 2.8

Persons Deemed Owner

 

 

Section 2.9

Payment of Principal and Interest; Defaulted Interest

 

 

Section 2.10

Cancellation

 

 

Section 2.11

Global Notes

 

 

Section 2.13

Special Transfer Provisions

 

 

Section 2.14

Notices to Clearing Agency

 

 

Section 2.15

Definitive Notes

 

 

Section 2.16

Payments on the Notes

 

 

Section 2.17

Limited Recourse to the Issuer

 

 

Section 2.18

Clean-Up Call

 

 

Section 2.19

Authentication Agent

 

 

Section 2.20

Appointment of Paying Agent

 

 

Section 2.21

Confidentiality

 

 

Section 2.22

144A Information

 

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ARTICLE III

PAYMENTS, SECURITY AND ALLOCATIONS

 

 

Section 3.1

Priority of Payments, Sequential Order

 

 

Section 3.2

Information Provided to Trustee

 

 

Section 3.3

Payments

 

 

Section 3.4

Collection Account

 

 

Section 3.5

Reserve Account

 

 

Section 3.6

Interest Rate Swap

 

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE ISSUER

 

 

Section 4.1

Representations and Warranties Regarding the Issuer

 

 

Section 4.2

Representations and Warranties Regarding the Loan Files

 

 

Section 4.3

Rights of Obligors and Release of Loan Files

 

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE ISSUER; ASSIGNMENT OF
REPRESENTATIONS AND WARRANTIES

 

 

Section 5.1

Representations and Warranties of the Issuer

 

 

Section 5.2

Eligible Loans

 

 

Section 5.3

Assignment of Representations and Warranties

 

 

Section 5.4

Release of Defective Loans

 

 

ARTICLE VI

ADDITIONAL COVENANTS OF ISSUER

 

 

Section 6.1

Affirmative Covenants

 

 

Section 6.2

Negative Covenants of the Issuer

 

 

ARTICLE VII

SERVICING OF PLEDGED LOANS

 

 

Section 7.1

Responsibility for Loan Administration

 

 

Section 7.2

Standard of Care

 

 

Section 7.3

Records

 

 

Section 7.4

Loan Schedule

 

 

Section 7.5

Enforcement

 

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Section 7.6

Trustee and Collateral Agent to Cooperate

 

 

Section 7.7

Other Matters Relating to the Servicer

 

 

Section 7.8

Servicing Compensation

 

 

Section 7.9

Costs and Expenses

 

 

Section 7.10

Representations and Warranties of the Servicer

 

 

Section 7.11

Additional Covenants of the Servicer

 

 

Section 7.12

Servicer not to Resign

 

 

Section 7.13

Merger or Consolidation of, or Assumption of the Obligations of Servicer

 

 

Section 7.14

Examination of Records

 

 

Section 7.15

Subservicing Agreements

 

 

Section 7.16.

Servicer Advances

 

ARTICLE VIII

REPORTS

 

 

Section 8.1

Monthly Report to Trustee

 

 

Section 8.2

Monthly Servicing Report

 

 

Section 8.3

Other Data

 

 

Section 8.4

Annual Servicer’s Certificate

 

 

Section 8.5

Notices to FAC

 

 

Section 8.6

Tax Reporting

 

 

ARTICLE IX

LOCKBOX ACCOUNTS

 

 

Section 9.1

Lockbox Accounts

 

 

ARTICLE X

INDEMNITIES

 

 

Section 10.1

Liabilities to Obligors

 

 

Section 10.2

Tax Indemnification

 

 

Section 10.3

Servicer’s Indemnities

 

 

Section 10.4

Operation of Indemnities

 

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ARTICLE XI

EVENTS OF DEFAULT

 

 

Section 11.1

Events of Default

 

 

Section 11.2

Acceleration of Maturity; Rescission and Annulment

 

 

Section 11.3

Collection of Indebtedness and Suits for Enforcement by Trustee

 

 

Section 11.4

Trustee May File Proofs of Claim

 

 

Section 11.5

Remedies

 

 

Section 11.6

Optional Preservation of Collateral

 

 

Section 11.7

Application of Monies Collected During Event of Default

 

 

Section 11.8

Limitation on Suits by Individual Noteholders

 

 

Section 11.9

Unconditional Rights of Noteholders to Receive Principal and Interest

 

 

Section 11.10

Restoration of Rights and Remedies

 

 

Section 11.11

Waiver of Event of Default

 

 

Section 11.12

Waiver of Stay or Extension Laws

 

 

Section 11.13

Sale of Collateral

 

 

Section 11.14

Action on Notes

 

 

Section 11.15.

Control by Noteholders

 

 

ARTICLE XII

SERVICER DEFAULTS

 

 

Section 12.1

Servicer Defaults

 

 

Section 12.2

Appointment of Successor

 

 

Section 12.3

Notification to Noteholders

 

 

Section 12.4

Waiver of Past Defaults

 

 

Section 12.5

Termination of Servicer’s Authority.

 

 

Section 12.6

Matters Related to Successor Servicer

 

 

ARTICLE XIII

THE TRUSTEE; THE COLLATERAL AGENT; THE CUSTODIAN

 

 

Section 13.1

Duties of Trustee

 

 

Section 13.2

Certain Matters Affecting the Trustee

 

 

Section 13.3

Trustee Not Liable for Recitals in Notes or Use of Proceeds of Notes

 

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Section 13.4

Trustee May Own Notes; Trustee in its Individual Capacity

 

 

Section 13.5

Trustee’s Fees and Expenses; Indemnification

 

 

Section 13.6

Eligibility Requirements for Trustee

 

 

Section 13.7

Resignation or Removal of Trustee

 

 

Section 13.8

Successor Trustee

 

 

Section 13.9

Merger or Consolidation of Trustee

 

 

Section 13.10

Appointment of Co-Trustee or Separate Trustee

 

 

Section 13.11

Trustee May Enforce Claims Without Possession of Notes

 

 

Section 13.12

Suits for Enforcement

 

 

Section 13.13

Rights of Noteholders to Direct the Trustee

 

 

Section 13.14

Representations and Warranties of the Trustee

 

 

Section 13.15

Maintenance of Office or Agency

 

 

Section 13.16

No Assessment

 

 

Section 13.17

UCC Filings and Title Certificates

 

 

Section 13.18

Replacement of the Custodian

 

 

ARTICLE XIV

TERMINATION

 

 

Section 14.1

Termination of Agreement

 

 

Section 14.2

Final Payment

 

 

Section 14.3

[Reserved]

 

 

Section 14.4

Release of Collateral

 

 

Section 14.5

Release of Defaulted Loans

 

 

Section 14.6

Release of Trendwest Timeshare Upgrades

 

 

Section 14.7

Release Upon Payment in Full

 

 

ARTICLE XV

MISCELLANEOUS PROVISIONS

 

 

Section 15.1

Amendment

 

 

Section 15.2

Reserved

 

 

Section 15.4

Governing Law

 

 

Section 15.5

Notices

 

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Section 15.6

Severability of Provisions

 

 

Section 15.7

Assignment

 

 

Section 15.8

Notes Non-assessable and Fully Paid

 

 

Section 15.9

Further Assurances

 

 

Section 15.10

No Waiver; Cumulative Remedies

 

 

Section 15.11

Counterparts

 

 

Section 15.12

Third-Party Beneficiaries

 

 

Section 15.13

Actions by the Noteholders

 

 

Section 15.14

Merger and Integration

 

 

Section 15.15

No Bankruptcy Petition

 

 

Section 15.16

Headings

 

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EXHIBITS

 

Exhibit A

Forms of Class A Notes

 

 

Exhibit B

Forms of Class B Notes

 

 

Exhibit C

Forms of Class C Notes

 

 

Exhibit D

Forms of Class D Notes

 

 

Exhibit E

Payment and Release Certificates

 

 

Exhibit F

Regulation S Certificate

 

 

Exhibit G

Form of Monthly Servicing Report

 

 

Exhibit H

Certificate of Servicing Officer

 

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SCHEDULES

 

1.               Schedule of Trustee’s fees.

 

2.               Loan Schedule.

 

3.               List of Lockbox Banks.

 

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INDENTURE AND SERVICING AGREEMENT

 

THIS INDENTURE AND SERVICING AGREEMENT dated as of March 31, 2003 is by and
among SIERRA 2003-1 RECEIVABLES FUNDING COMPANY, LLC, a limited liability
company organized under the laws of the State of Delaware as issuer, FAIRFIELD
ACCEPTANCE CORPORATION-NEVADA, a Delaware corporation, as Servicer, WACHOVIA
BANK, NATIONAL ASSOCIATION, a national banking association, as trustee and as
collateral agent.  This Agreement may be supplemented and amended from time to
time in accordance with Article XV.

 

RECITALS

 

The Issuer has duly authorized the execution and delivery of this Agreement to
provide for the issuance of its loan-backed notes as provided herein.

 

All covenants and agreements made by the Issuer herein are for the benefit and
security of the Noteholders and the Swap Counterparty.

 

The Issuer is entering into this Agreement, and the Trustee is accepting the
trusts created hereby, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged.  All things necessary have been
done to make the Notes, when executed by the Issuer and authenticated and
delivered by the Trustee hereunder, the valid obligations of the Issuer and to
make this Agreement a valid agreement of the Issuer, enforceable in accordance
with its terms.

 

NOW THEREFORE, in consideration of the mutual agreements herein contained, each
party agrees as follows for the benefit of the other parties and for the benefit
of the Noteholders and the Swap Counterparty.

 

GRANTING CLAUSES

 

The Issuer hereby Grants to the Collateral Agent, for the benefit of the Trustee
for the benefit of the Noteholders and the Swap Counterparty, all of the
Issuer’s right, title and interest, whether now owned or hereafter acquired, in,
to and under the following:

 

(a)                                  all Pledged Loans, together with all other
Pledged Assets;

 

(b)                                 the Collection Account and all money,
investment property, instruments and other property credited to, carried in or
deposited in the Collection Account;

 

(c)                                  all money, investment property, instruments
and other property credited to, carried in or deposited in a Lockbox Account or
any other bank or similar account into which Collections are deposited, to the
extent such

 

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money, investment property, instruments and other property constitutes
Collections;

 

(d)                                 the Reserve Account and all money,
investment property, instruments and other property credited to, carried in or
deposited in the Reserve Account;

 

(e)                                  the Interest Rate Swap and all rights and
interests therein and thereto;

 

(f)                                    all rights, remedies, powers, privileges
and claims of the Issuer under or with respect to the Series 2003-1 Term
Purchase Agreement, the Sale and Assignment Agreement and the Letters of
Understanding, including, without limitation, all rights to enforce payment
obligations of the Issuer, the Depositor, Sierra 2002 and each Seller and all
rights to collect all monies due and to become due to the Issuer from the
Depositor, Sierra 2002, or any Seller under or in connection with the Series
2003-1 Term Purchase Agreement, the Sale and Assignment Agreement or the Letters
of Understanding (including without limitation all interest and finance charges
for late payments and proceeds of any liquidation or sale of Pledged Loans or
resale of Timeshare Properties or Vacation Credits and all other Collections on
the Pledged Loans) and all other rights of the Issuer to enforce the Series
2003-1 Term Purchase Agreement, the Sale and Assignment Agreement and the
Letters of Understanding;

 

(g)                                 all Assigned Rights of the Issuer with
respect to the Pledged Loans and the Pledged Assets including, without
limitation, all rights to enforce payment obligations of the Issuer, the
Depositor, Sierra 2002, and each Seller and all rights to collect all monies due
and to become due to the Issuer from the Depositor, Sierra 2002, or any Seller
under or in connection with the Pledged Loans (including without limitation all
interest and finance charges for late payments accrued thereon and proceeds of
any liquidation or sale of Pledged Loans or resale of Timeshare Properties or
Vacation Credits and all other Collections on the Pledged Loans);

 

(h)                                 all certificates and instruments, if any,
from time to time representing or evidencing any of the foregoing property
described in clauses (a) through (g) above;

 

(i)                                     all present and future claims, demands,
causes of and choses in action in respect of any of the foregoing and all
interest, principal, payments and distributions of any nature or type on any of
the foregoing;

 

(j)                                     all accounts, chattel paper, deposit
accounts, documents, general intangibles, goods, instruments, investment
property, letter-of-credit rights, letters of credit, money, and oil, gas and
other minerals, consisting of, arising from, or relating to, any of the
foregoing;

 

(k)                                  all proceeds of the foregoing property
described in clauses (a) through (j) above, any security therefor, and all
interest, dividends, cash, instruments,

 

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financial assets and other investment property and other property from time to
time received, receivable or otherwise distributed in respect of, or in exchange
for or on account of the sale, condemnation or other disposition of, any or all
of the then existing Collateral, and including all payments under insurance
policies (whether or not a Seller or an Originator, the Depositor, Sierra 2002,
the Issuer, the Collateral Agent or the Trustee is the loss payee thereof) or
any indemnity, warranty or guaranty payable by reason of loss or damage to or
otherwise with respect to any of the Collateral; and

 

(l)                                     all proceeds of the foregoing.

 

The property described in the preceding sentence is collectively referred to as
the “Collateral.”  The Grant of the Collateral to the Collateral Agent is for
the benefit of the Trustee to secure the Notes equally and ratably without
prejudice, priority or distinction among any Notes by reason of difference in
time of issuance or otherwise, except as otherwise expressly provided in the
Agreement and to secure (i) the payment of all amounts due on the Notes in
accordance with their respective terms, (ii) the payment of all other sums
payable by the Issuer under this Agreement or the Notes and (iii) compliance by
the Issuer with the provisions of this Agreement and the Notes.  This Agreement
is a security agreement within the meaning of the UCC.

 

The Collateral Agent and the Trustee acknowledge the Grant of the Collateral,
and the Collateral Agent accepts the Collateral in trust hereunder in accordance
with the provisions hereof and agrees to perform the duties herein to the end
that the interests of the Noteholders may be adequately and effectively
protected.

 

The Trustee and the Collateral Agent each acknowledges that it has entered into
the Collateral Agency Agreement pursuant to which the Collateral Agent acts as
agent for the benefit of the Trustee for the purpose of maintaining a security
interest in the Collateral.  The Trustee and the Noteholders are bound by the
terms of the Collateral Agency Agreement by the Trustee’s execution thereof on
their behalf.

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1             Definitions

 

Whenever used in this Agreement, the following words and phrases shall have the
following meanings:

 

“Account” shall mean the Collection Account or the Reserve Account and
“Accounts” means the Collection Account and the Reserve Account.

 

“Accrual Period” shall mean, with respect to the Notes for any Payment Date, the
period beginning on and including the immediately preceding Payment Date and
ending on and excluding the current Payment Date, except that the first Accrual
Period will begin on and include the Closing Date and end on and exclude the
April, 2003 Payment Date.

 

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“Accrued Interest” shall mean with, respect to each Class, interest accrued
during the related Accrual Period at the applicable Note Interest Rate on the
Adjusted Principal Amount of such Class of Notes as of the immediately preceding
Payment Date (or, in the case of the initial Payment Date, the Adjusted
Principal Amount as of the Closing Date).

 

“Adjusted Principal Amount” shall mean, on any Payment Date and for any Class of
Notes, the Adjusted Principal Amount of such Class as of the prior Payment Date
or, with respect to the first Payment Date, as of the Closing Date, minus the
sum of (i) the amount of all principal distributions actually made to such Class
on such Payment Date and (ii) the Monthly Adjustment Amount of such Class on
such Payment Date.  In no event will the Adjusted Principal Amount of any Class
exceed the Principal Amount of such Class or be less than zero.  On the Closing
Date, the Adjusted Principal Amount of any Class is the Initial Principal Amount
of such Class.

 

“Administrative Services Agreement” shall mean either the Depositor
Administrative Services Agreement dated as of August 29, 2002 by and between the
Depositor and the Administrator or the Issuer Administrative Services Agreement
dated as of March 31, 2003 by and between the Issuer and the Administrator, as
the same may be amended, supplemented or otherwise modified from time to time in
accordance with the terms of the respective agreements.

 

“Administrator” shall mean, with respect to the Administrative Services
Agreements, FAC, as administrator with respect to the Depositor and the Issuer,
respectively, or any other entity which becomes the Administrator under the
terms of the applicable Administrative Services Agreement.

 

“Affiliate” shall mean, when used with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person, and “control” means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and “controlling” and “controlled” shall
have meanings correlative to the foregoing.

 

“Aggregate Default Rate” shall mean as of any Determination Date, a percentage
obtained by dividing (i) the aggregate amount of all Pledged Loans that have
become Defaulted Loans for the period commencing with the Cut-Off Date and
ending at the end of the prior Due Period by (ii) the Aggregate Loan Balance as
of the Cut-Off Date.

 

“Aggregate Loan Balance” shall mean, as of any time, the sum of the Loan
Balances for the Pledged Loans excluding Defaulted Loans.

 

“Aggregate Monthly Adjustment Amount” shall mean, on any Payment Date, the
amount by which the aggregate Adjusted Principal Amount of all Classes as of the
prior Payment Date (or in the case of the initial Payment Date, as of the
Closing Date), after giving effect to any principal distributions made on all
Classes on such Payment Date, exceeds the Aggregate Loan Balance as of the last
day of the related Due Period.

 

“Aggregate Principal Amount” shall mean the sum of the Principal Amounts for all
Classes of Notes.

 

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“Agreement” shall mean this Indenture and Servicing Agreement as the same may be
amended, supplemented, restated or otherwise modified from time to time.

 

“Assigned Rights” shall mean all rights of the Depositor with respect to the
Series 2002-1 Loans and related Transferred Assets transferred to the Depositor
by Sierra 2002 under the Sale and Assignment Agreement and all rights of the
Depositor under the Purchase Agreement with respect to Series 2002-1 Loans which
are Pledged Loans and the related Transferred Assets which are Pledged Assets,
including, but not limited to, the right to sell Defective Loans to the Sellers
or to cause the Sellers to purchase Defective Loans from the Issuer.

 

“Authentication Agent” shall mean a Person designated by the Trustee to
authenticate Notes on behalf of the Trustee.

 

“Authorized Officer” shall mean, with respect to the Issuer, any officer who is
authorized to act for the Issuer in matters relating to the Issuer, and with
respect to the Trustee or any other bank or trust company acting as trustee of
an express trust or as custodian or authenticating agent, a Responsible
Officer.  Each party may receive and accept a certification of the authority of
any other party as conclusive evidence of the authority of any person to act,
and such certification may be considered as in full force and effect until
receipt by such other party of written notice to the contrary.

 

“Available Funds” for any Payment Date shall mean (i) all payments (including
prepayments) of principal, interest and fees collected from or on behalf of the
Obligors during the related Due Period on the Pledged Loans, including amounts
paid to the Issuer for release of the Pledged Loans which are deemed to be
prepaid; (ii) any Servicer Advances made on or prior to the Payment Date with
respect to payments due from the Obligors on the Pledged Loans during the
related Due Period; (iii) all amounts received as the Release Price paid to the
Trustee for the release from the Lien of this Agreement securing the Notes of
any Pledged Loan that has become a Defaulted Loan; (iv) all Net Liquidation
Proceeds from the disposition of Pledged Assets securing Defaulted Loans
received during the related Due Period; (v) the amounts received by the Trustee
as the Release Price in connection with the release of a Defective Loan and (vi)
all amounts received by the Issuer under the Interest Rate Swap.

 

“Bankruptcy Code” shall mean the United States Bankruptcy Code, Title 11 of the
United States Code, as amended.

 

“Benefit Plan” shall mean any employee benefit plan as defined in Section 3(3)
of ERISA in respect of which the Issuer, any eligible Originator, any eligible
Seller or any ERISA Affiliate of the Issuer is, or at any time during the
immediately preceding six years was, an “employer” as defined in Section 3(5) of
ERISA.

 

“Business Day” shall mean any day other than (i) a Saturday or Sunday or (ii) a
day on which banking institutions in New York, New York, Las Vegas, Nevada,
Chicago, Illinois, Charlotte, North Carolina, or the city in which the Corporate
Trust Office of the Trustee is located, are authorized or obligated by law or
executive order to be closed.

 

“Calculation Date” shall mean the close of business on the last Business Day of
the related Due Period.

 

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“Cash Accumulation Event” shall mean the occurrence of any of the following
events:

 

(i)            on any Determination Date, the average of the Delinquency Ratios
for the three immediately preceding Due Periods is greater than 5.0%;

 

(ii)           on any Determination Date, the average of the Default Percentages
for the four immediately preceding Due Periods is greater than the applicable
Default Percentage Threshold; or

 

(iii)          on any Determination Date, the Aggregate Default Rate is greater
than 23%;

 

a Cash Accumulation Event described in (i) above shall continue until the
average of the Delinquency Ratios for the three immediately preceding Due
Periods is equal to or less than 5.0% for three consecutive Determination
Dates.  A Cash Accumulation Event described in clause (ii) above will continue
until the average of the Default Percentages for the four immediately preceding
Due Periods is equal to or less than the applicable Default Percentage Threshold
for three consecutive Determination Dates.

 

“Cendant” shall mean Cendant Corporation or any successor thereof.

 

“Certificate of Authentication” shall have the meaning set forth in Section 2.2.

 

“Class” shall mean the Class A Notes, the Class B Notes, the Class C Notes or
the Class D Notes.

 

“Class A Monthly Adjustment Amount” shall mean, on any Payment Date, the lesser
of (i) the Adjusted Principal Amount of the Class A Notes as of the prior
Payment Date after giving effect to any principal distributions made on such
Class on such Payment Date, and (ii) the amount by which the Aggregate Monthly
Adjustment Amount exceeds the aggregate Adjusted Principal Amount of the Class
B, Class C and Class D Notes as of the prior Payment Date (or, in the case of
the first Payment Date, as of the Closing Date), after giving effect to all
principal distributions made to such Class B, Class C and Class D Notes on such
Payment Date.

 

“Class A Note” shall mean any of the $180,200,000 3.09% Loan-Backed Notes,
Series 2003-1, Class A, due 2014.

 

“Class B Monthly Adjustment Amount” shall mean, on any Payment Date, the lesser
of (i) the Adjusted Principal Amount of the Class B Notes as of the prior
Payment Date after giving effect to any principal distributions made on such
Class on such Payment Date, and (ii) the amount by which the Aggregate Monthly
Adjustment Amount exceeds the aggregate Adjusted Principal Amount of the Class C
and Class D Notes as of the prior Payment Date (or, in the case of the first
Payment Date, as of the Closing Date), after giving effect to all principal
distributions made to such Class C and Class D Notes on such Payment Date.

 

“Class B Note” shall mean any of the $27,200,000 3.48% Loan-Backed Notes, Series
2003-1, Class B, due 2014.

 

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“Class C Monthly Adjustment Amount” shall mean, on any Payment Date, the lesser
of (i) the Adjusted Principal Amount of the Class C Notes as of the prior
Payment Date after giving effect to any principal distributions made on such
Class on such Payment Date, and (ii) the amount by which the Aggregate Monthly
Adjustment Amount exceeds the aggregate Adjusted Principal Amount of the Class D
Notes as of the prior Payment Date (or, in the case of the first Payment Date,
as of the Closing Date), after giving effect to all principal distributions made
to the Class D Notes on such Payment Date.

 

“Class C Note” shall mean any of the $37,400,000 4.56% Loan-Backed Notes, Series
2003-1, Class C, due 2014.

 

“Class D Monthly Adjustment Amount” shall mean, on any Payment Date, the lesser
of (i) the Adjusted Principal Amount of the Class D Notes as of the prior
Payment Date after giving effect to any principal distributions made on such
Class on such Payment Date, and (ii) the Aggregate Monthly Adjustment Amount for
such Payment Date (or, in the case of the first Payment Date, the Closing Date).

 

“Class D Note” shall mean any of the $57,800,000 Floating Rate Loan-Backed
Notes, Series 2003-1, Class D, due 2014.

 

“Class Percentages” shall mean for each Class, at any time, the percentage
expressed as a fraction with the numerator being the Principal Amount of such
Class and the denominator being the Aggregate Principal Amount of all Classes.

 

“Clearing Agency” shall mean an organization registered as a “clearing agency”
pursuant to Section 17A of the Exchange Act.

 

“Clearing Agency Custodian” shall mean the entity maintaining possession of the
Global Notes for the Clearing Agency.

 

“Clearing Agency Participant” means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.

 

“Clearstream” shall mean Clearstream Banking, société anonyme, a professional
depository incorporated under the laws of Luxembourg, and its successors.

 

“Closing Date” shall mean March 31, 2003.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time.

 

“Collateral” shall have the meaning specified in the Granting Clause of this
Agreement.

 

“Collateral Agency Agreement” shall mean the Collateral Agency Agreement dated
as of January 15, 1998 by and between Fleet National Bank as predecessor
Collateral Agent, Fleet Securities, Inc. as deal agent and the secured parties
named therein, as amended by the First Amendment to Collateral Agency Agreement
dated as of July 31, 1998, as further amended by the Second Amendment to
Collateral Agency Agreement dated as of July 25, 2000, as further

 

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amended by the Third Amendment to Collateral Agency Agreement dated as of
July 1, 2001, as further amended by the Fourth Amendment to Collateral Agency
Agreement dated as of August 29, 2002, and as further amended by the Fifth
Amendment to the Collateral Agency Agreement dated as of March 31, 2003, by and
among the Collateral Agent, the Trustee and other secured parties, as such
Collateral Agency Agreement may be amended, supplemented or otherwise modified
from time to time in accordance therewith.

 

“Collateral Agent” shall mean Wachovia Bank, National Association in its
capacity as collateral agent under this Agreement and the Collateral Agency
Agreement or any successor collateral agent appointed under the Collateral
Agency Agreement.

 

“Collection Account” shall mean the account described in Section 3.4 hereof and
established for the deposit of Collections and other amounts as provided in this
Agreement.

 

“Collections,” shall mean, with respect to any Pledged Loan, all funds, cash
collections and other cash proceeds of such Pledged Loan paid by or on behalf of
the Obligor after the Cut-Off Date, including without limitation (i) all
Scheduled Payments or recoveries made in the form of money, checks and like
items to, or a wire transfer or an automated clearinghouse transfer received in,
any of the Lockbox Accounts or received by the Issuer or the Servicer (or the
Subservicer) in respect of such Pledged Loan, (ii) all amounts received by the
Issuer, the Servicer (or the Subservicer) or the Trustee in respect of any
Insurance Proceeds relating to such Pledged Loan or the related Timeshare
Property and (iii) all amounts received by the Issuer, the Servicer (or the
Subservicer) or the Trustee in respect of any proceeds in respect of a
condemnation of property in any Resort, which proceeds relate to such Pledged
Loan or the related Timeshare Property.

 

“Corporate Trust Office” shall mean the office of the Trustee at which at any
particular time its corporate trust business is administered, which office at
the date of the execution of this Agreement is located at 401 South Tryon
Street, NC-1179, 12th Floor, Charlotte, NC 28288-1179, Attention:  Structured
Finance Trust Services, Sierra 2003-1 Receivables Funding Company, LLC.

 

“Credit Card Account” shall mean an arrangement whereby an Obligor makes
Scheduled Payments under a Loan via pre-authorized debit to a Major Credit Card.

 

“Credit Standards and Collection Policies” shall mean the Credit Standards and
Collection Policies of FAC and FRI or Trendwest, as attached to the applicable
Purchase Agreement and as amended from time to time in accordance with the
applicable Purchase Agreement and the restrictions of this Agreement.

 

“Custodial Agreement” shall mean the First Amended and Restated Custodial
Agreement dated as of March 31, 2003 by and among the Issuer, Sierra 2002, the
Depositor, FAC, EFI, Trendwest, Wachovia Bank, National Association, as
Custodian, the Trustee and the Collateral Agent and the Sierra 2002 Trustee, as
the same may be further amended, supplemented or otherwise modified from time to
time hereafter in accordance with the terms hereof.

 

“Custodian” shall mean, at any time, the custodian under the Custodial
Agreement.

 

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“Customary Practices” shall, with respect to the servicing and administration of
any Pledged Loans, have the meaning assigned to that term in the Purchase
Agreement under which such Loan was transferred from the Seller to the
Depositor.

 

“Cut-Off Date” shall mean, with respect to the Pledged Loans, the close of
business on February 28, 2003.

 

“Debt” of any Person shall mean (a) indebtedness of such Person for borrowed
money, (b) obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, (c) obligations of such Person to pay the deferred
purchase price of property or services, (d) obligations of such Person as lessee
under leases which have been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases, (e) obligations secured by
any lien, security interest or other charge upon property or assets owned by
such Person, even though such Person has not assumed or become liable for the
payment of such obligations, (f) obligations of such Person under direct or
indirect guaranties in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds referred to in
clauses (a) through (e) above, and (g) liabilities of such Person in respect of
unfunded vested benefits under Benefit Plans covered by Title IV of ERISA.

 

“Debtor Relief Laws” shall mean the Bankruptcy Code and all other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments, or similar
debtor relief laws from time to time in effect affecting the rights of creditors
generally.

 

“Defaulted Loan” shall mean any Pledged Loan (a) with any portion of a Scheduled
Payment delinquent more than 119 days, (b) with respect to which the Servicer
shall have determined in good faith that the Obligor will not resume making
Scheduled Payments, (c) for which the related Obligor shall have become the
subject of a proceeding under a Debtor Relief Law or (d) for which cancellation
or foreclosure actions have been commenced.

 

“Default Percentage” shall mean, for any Due Period, a fraction the numerator of
which is the outstanding Aggregate Loan Balance (immediately before the date on
which the Loan became a Defaulted Loan) of all Pledged Loans that became
Defaulted Loans during the Due Period and the denominator of which is the
Aggregate Loan Balance as of the last day of the Due Period.

 

“Default Percentage Threshold” shall mean (i) for any Determination Date
occurring on or before March 2004, 0.85%, (ii) for any Determination Date
occurring after March 2004 and on or before March 2005, 1.00% and (iii) after
the Determination Date occurring in March 2005, 1.25%.

 

“Defective Loan” shall mean any Pledged Loan with any uncured material breach of
a representation or warranty of the Issuer set forth in Section 5.2 of this
Agreement.

 

“Definitive Notes” shall have the meaning set forth in Section 2.11.

 

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“Delinquency Ratio” shall mean, for any Due Period, a fraction the numerator of
which is the sum of the outstanding Loan Balances of all Pledged Loans which are
Delinquent Loans at the end of such Due Period and the denominator of which is
the Aggregate Loan Balance as of the last day of such Due Period.

 

“Delinquent Loan” shall mean a Pledged Loan with any Scheduled Payment or
portion of a Scheduled Payment delinquent more than 60 days other than a Pledged
Loan that is a Defaulted Loan.

 

“Depositor” shall mean Sierra Deposit Company, LLC, a Delaware limited liability
company.

 

“Depository Agreement” shall mean the agreement among the Issuer, the Trustee
and The Depository Trust Company.

 

“Designated Maturity” shall mean for any LIBOR Determination Date, one month.

 

“Determination Date” shall mean, with respect to any Payment Date, the second
Business Day preceding such Payment Date.

 

“Distribution Compliance Period” shall have the meaning specified in Rule 902 of
Regulation S under the Securities Act.

 

“Due Date” shall mean, with respect to any Pledged Loan, the date on which the
Obligor with respect to such Pledged Loan is required to make a Scheduled
Payment thereon.

 

“Due Period” shall mean, for any Payment Date, the immediately preceding
calendar month.

 

“DWAC”  shall have the meaning set forth in subsection 2.13(a).

 

“EFI” shall mean EFI Development Funding, Inc., a Delaware corporation.

 

“Eligible Account” means either (a) a segregated account (including a securities
account) with an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States of America or any one of the states thereof or the District
of Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as any
of the securities of such depository institution shall have a credit rating from
each Rating Agency in one of its generic rating categories which signifies
investment grade.

 

“Eligible Loan” shall have the meaning assigned to that term in Section 5.2.

 

“Eligible Institution” shall mean any depository institution the short term
unsecured senior indebtedness of which is rated at least “Fl” by Fitch, “A-l” by
S&P or “P-l” by Moody’s, and the long term unsecured indebtedness rating of
which is rated at least “A” by Fitch, “A” by S&P or “A-2” by Moody’s.

 

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“Equity Percentage” shall mean with respect to a Pledged Loan, a fraction,
expressed as a percentage, the numerator of which is the excess of (A) the
Timeshare Price of the related Timeshare Property relating to a Pledged Loan
paid or to be paid by an Obligor over (B) the outstanding principal balance of
such Pledged Loan at the time of sale of such Timeshare Property to such Obligor
(less the amount of any valid check presented by such Obligor at the time of
such sale that has cleared the payment system), and the denominator of which is
the Timeshare Price of the related Timeshare Property, provided that any cash
downpayments or principal payments made on any initial Pledged Loan that have
been fully prepaid as part of a Timeshare Upgrade and financed downpayments
under such initial Pledged Loan financed over a period not exceeding six months
from the date of origination of such Pledged Loan that have actually been paid
within such six-month period shall be included for purposes of calculating the
numerator of such fraction.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.

 

“ERISA Affiliate” shall mean with respect to any Person, (i) any corporation
which is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as such Person; (ii) a trade or business
(whether or not incorporated) under common control (within the meaning of
Section 414(c) of the Code) with such Person; or (iii) a member of the same
affiliated service group (within the meaning of Section 414(n) of the Code) as
such Person, any corporation described in clause (i) or any trade or business
described in clause (ii).

 

“ERISA Liabilities” shall have the meaning set forth in Section 6.2(h).

 

“Euroclear Operator” shall mean Euroclear Bank S.A./N.V., as operator of the
Euroclear System, and its successor and assigns in such capacity.

 

“Euroclear Participants” shall mean the participants of the Euroclear System,
for which the Euroclear System holds securities.

 

“Event of Default” shall mean the events designated as Events of Default under
Section 11.1 of this Agreement.

 

“Exchange Act” shall mean the U. S. Securities Exchange Act of 1934, as amended.

 

“Exchange Date” shall have the meaning specified in subsection 2.9(d).

 

“Extra Principal Distribution Amount,” shall mean, on any Payment Date, the
lesser of (i) the amount by which the portion of the Available Funds
representing the interest portion of Available Funds or other amounts received
in respect of interest exceeds the amount required to be distributed on such
Payment Date pursuant to clauses FIRST through NINTH, inclusive, of the Priority
of Payments and (ii) the Interim Overcollateralization Deficiency on such
Payment Date.

 

“FAC” shall mean Fairfield Acceptance Corporation-Nevada, a Delaware corporation
domiciled in Nevada and a wholly-owned subsidiary of FRI.

 

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“Fairfield Loan” shall mean a Pledged Loan which was sold to the Depositor under
the Fairfield Master Loan Purchase Agreement.

 

“Fairfield Master Loan Purchase Agreement” shall mean the Master Loan Purchase
Agreement dated as of August 29, 2002 and the First Amendment and Supplement to
Master Loan Purchase Agreement dated as of November 27, 2002, by and between
FAC, as Seller and the Depositor, as Purchaser and FRI, Fairfield Myrtle Beach,
Inc., Sea Gardens Beach and Tennis Resort, Inc., Vacation Break Resorts, Inc.,
Vacation Break Resorts at Star Island, Inc., Palm Vacation Group, Ocean Ranch
Vacation Group, and Kona Hawaiian Vacation Ownership, LLC, together with the
Series 2002-1 Supplement dated as of August 29, 2002 to such Master Loan
Purchase Agreement and the First Amendment, dated as of November 27, 2002, to
the Series 2002-1 Supplement to the Master Loan Purchase Agreement.

 

“Fairfield Originator” shall mean FRI, Fairfield Myrtle Beach, Inc., Kona
Hawaiian Vacation Ownership, LLC, Sea Gardens Beach and Tennis Resort, Inc.,
Vacation Break Resorts, Inc., Vacation Break Resorts at Star Island, Inc., Palm
Vacation Group, Ocean Ranch Vacation Group, or any other Subsidiary of Cendant
that originates Loans in accordance with the Credit Standards and Collection
Policies for sale to FAC.

 

“FairShare Plus Agreement” shall mean the Amended and Restated FairShare
Vacation Plan Use Management Trust Agreement effective as of January 1, 1996 by
and between FRI, and certain of its subsidiaries and third party developers.

 

“FairShare Plus Program” shall mean the program pursuant to which the occupancy
and use of a Timeshare Property is assigned to the trust created by the
FairShare Plus Agreement in exchange for annual symbolic points that are used to
establish the location, timing, length of stay and unit type of a vacation,
including without limitation systems relating to reservations, accounting and
collection, disbursement and enforcement of assessments in respect of
contributed units.

 

“Financing Statements” shall mean, collectively, the UCC financing statements
and the amendments thereto to be authorized and delivered in connection with any
of the transactions contemplated hereby or any of the other Transaction
Documents.

 

“First Guaranty Agreement” shall mean that Performance Guaranty dated as of
August 29, 2002 made by Cendant in favor of the Depositor, Sierra 2002, the
Sierra 2002 Trustee and confirmed by the Letter of Understanding as extending to
the Trustee.

 

“Fitch” shall mean Fitch, Inc. or any successor thereto.

 

“Fixed Amount” shall mean, for any Payment Date, an amount equal to the fixed
amount payable by the Issuer to the Swap Counterparty for such date pursuant to
the Interest Rate Swap.

 

“Fixed Week” shall mean a Timeshare Property representing a fee simple interest
in a lodging unit at a Resort that entitles the related Obligor to occupy such
lodging unit for a specified one-week period each year.

 

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“Floating Amount” shall mean, for any Payment Date an amount equal to the
floating amount payable by the Swap Counterparty to the Issuer for such date
pursuant to the Interest Rate Swap.

 

“FMB” shall mean Fairfield Myrtle Beach, Inc., a Delaware corporation.

 

“Foreign Clearing Agency” shall mean Clearstream and the Euroclear Operator.

 

“FRI” shall mean Fairfield Resorts, Inc., a Delaware corporation and its
successors and assigns.

 

“GAAP” shall mean generally accepted accounting principles as in effect from
time to time in the United States.

 

“Global Notes” shall mean the Rule 144A Global Note and the Regulation S Global
Note.

 

“Grant” shall mean, as to any asset or property, to pledge, assign and grant a
security interest in such asset or property.  A Grant of any item of Collateral
shall include all rights, powers and options of the Granting party thereunder or
with respect thereto, including without limitation the immediate and continuing
right to claim, collect, receive and give receipt for principal, interest and
other payments in respect of such item of Collateral, principal and interest
payments and receipts in respect of the Permitted Investments, Insurance
Proceeds, purchase prices and all other monies payable thereunder and all
income, proceeds, products, rents and profits thereof, to give and receive
notices and other communications, to make waivers or other agreements, to
exercise all such rights and options, to bring Proceedings in the name of the
Granting party or otherwise, and generally to do and receive anything which the
Granting party is or may be entitled to do or receive thereunder or with respect
thereto.

 

“Green Loan” shall mean a Loan the proceeds of which are used to finance the
purchase of a Green Timeshare Property.

 

“Green Timeshare Property” shall mean a Timeshare Property for which
construction on the related Resort has not yet begun or is subject to
completion.

 

“Independent Director” shall have the meaning assigned to the term in subsection
6.1(m).

 

“Initial Principal Amount” shall mean the aggregate amount of $302,600,000 of
the Notes composed of the initial principal amounts of $180,200,000 of the Class
A Notes, $27,200,000 of the Class B Notes, $37,400,000 of the Class C Notes and
$57,800,000 of the Class D Notes at the time such Notes were issued.

 

“Initial Purchasers” shall mean the initial purchasers of the Notes as set forth
in the Note Purchase Agreement.

 

“Insolvency Event” shall mean, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Debtor Relief

 

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Law now or hereafter in effect, or the filing of a petition against such Person
in an involuntary case under any applicable Debtor Relief Law now or hereafter
in effect, which case remains unstayed and undismissed within 30 days of such
filing, or the appointing of a receiver, conservator, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the ordering of the winding-up or
liquidation of such Person’s business; or (b) the commencement by such Person of
a voluntary case under any applicable Debtor Relief Law now or hereafter in
effect, or the consent by such Person to the entry of an order for relief in an
involuntary case under any such Debtor Relief Law, or the consent by such Person
to the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due or the admission by such Person of its
inability to pay its debts generally as they become due.

 

“Insolvency Proceeding” shall mean any proceeding relating to an Insolvency
Event.

 

“Installment Contract” shall mean an installment sale contract as defined in the
applicable Purchase Agreement.

 

“Insurance Proceeds” shall have the meaning assigned to that term in the
applicable Purchase Agreement.

 

“Intercreditor Agreement” shall mean the intercreditor and clearing account
agreement dated as of January 3, 2001, among Trendwest, LaSalle Bank National
Association, Wells Fargo Bank Minnesota, National Association, the issuers named
therein, Bank One, NA, Jupiter Securitization Corporation, TW Holdings III, Key
Bank National Association and other parties thereto by accession.

 

“Interest Carry-Forward Amount” shall mean, for any Class on any Payment Date,
the sum of (i) interest accrued during the related Accrual Period at the
applicable Note Interest Rate for such Class on the excess, if any, of the
Principal Amount of such Class over the Adjusted Principal Amount of such Class,
in each case as of the prior Payment Date and (ii) any amounts payable pursuant
to clause (i) above for such Class from all prior Payment Dates remaining
unpaid, if any, with interest thereon at the applicable Note Interest Rate. 
Interest Carry-Forward Amounts with respect to Class A, Class B and Class C will
be computed on the basis of a 360-day year consisting of twelve 30-day months. 
Interest Carry-Forward Amounts with respect to Class D will be computed on the
basis of actual days elapsed and a year of 360 days.

 

“Interest Rate Swap” shall mean the ISDA Master Agreement, together with the
Schedule thereto and the “Confirmation For U.S. Dollar Interest Rate Swap
Transaction Under 1992 Master Agreement,” each dated as of March 25, 2003
between the Issuer and the Swap Counterparty, as such Interest Rate Swap may be
amended, modified or replaced.

 

“Interim Overcollateralization Amount” shall mean, on any Payment Date, the
excess, if any, of (i) the Aggregate Loan Balance as of the last day of the
immediately preceding Due Period over (ii) (x) the Aggregate Principal Amount on
such Payment Date, before taking into

 

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account any distributions of principal to the Noteholders on such Payment Date,
minus (y) the Monthly Principal for such Payment Date.

 

“Interim Overcollateralization Deficiency,” shall mean, on any Payment Date, the
excess, if any, of (x) the Required Overcollateralization Amount on such Payment
Date over (y) the Interim Overcollateralization Amount on such Payment Date.

 

“Investment Company Act” shall mean the U.S. Investment Company Act of 1940, as
amended.

 

“Issuer” shall mean Sierra 2003-1 Receivables Funding Company, LLC, a Delaware
limited liability company and its successors and assigns.

 

“Issuer Order” shall mean a written order or request dated and signed in the
name of the Issuer by an Authorized Officer of the Issuer.

 

“Kona Loans” shall mean Loans which were acquired by FRI from Kona Hawaiian
Vacation Ownership, LLC.

 

“Letters of Understanding” shall mean (i) the letter agreement dated March 31,
2003 among FAC, Cendant and the Depositor with respect to the obligations of FAC
under the Fairfield Master Loan Purchase Agreement and Cendant’s guaranty of
FAC’s performance under the Fairfield Master Loan Purchase Agreement and (ii)
the letter agreement dated March 31, 2003 among Trendwest, Cendant and the
Depositor with respect to the obligations of Trendwest under the Trendwest
Master Loan Purchase Agreement and Cendant’s guaranty of the Trendwest
performance under the Trendwest Master Loan Purchase Agreement.

 

“LIBOR” shall mean an interest rate per annum determined by the Trustee for each
Interest Period in accordance with the provisions of Section 2.4.

 

“LIBOR Determination Date” shall mean the second London Business Day prior to
the Closing Date with respect to the period from the Closing Date through April
14, 2003; and, with respect to each Accrual Period thereafter, the second London
Business Day immediately preceding the first day of such Accrual Period
commencing with the April 2003 Payment Date.

 

“Lien” shall mean any mortgage, security interest, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever, including, without limitation, 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 (other than any such financing statement
filed for informational purposes only) or comparable law of any jurisdiction to
evidence any of the foregoing.

 

“LLC Agreement” shall mean the Limited Liability Company Agreement of Sierra
2003-1 Receivables Funding Company, LLC dated as of March 31, 2003 as amended,
supplemented, restated or otherwise modified from time to time.

 

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“Loan” shall mean each loan, installment contract or contract for deed or
contract or note secured by a mortgage, deed or trust, vendor’s lien or
retention of title originated or acquired by a Seller and relating to the sale
of one or more Timeshare Properties.

 

“Loan Balance” shall mean the outstanding principal balance due under or in
respect of a Pledged Loan (including a Defaulted Loan (until it becomes a
Released Pledged Loan)).

 

“Loan Documents” shall, with respect to any Pledged Loan, have the meaning
assigned to that term in the Purchase Agreement under which such Pledged Loan
was transferred from the Seller to the Depositor.

 

“Loan File” shall, with respect to any Pledged Loan, have the meaning assigned
to that term in the Purchase Agreement under which such Pledged Loan was
transferred from the Seller to the Depositor.

 

“Loan Rate” shall mean the annual rate at which interest accrues on any Pledged
Loan, as modified from time to time in accordance with the terms of any related
Credit Standards and Collection Policies.

 

“Loan Schedule” shall mean the Loan Schedule containing information about the
Pledged Loans, which Loan Schedule is attached hereto as Schedule 2 and which is
as delivered by the Issuer to the Collateral Agent as of the Closing Date and as
amended upon the release of Pledged Loans or the Grant of Qualified Substitute
Loans.

 

“Lockbox Account” shall mean any of the accounts established pursuant to a
Lockbox Agreement.

 

“Lockbox Agreement” shall mean the Intercreditor Agreement and any agreement
substantially in the form of Exhibit I by and between the Issuer, the Trustee
and the Servicer and the applicable Lockbox Bank, which agreement sets forth the
rights of the Issuer, the Trustee and the applicable Lockbox Bank, with respect
to the disposition and application of the Collections deposited in the
applicable Lockbox Account, including without limitation the right of the
Trustee to direct the Lockbox Bank, to remit all Collections directly to the
Trustee.

 

“Lockbox Bank” shall mean any of the commercial banks holding one or more
Lockbox Accounts.

 

“London Business Day” shall mean a day on which banks are open for dealing in
foreign currency and exchange in London and New York City.

 

“Lot” shall mean a fully or partially developed parcel of real estate.

 

“Major Credit Card” shall mean a credit card issued by any VISA USA, Inc.,
MasterCard International Incorporated, American Express Company, Discover Bank
or Diners Club International Ltd. credit card entity.

 

“Majority Holders” shall mean with respect to all Notes issued and outstanding,
the Holders of fifty-one percent or more of the Aggregate Principal Amount of
all Notes.

 

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“Market Servicing Rate” shall mean the rate calculated by the Trustee following
a Servicer Default and which rate shall be calculated as follows:  (1) the
Trustee shall, within 10 Business Days after the occurrence of a Servicer
Default, solicit bids from entities which are experienced in servicing loans
similar to the Pledged Loans and shall request delivery of such bids to the
Trustee within 30 days of the delivery of the notice to such potential Successor
Servicers, and such bids shall state a servicing fee as part of the bid and (2)
upon the receipt of three arms length bids, the Trustee shall disregard the
highest bid and the lowest bid and select the remaining middle bid, and the
servicing fee rate bid by such bidder shall be the Market Servicing Rate.

 

“Master Loan Purchase Agreement” shall mean the Fairfield Master Loan Purchase
Agreement or the Trendwest Master Loan Purchase Agreement.

 

“Material Adverse Effect” shall mean, with respect to any Person and any event
or circumstance, a material adverse effect on:

 

(a)                                  the business, properties, operations or
condition (financial or otherwise) of any of such Person;

 

(b)                                 the ability of such Person to perform its
respective obligations under any of the Transaction Documents to which it is a
party;

 

(c)                                  the validity or enforceability of, or
collectibility of amounts payable under, this Agreement (if such Person is a
party to this Agreement) or any of the Transaction Documents to which it is a
party;

 

(d)                                 the status, existence, perfection or
priority of any Lien arising through or under such Person under any of the
Transaction Documents to which it is a party; or

 

(e)                                  the value, validity, enforceability or
collectibility of the Pledged Loans with respect to the Notes or any of the
other Pledged Assets with respect to the Notes.

 

“Maturity Date” shall mean the Payment Date occurring in January 2014.

 

“Member” shall have the meaning assigned thereto in the LLC Agreement.

 

“Monthly Adjustment Amount” shall mean, for the Class A Notes, the Class A
Monthly Adjustment Amount, for the Class B Notes, the Class B Monthly Adjustment
Amount, for the Class C Notes, the Class C Monthly Adjustment Amount and for the
Class D Notes, the Class D Monthly Adjustment Amount.

 

“Monthly Collateral Agent Fee” shall mean, in respect of any Due Period (or
portion thereof), the amount due to the Collateral Agent for fees related to the
Collateral for the Series 2003-1 Notes.

 

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“Monthly Custodian Fee” shall mean, in respect of any Due Period (or portion
thereof), the amount due to the Custodian under the Custodial Agreement for fees
related to the Pledged Loans and related Pledged Assets.

 

“Monthly Principal” shall mean on any Payment Date, the sum of (i) the principal
portion of Scheduled Payments due during the related Due Period on the Pledged
Loans; (ii) the principal amount of any prepayments collected on any Pledged
Loan during the related Due Period, and the amounts deposited into the
Collection Account since the most recent Payment Date in respect of the release
of Trendwest Loans which have become Timeshare Upgrades and are treated as
prepayments; (iii) principal proceeds from the purchase by the Sellers of any
Pledged Loans that have become Defaulted Loans during the related Due Period and
any Net Liquidation Proceeds from the disposition of Pledged Assets securing
Defaulted Loans received during the related Due Period; and (iv) the principal
proceeds of any repurchase of a Defective Loan by a Seller or deposit in respect
of a Defective Loan by the Issuer.

 

“Monthly Servicer Fee” shall mean, in respect of any Due Period (or portion
thereof), an amount equal to one-twelfth of the product of (a) 1.25% and (b) the
Aggregate Loan Balance of the Pledged Loans that have not been released from the
lien of this Agreement at the beginning of such Due Period or if a Successor
Servicer has been appointed and accepted the appointment or if the Trustee is
acting as Servicer, an amount equal to one-twelfth of the product of (x) the
lesser of 2.35% and the Market Servicing Rate (or such higher rate as may be
consented to by Noteholders representing not less than 66 2/3% of the Aggregate
Principal Amount) and (y) the Aggregate Loan Balance of the Pledged Loans that
have not been released from the lien of this Agreement at the beginning of such
Due Period.

 

“Monthly Servicing Report” shall mean each monthly report prepared by the
Servicer as provided in Section 8.2.

 

“Monthly Trustee Fee” shall mean, in respect of any Due Period, an amount equal
to one-twelfth of 0.01% of the Aggregate Loan Balance of the Pledged Loans as of
the first day of such Due Period as an administration fee plus an amount equal
to one-twelfth of 0.02% of the Aggregate Loan Balance of the Pledged Loans as of
the first day of such Due Period as a backup servicer fee.

 

“Moody’s” shall mean Moody’s Investors Service, Inc. or any successor thereto.

 

“Mortgage” shall mean any mortgage, deed of trust, purchase money deed of trust
or deed to secure debt encumbering the related Timeshare Property, granted by
the related Obligor to the Originator of a Loan to secure payments or other
obligations under such Loan.

 

“Multiemployer Plan” shall have the meaning set forth in Section 3(37) of ERISA.

 

“Net Liquidation Proceeds” shall mean, with respect to any Defaulted Loan which
is a Pledged Loan and which has not been released from the Lien of this
Agreement, the proceeds of the sale, liquidation or other disposition of the
collateral securing such Defaulted Loan.

 

“Net Swap Payment” shall mean, for any Payment Date, the amount, if any, by
which the Fixed Amount for such date exceeds the Floating Amount for such date.

 

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“Net Swap Receipt” shall mean, for any Payment Date, the amount, if any, by
which the Floating Amount for such date exceeds the Fixed Amount for such date.

 

“Nominee” shall have the meaning set forth in the Purchase Agreements.

 

“Non-U.S. Certificate” shall have the meaning set forth in subsection 2.12(b).

 

“Noteholder” or “Holder” shall mean the Person in whose name a Note is
registered in the Note Register.

 

“Note Interest Rate” shall mean with respect to each Class, the respective rate
per annum set forth below:

 

Class of Notes

 

Note Interest Rate

 

 

 

Class A Notes

 

3.09%

Class B Notes

 

3.48%

Class C Notes

 

4.56%

Class D Notes

 

LIBOR as determined from time to time plus 4.50%

 

“Note Owner” shall mean, with respect to a Note, the Person who is the owner of
a security entitlement to such Note, as reflected on the books of the Clearing
Agency, or on the books of a Person maintaining an account with such Clearing
Agency (directly as a participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).

 

“Note Purchase Agreement” shall mean the Note Purchase Agreement dated March 25,
2003 among the Issuer, the Sellers and the Initial Purchasers named therein.

 

“Note Register” shall have the meaning specified in Section 2.6.

 

“Note Registrar” shall have the meaning specified in Section 2.6.

 

“Notes” shall mean the Sierra 2003-1 Receivables Funding Company, LLC
Loan-Backed Notes, Series 2003-1.

 

“Obligor” shall mean, with respect to any Pledged Loan, the Person or Persons
obligated to make Scheduled Payments thereon.

 

“Offering Circular” shall mean the final Offering Circular dated March 25, 2003
relating to the Notes.

 

“Officer’s Certificate” shall mean, unless otherwise specified in this
Agreement, a certificate delivered to the Trustee signed by any Vice President
or more senior officer of the Issuer or the Servicer, as the case may be, or, in
the case of a Successor Servicer, a certificate signed by any Vice President or
more senior officer or the financial controller (or an officer holding an office
with equivalent or more senior responsibilities) of such Successor Servicer, and
delivered to the Trustee.

 

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“Operating Agreement” shall mean the Ninth Amended and Restated Operating
Agreement dated as of March 31, 2003 by and between FRI, FMB, FAC, Kona and the
VB Subsidiaries as described therein.

 

“Opinion of Counsel” shall mean a written opinion of counsel who may be counsel
for, or an employee of, the Person providing the opinion and who shall be
reasonably acceptable to the Trustee.

 

“Originator,” with respect to any Pledged Loan, shall have the meaning assigned
to such term in applicable Purchase Agreement or if such term is not so defined,
the entity which originates or acquires Loans and transfers such Loans directly
or through a Seller to the Depositor.

 

“Overcollateralization Amount,” shall mean on any Payment Date, the excess, if
any, of (i) the Aggregate Loan Balance as of the last day of the related Due
Period over (ii) the Aggregate Principal Amount on such Payment Date, after
taking into account any distributions of principal to the Noteholders on such
Payment Date.

 

“Overcollateralization Release Amount,” shall mean (i) on any Payment Date on or
after the Stepdown Date when neither a Cash Accumulation Event nor a Sequential
Order Event has occurred and is then continuing, an amount equal to the excess,
if any, of (a) the Interim Overcollateralization Amount on such Payment Date
over (b) the Required Overcollateralization Amount on such Payment Date;
provided that such amount will not be more than the Monthly Principal for such
Payment Date and (ii) on any other Payment Date, zero.

 

“Overdue Interest” shall mean, as of any Payment Date, the amount, if any, by
which Accrued Interest in respect of all prior Payment Dates exceeds the amount
paid to Noteholders on such prior Payment Dates, together with interest thereon
for each Accrual Period for each Class at the rate of the applicable Note
Interest Rate plus 2%.

 

“PAC” shall mean an arrangement whereby an Obligor makes Scheduled Payments
under a Pledged Loan via pre-authorized debit.

 

“Paying Agent” shall mean the Trustee or any successor thereto, in its capacity
as paying agent.

 

“Payment Date” shall mean the 15th day of each calendar month, or, if such 15th
day is not a Business Day, the next succeeding Business Day, commencing in April
2003.

 

“Performance Guarantor” shall mean Cendant Corporation, a Delaware corporation.

 

“Performance Guaranty” shall mean the Guaranty dated as of March 31, 2003
pursuant to which the Performance Guarantor guarantees the performance of FAC as
Servicer under this Agreement and guarantees the Issuer’s obligations under
Section 5.4.

 

“Permanent Regulation S Global Note” shall have the meaning assigned thereto in
subsection 2.12(a).

 

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“Permitted Encumbrance” with respect to any Pledged Loan has the meaning
assigned to that term under the Purchase Agreement pursuant to which such Loan
has been sold to the Depositor.

 

“Permitted Investments” shall mean (i) U.S. Government Obligations having
maturities on or before the first Payment Date after the date of acquisition;
(ii) time deposits and certificates of deposit having maturities on or before
the first Payment Date after the date of acquisition, maintained with or issued
by any commercial bank having capital and surplus in excess of $500,000,000 and
having a short term senior unsecured debt rating of at least “A-1” by S&P and
“P-l” by Moody’s and “F1” by Fitch if rated by Fitch; (iii) repurchase
agreements having maturities on or before the first Payment Date after the date
of acquisition for underlying securities of the types described in clauses (i)
and (ii) above or clause (iv) below with any institution having a short term
senior unsecured debt rating of at least “P-1” by Moody’s and “A-1” by S&P and
“F1” by Fitch if rated by Fitch; (iv) commercial paper maturing on or before the
first Payment Date after the date of acquisition and having a short term senior
unsecured debt rating of at least “P-1” by Moody’s and “A-1+” by S&P and “F1” by
Fitch if rated by Fitch; and (v) money market funds rated “Aaa” by Moody’s and
rated “AAAm” or “AAAm-G” by S&P and which invest solely in any of the foregoing,
including any such funds in which the Trustee or an Affiliate of the Trustee
acts as an investment advisor or provides other investment related services;
provided, however, that no obligation of any Seller or the Performance Guarantor
shall constitute a Permitted Investment and provided further, that no interest
only obligation and no investment purchased by the Issuer or the Trustee at a
premium shall constitute Permitted Investments.

 

“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
or organization of any nature, whether or not a legal entity.

 

“Plan” shall mean an employee benefit plan or other retirement arrangement
subject to ERISA or Section 4975 of the Code of 1986, as amended from time to
time.

 

“Plan Insolvency” shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.

 

“Pledged Assets” with respect to each Pledged Loan, shall mean all right, title
and interest of the Depositor in, to and under the Pledged Loans from time to
time and the related Transferred Assets and all of the Depositor’s rights under
the Purchase Agreements, the Letters of Understanding, the Collections and the
proceeds of any of the foregoing.

 

“Pledged Loans” shall mean the Loans listed on the Loan Schedule.

 

“POA” shall mean each property owners’ association or similar timeshare owner
body for a Timeshare Property Regime or Resort or portion thereof, in each case
established pursuant to the declarations, articles or similar charter documents
applicable to each such Timeshare Property Regime, Resort or portion thereof.

 

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“Post Office Box” shall mean each post office box to which Obligors are directed
to mail payments in respect of the Pledged Loans.

 

“Predecessor Note” shall mean, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.7 in lieu of a mutilated, lost,
destroyed or stolen Note shall evidence the same debt as the mutilated, lost,
destroyed or stolen Note.

 

“Principal Distribution Amount” shall mean the Monthly Principal reduced by the
Overcollateralization Release Amount, if any, and increased by the Extra
Principal Distribution Amount, if any.

 

“Principal Amount” shall mean, the Initial Principal Amount of a Class, less
principal payments previously paid to such Class as of such date.

 

“Priority of Payments” shall mean the application of Available Funds in
accordance with Section 3.1.

 

“Proceeding” shall have the meaning specified in Section 11.3.

 

“Purchase Agreement” shall mean a Master Loan Purchase Agreement between a
Seller and the Depositor pursuant to which the Seller sells Loans to the
Depositor.

 

“QIB” shall have the meaning set forth in subsection 2.6(c).

 

“Qualified Substitute Loan” shall mean a substitute Pledged Loan that is an
Eligible Loan on the applicable date of substitution and that on such date of
substitution has (i) a coupon rate not less than the coupon rate of the
substituted Pledged Loan, (ii) a remaining term to stated maturity not greater
than the remaining term to maturity of the substituted Pledged Loan and (iii) is
provided by the same Seller as that Pledged Loan for which the Qualified
Substitute Loan is to be substituted.

 

“Rating Agency” shall mean each of Fitch, S&P or Moody’s as appropriate and
their respective successors in interest.

 

“Rating Agency Condition” shall mean, with respect to any action, that each
Rating Agency shall have notified the Issuer and the Trustee in writing that
such action will not result in a reduction or withdrawal of the then existing
rating of any outstanding Class.

 

“Record Date” shall mean as to any Payment Date the last day of the preceding
Due Period.

 

“Records” shall, with respect to any Pledged Loan, have the meaning assigned
thereto in the applicable Purchase Agreement.

 

“Reference Banks” shall mean leading banks selected by the Servicer and engaged
in transactions in Eurodollar deposits in the international Eurocurrency market
(i) with an

 

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established place of business in London, (ii) whose quotations appear on
Telerate Page 3750 on the Interest Determination Date in question and (iii)
which have been designated as such by the Servicer.

 

“Regulation S Certificate” shall have the meaning assigned thereto in subsection
2.9(d).

 

“Regulation S Global Note” shall mean either the Temporary Regulation S Global
Note or the Permanent Regulation S Global Note.

 

“Release Date” shall mean the date on which Pledged Loans are released from the
Lien of this Agreement.

 

“Release Price” shall mean an amount equal to the outstanding Loan Balance of
the Pledged Loan as of the close of business on the Due Date immediately
preceding the Payment Date on which the release is to be made, plus accrued and
unpaid interest thereon to the date of such release.

 

“Released Pledged Loan” shall mean any Loan which was included as a Pledged
Loan, but which has been released from the Lien of this Agreement pursuant to
the terms hereof.

 

“Reorganization” shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning of Section 4241
of ERISA.

 

“Reportable Event” shall mean any of the events described in Section 4043 of
ERISA.

 

“Required Overcollateralization Amount,” shall mean, as of any Payment Date, an
amount equal to (i) prior to the Stepdown Date, 11% of the Aggregate Loan
Balance as of the Cut-Off Date, and (ii) on and after the Stepdown Date, (A) if
no Cash Accumulation Event has occurred and is continuing, the greater of (x)
0.50% of the Aggregate Loan Balance as of the Cut-Off Date and (y) 22% of the
Aggregate Loan Balance as of the last day of the related Due Period and (B) if a
Cash Accumulation Event has occurred and is continuing, the Required
Overcollateralization Amount as determined on the immediately preceding Payment
Date; provided that if a Sequential Order Event has occurred and is then
continuing, the Required Overcollateralization Amount will be equal to the
Aggregate Loan Balance as of the last day of the related Due Period.

 

“Reserve Account” shall mean the account established pursuant to Section 3.5 of
this Agreement.

 

“Reserve Account Amount” shall mean, as of any date, the amount then on deposit
in the Reserve Account.

 

“Reserve Required Amount” shall mean (a) as of the Closing Date, 1% of the
Aggregate Loan Balance as of the Cut-Off Date, and (b) at any time after the
Closing Date, (i) if no Cash Accumulation Event has occurred and is continuing,
the greater of (A) the lesser of (x) 2% of the Aggregate Loan Balance at such
time and (y) 1% of the Aggregate Loan Balance as of the Cut-Off Date and (B)
0.50% of the Aggregate Loan Balance as of the Cut-Off Date; and (ii) if a Cash
Accumulation Event has occurred and is continuing, the product of (A) the
Aggregate Loan

 

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Balance as of the last day of the immediately preceding Due Period and (B) the
greater of (x) 10% or (y) 2 times the Delinquency Ratio for such Due Period;
provided that in no event will the Required Reserve Amount be greater than the
Aggregate Principal Amount.

 

“Resort” shall have the meaning set forth in the applicable Purchase Agreement.

 

“Responsible Officer” shall mean any officer assigned to the Corporate Trust
Office (or any successor thereto), including any Vice President, Assistant Vice
President, Trust Officer, any Assistant Secretary, any trust officer or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers, in each case having direct
responsibility for the administration of this Agreement.

 

“Rule 144A Global Note” shall have the meaning assigned thereto in Section 2.11.

 

“S&P” shall mean Standard & Poor’s Ratings Group, a Division of the McGraw-Hill
Companies, Inc. or any successor thereto.

 

“Sale” shall have the meaning specified in Section 11.13(a).

 

“Sale and Assignment Agreement” shall mean the Sale and Assignment Agreement
dated as of March 31, 2003 entered into by Sierra 2002 and the Depositor and
pursuant to which Sierra 2002 sells and assigns to the Depositor all of Sierra
2002’s right, title and interest in the Pledged Loans and the Pledged Assets
related thereto.

 

“Scheduled Payment” shall mean the scheduled monthly payment of principal and
interest on a Pledged Loan.

 

“Securities Act” shall mean the U.S. Securities Act of 1933, as amended.

 

“Seller” shall mean FAC or Trendwest or, in either case, any successor thereto.

 

“Sequential Order” shall have the meaning set forth in Section 3.1(b).

 

“Sequential Order Events” shall mean: (i) an Insolvency Event has occurred with
respect to the Issuer; (ii) on any two consecutive Payment Dates, (A) Available
Funds are not sufficient to pay all Accrued Interest due on the Notes on that
date, or (B) the Overcollateralization Amount is less than the Required
Overcollateralization Amount, after giving effect to distributions of principal
on such Payment Date; or (iii) on any Payment Date, after application of all
Available Funds, the sum of the Aggregate Loan Balance plus the amount on
deposit in the Reserve Account is less than the Aggregate Principal Amount of
all Notes, and Available Funds are not sufficient to pay all principal on the
Notes due on that Payment Date.  The Sequential Order Events described in (ii)
and (iii) above will continue to be in effect until such time, if ever, that the
Noteholders representing not less than 66 2/3% of the outstanding principal
balance of each Class of Notes has consented to the termination of the
Sequential Order Event.

 

“Series 2003-1 Term Purchase Agreement” shall mean the Series 2003-1 Term
Purchase Agreement dated as of March 31, 2003 between the Depositor as seller of
the Pledged Loans and the Issuer.

 

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“Servicer” shall mean Fairfield Acceptance Corporation – Nevada or, if the
conditions set forth in Section 7.12 are satisfied, Trendwest, in either case in
its capacity as Servicer pursuant to this Agreement and, after any Service
Transfer, the Successor Servicer.

 

“Servicer Advance” shall mean amounts, if any, advanced by the Servicer, at its
option, to cover any shortfall between (i) the Scheduled Payments on the Pledged
Loans for a Due Period and (ii) the amounts actually deposited in the Collection
Account on account of such Scheduled Payments on or prior to the Payment Date
immediately following such Due Period.

 

“Servicer Default” shall mean the defaults specified in Section 12.1.

 

“Service Transfer” shall have the meaning set forth in Section 12.1.

 

“Servicing Officer” shall mean any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Loans whose name
appears on a list of servicing officers furnished to the Trustee by the
Servicer, as such list may be amended from time to time.

 

“Settlement Statement” shall mean the information furnished by the Servicer to
the Trustee for distribution to the Noteholders and pursuant to Section 8.1 of
this Agreement.

 

“Sierra 2002” shall mean Sierra Receivables Funding Company, LLC, a Delaware
limited liability company.

 

“Sierra 2002 Trustee” shall mean the trustee under the terms of the Master
Indenture and Servicing Agreement dated as of August 29, 2002 and the Series
2002-1 supplement thereto, each of which is among the trustee named therein, FAC
and Sierra 2002.

 

“Sierra 2002-1 Loans” shall mean Loans sold by a Seller to the Depositor under
the terms of the Purchase Agreements and designated as Series 2002-1 Loans, a
portion of which have been sold transferred by Sierra 2002 to the Depositor and
sold by the Depositor to the Issuer and included in the Pledged Loans.

 

“Sierra 2003-1 Performance Guaranty” shall mean the Guaranty dated as of March
31, 2003 pursuant to which the Performance Guarantor guarantees the performance
of FAC as Servicer under this Agreement and guarantees the Issuer’s obligations
under Section 5.4.

 

“Stepdown Date” shall mean the later to occur of the Payment Date in April 2005
or the Payment Date on which the Aggregate Loan Balance as of the last day of
the related Due Period is less than 50% of the Aggregate Loan Balance as of the
Cut-Off Date.

 

“Subservicer” shall mean each entity which enters into a Subservicing Agreement
with the Servicer and agrees to service all or a portion of the Pledged Loans.

 

“Subservicing Agreement” shall mean the agreement between the Servicer and
Trendwest relating to the servicing of Pledged Loans originated by Trendwest or
if FAC is no longer the Servicer, the agreement between the Servicer and FAC
relating to the servicing of the Pledged Loans originated by FAC.

 

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“Subsidiary” shall mean, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by such Person.

 

“Substitution Adjustment Amount” shall have the meaning specified in the Series
2003-1 Term Purchase Agreement.

 

“Substitution Date” shall have the meaning specified in Exhibit A to the Series
2003-1 Term Purchase Agreement.

 

“Successor Servicer” shall have the meaning set forth in Section 12.2.

 

“Swap Counterparty” shall mean Bank of America, N.A. and any entity replacement
swap counterparty as provided in Section 3.6.

 

“Tax Sharing Agreement” shall mean the Tax Sharing Agreement dated as of March
31, 2003 by and between Cendant, FAC and the Issuer.

 

“Telerate Page 3750” shall mean the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace such page on such
service for the purpose of displaying comparable rates or prices).

 

“Temporary Regulation S Global Note” shall have the meaning assigned thereto in
Section 2.11.

 

“Termination Date” shall have the meaning specified in Section 14.1.

 

“Termination Notice” shall have the meaning specified in Section 12.1.

 

“Termination Payments” shall mean payments required to be made by the Issuer to
the Swap Counterparty under the terms of the Interest Rate Swap as a result of a
termination of the Interest Rate Swap.

 

“Termination Receipts” shall mean payments required to be made by the Swap
Counterparty to the Issuer under the terms of the Interest Rate Swap as a result
of a termination of the Interest Rate Swap.

 

“Timeshare Price” shall mean the original price of the Timeshare Property paid
by an Obligor, plus any accrued and unpaid interest and other amounts owned by
the Obligor.

 

“Timeshare Property” shall have the meaning assigned thereto in the applicable
Purchase Agreement.

 

“Timeshare Property Regime” shall have the meaning assigned thereto in the
applicable Purchase Agreement.

 

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“Timeshare Upgrade” shall have the meaning assigned thereto in the applicable
Purchase Agreement.

 

“Title Clearing Agreement” shall have the meaning assigned thereto in the
applicable Purchase Agreement.

 

“Transaction Documents” shall mean, collectively, this Agreement, the Series
2003-1 Term Purchase Agreement, the Sale and Assignment Agreement, the Purchase
Agreements, the assignment agreements executed by the Sellers and related to the
periodic sale of Pledged Loans, the Custodial Agreements, the Lockbox
Agreements, the Title Clearing Agreements, the Collateral Agency Agreement, the
Administrative Services Agreements, the Financing Statements and all other
agreements, documents and instruments delivered pursuant thereto or in
connection therewith, and “Transaction Document” shall mean any of them.

 

“Transferred Assets”  shall, with respect to each Pledged Loan, have the meaning
set forth in the Purchase Agreement under which such Loan was transferred to the
Depositor.

 

“Trendwest” shall mean Trendwest Resorts, Inc., an Oregon corporation, a
wholly-owned indirect subsidiary of Cendant, and its successors and assigns.

 

“Trendwest Loan” shall mean a Pledged Loan which was sold to the Depositor under
the Trendwest Master Loan Purchase Agreement.

 

“Trendwest Master Loan Purchase Agreement” shall mean that Master Loan Purchase
Agreement dated as of August 29, 2002 between Trendwest and the Depositor and
the Series 2002-1 Supplement thereto.

 

“Trendwest Originator” shall mean Trendwest.

 

“Trendwest Timeshare Upgrade” shall mean a Pledged Loan which was sold to the
Depositor by Trendwest and with respect to which the Obligor purchases a
Timeshare Upgrade.

 

“Trustee” shall mean Wachovia Bank, National Association or its successor in
interest, or any successor trustee appointed as provided in this Agreement.

 

“Trustee Fee Letter” shall mean the schedule of fees attached as Schedule 1, and
all amendments thereof and supplements thereto.

 

“UCC” shall mean the Uniform Commercial Code, as amended from time to time, as
in effect in any applicable jurisdiction.

 

“UDI” shall have the meaning assigned thereto in the respective Purchase
Agreements.

 

“US Government Obligations” shall mean (i) obligations of, or obligations
guaranteed as to principal and interest by, the U.S. Government or any agency or
instrumentality thereof, when these obligations are backed by the full faith and
credit of the United States (ii) and certain obligations of government-sponsored
agencies that are not backed by the full faith credit of the United States which
are limited to: Federal Home Loan Mortgage Corp. debt obligations; Farm

 

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Credit System (formerly Federal Land Banks, Federal Intermediate Credit Banks,
and Banks for Cooperatives) consolidated system-wide bonds and notes; Federal
Home Loan Banks consolidated debt obligations; Federal National Mortgage
Association debt obligations; Student Loan Marketing Association debt
obligations which mature before September 30, 2008; Financing Corp. debt
obligations; and Resolution Funding Corp. debt obligations.

 

“Vacation Credits” shall mean ownership interests in WorldMark that entitle the
owner thereof to use the Resorts owned by WorldMark.

 

“VB Subsidiaries” shall mean Sea Gardens Beach and Tennis Resorts, Inc.,
Vacation Break Resorts, Inc. and Vacation Break Resorts at Star Island, Inc.

 

“WorldMark” shall mean WorldMark, The Club, a California not-for-profit mutual
benefit corporation.

 

Section 1.2             Other Definitional Provisions.

 

(a)           With respect to terms used in this Agreement and not otherwise
defined herein such terms shall have the meanings ascribed to them in the Series
2003-1 Term Purchase Agreement.

 

(b)           All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant thereto unless otherwise defined therein.

 

(c)           As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
Section 1.1, and accounting terms partly defined in Section 1.1 to the extent
not defined, shall have the respective meanings given to them under generally
accepted accounting principles and as in effect from time to time.  To the
extent that the definitions of accounting terms herein are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained herein or in any such certificate or other document shall
control.

 

(d)           Any reference to each Rating Agency shall only apply to any
specific rating agency if such rating agency is then rating any outstanding
Class of Notes.

 

(e)           Unless otherwise specified, references to any amount as on deposit
or outstanding on any particular date shall mean such amount at the close of
business on such day.

 

(f)            The words “hereof,” “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; and Article, Section,
subsection, Schedule and Exhibit references contained in this Agreement are
references to Articles, Sections, subsections, Schedules and Exhibits in or to
this Agreement unless otherwise specified.

 

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Section 1.3             Intent and Interpretation of Documents

 

The arrangement by this Agreement, the Series 2003-1 Term Purchase Agreement,
the Sale and Assignment Agreement, the Purchase Agreements, the Custodial
Agreements, the Collateral Agency Agreement and the other Transaction Documents
is intended not to be a taxable mortgage pool for federal income tax purposes,
and is intended to constitute a sale of the Loans by the applicable Seller to
the Depositor for commercial law purposes.  Each of the Depositor and the Issuer
are and are intended to be a legal entity separate and distinct from each Seller
for all purposes other than tax purposes.  This Agreement and the other
Transaction Documents shall be interpreted to further these intentions.

 

ARTICLE II

 

THE NOTES

 

Section 2.1             Designation.

 

(a)           There is hereby created a series of Notes of the Issuer to be
issued pursuant to this Agreement and which are hereby designated as “Sierra
2003-1 Receivables Funding Company, LLC Loan-Backed Notes, Series 2003-1,” the
“Series 2003-1 Notes” or the “Notes.”

 

(b)           The terms of the Notes shall be as set forth in this Agreement.

 

Section 2.2             Form Generally.  The Notes and the Trustee’s or
Authentication Agent’s certificate of authentication thereon (the “Certificate
of Authentication”) shall be in substantially the forms set forth as Exhibit A
with respect to the Class A Notes, Exhibit B with respect to the Class B Notes,
Exhibit C with respect to the Class C Notes and Exhibit D with respect to the
Class D Notes, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Agreement, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon, as may, consistently herewith, be determined by the
Authorized Officers of the Issuer executing such Notes as evidenced by their
execution of such Notes.  Any portion of the text of any Note may be set forth
on the reverse or subsequent pages thereof, with an appropriate reference
thereto on the face of the Note.

 

The Notes shall be typewritten, word processed, printed, lithographed or
engraved or produced by any combination of these methods, all as determined by
the officers executing such Notes, as evidenced by their execution of such
Notes.

 

Section 2.3             Interest and Principal Payments.  The Notes of each
Class shall bear interest from and including the Closing Date at the following
rates per annum:

 

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Class of Notes

 

Interest Rate

 

 

 

Class A Notes

 

3.09%

Class B Notes

 

3.48%

Class C Notes

 

4.56%

Class D Notes

 

One Month LIBOR plus 4.50%

 

Interest on the Class A Notes, Class B Notes and Class C Notes will be computed
on the basis of a 360-day year consisting of twelve 30-day months.  Interest on
the Class D Notes will be computed on the basis of actual days elapsed and a
year of 360 days.  Interest shall be due and payable on April 15, 2003 and each
Payment Date thereafter.

 

To the extent of Available Funds, principal shall be due and payable on the
Notes as provided in Section 3.1(a) or if a Sequential Order Event has occurred
and is continuing as provided in Section 3.1(b), and any amounts of principal
not paid prior to the Maturity Date, shall be due and payable on such date.

 

Section 2.4             Determination of LIBOR.

 

(a)           On each LIBOR Determination Date, the Trustee shall determine
LIBOR for a period of the Designated Maturity and shall give notice thereof to
the Issuer and the Servicer.

 

For each Accrual Period, “LIBOR” will be determined on the LIBOR Determination
Date for such Accrual Period.  The Trustee will determine LIBOR for such Accrual
Period on the basis of the offered rates of the Reference Banks for the
Designated Maturity, for U.S. dollar deposits, as such rates appear on the
Telerate Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination
Date.

 

On each LIBOR Determination Date, LIBOR for the applicable Accrual Period will
be established by the Trustee as follows:

 

(a)           If on such LIBOR Determination Date two or more Reference Banks
provide such offered quotations, LIBOR for such related Accrual Period will be
the arithmetic mean of such offered quotations (rounded upwards if necessary to
the nearest whole multiple of 0.0001%).

 

(b)           If on such LIBOR Determination Date fewer than two Reference Banks
provide such offered quotations, LIBOR for the related Accrual Period will be
the higher of (x) LIBOR as determined on the previous LIBOR Determination Date
and (y) the arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 0.0001%) of the one-month U.S. dollar lending rates that three New
York City banks selected by the Trustee are quoting at approximately 11:00 a.m.
(New York City time) on the relevant LIBOR Determination Date to leading
European banks.

 

The establishment of LIBOR on each Determination Date by the Trustee and the
Trustee’s calculation of the rate of interest applicable to the Class D Notes
for the related Accrual Period will (in the absence of manifest error) be final
and binding.  The Trustee shall, upon the establishment of LIBOR on each LIBOR
Determination Date notify the Issuer and the Servicer of the rate.

 

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Section 2.5             Execution, Authentication and Delivery.  The Notes shall
be executed on behalf of the Issuer by any of its Authorized Officers.  The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.

 

Notes bearing the manual or facsimile signature of individuals who were at any
time Authorized Officers of the Issuer shall bind the Issuer, notwithstanding
that such individuals or any of them have ceased to hold such offices prior to
the authentication and delivery of such Notes or did not hold such offices at
the date of such Notes.

 

The Trustee shall, upon written order of the Issuer, authenticate and deliver
Notes for original issue in an aggregate principal amount of $302,600,000,
including $180,200,000 principal amount of Class A Notes, $27,200,000 principal
amount of Class B Notes, $37,400,000 principal amount of Class C Notes and
$57,800,000 principal amount of Class D Notes.  The Trustee shall be entitled to
rely upon such written order as authority to so authenticate and deliver the
Notes without further inquiry of any Person.

 

Each Note shall be dated the date of its authentication.  The Notes shall be
issuable as registered Notes in the minimum denomination of $500,000 and in
integral multiples of $1,000 in excess thereof.

 

No Note shall be entitled to any benefit under this Agreement or be valid or
obligatory for any purpose, unless there appears on such Note a certificate of
authentication substantially in the form provided for herein executed by the
Trustee by the manual signature of one of its authorized signatories, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder.

 

Section 2.6             Registration; Registration of Transfer and Exchange;
Transfer Restrictions.  (a) The Issuer shall cause to be kept a register (the
“Note Register”) in which, subject to such reasonable regulations as it may
prescribe, the Issuer shall provide for the registration of Notes and the
registration of transfers of Notes. The Trustee shall be the initial “Note
Registrar” for the purpose of registering Notes and transfers of Notes as herein
provided.  Upon any resignation of any Note Registrar, the Issuer shall promptly
appoint a successor or, if it elects not to make such an appointment, assume the
duties of Note Registrar.

 

If a Person other than the Trustee is appointed by the Issuer as Note Registrar,
the Issuer will give the Trustee and the Swap Counterparty prompt written notice
of the appointment of such Note Registrar and of the location, and any change in
the location, of the Note Registrar, and the Trustee shall have the right to
inspect the Note Register at all reasonable times and to obtain copies thereof,
and the Trustee shall have the right to rely upon a certificate executed on
behalf of the Note Registrar as to the names and addresses of the Holders of the
Notes and the principal amounts and number of such Notes.

 

Upon surrender for registration of transfer of any Note at the office of the
Note Registrar as provided in Section 2.6, if the requirements of Section
8-401(a) of the UCC are met, the Issuer shall execute, and upon receipt of such
surrendered Note the Trustee shall authenticate and the Noteholder shall obtain
from the Trustee, in the name of the designated transferee or transferees, one
or more new Notes in any authorized denominations, of a like aggregate principal
amount.

 

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At the option of the Holder, Notes may be exchanged for other Notes in any
authorized denominations, of the same Class and of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency. 
Whenever any Notes are so surrendered for exchange, if the requirements of
Section 8-401(a) of the UCC are met, the Issuer shall execute, and upon receipt
of such surrendered Note the Trustee shall authenticate and the Noteholder shall
obtain from the Trustee, the Notes which the Noteholder making the exchange is
entitled to receive.

 

All Notes issued upon any registration of transfer or exchange of Notes shall be
the valid obligations of the Issuer, evidencing the same debt, and entitled to
the same benefits under this Agreement, as the Notes surrendered upon such
registration of transfer or exchange.

 

Every Note presented or surrendered for registration of transfer or exchange
shall be duly endorsed by, or be accompanied by a written instrument of transfer
in form satisfactory to the Trustee duly executed by, the Holder thereof or such
Holder’s attorney duly authorized in writing, and such other documents as the
Trustee may require.

 

No service charge shall be made to a Holder for any registration of transfer or
exchange of Notes, but the Issuer may require payment of a sum sufficient to
cover any tax or other governmental charge or expense that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to subsection 15.1(e) not involving any transfer.

 

The preceding provisions of this section notwithstanding, the Issuer shall not
be required to make, and the Note Registrar need not register, transfers or
exchanges of Notes (i) for a period of 20 days preceding the due date for any
payment with respect to the Notes or (ii) after the Trustee sends a notice of
redemption with respect to such Note in accordance with Section 2.18.

 

(b)           The Notes have not been registered under the Securities Act or any
state securities law.  None of the Issuer, the Note Registrar or the Trustee is
obligated to register the Notes under the Securities Act or any other securities
or “Blue Sky” laws or to take any other action not otherwise required under this
Agreement to permit the transfer of any Note without registration.

 

(c)           No transfer of any Note or any interest therein (including,
without limitation, by pledge or hypothecation) shall be made except in
compliance with the restrictions on transfer set forth in this Section 2.6
(including the applicable legend to be set forth on the face of each Note as
provided in Exhibit A to this Agreement) and in Section 2.12 and Section 2.13 in
a transaction exempt from the registration requirements of the Securities Act
and applicable state securities or “Blue Sky” laws (i) to a person (A) that the
transferor reasonably believes is a “qualified institutional buyer” within the
meaning thereof in Rule 144A (a “QIB”) in the form of security entitlements to
the Rule 144A Global Note, and (B) that is aware that the resale or other
transfer is being made in reliance on Rule 144A or (ii) in an offshore
transaction in accordance with Rule 903 or Rule 904 of Regulation S under the
Securities Act, in the form of security entitlements to the applicable
Regulation S Global Note.

 

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(d)           Each Note Owner, by its acceptance of its security entitlement to
a Note, will be deemed to have acknowledged, represented to and agreed with the
Issuer and the Initial Purchasers as follows:

 

(i)            It understands and acknowledges that the Notes will be offered
and may be resold by the Initial Purchasers (A) in the United States to QIBs
pursuant to Rule 144A in the form of security entitlements to the Rule 144A
Global Note, or (B) outside the United States pursuant to Regulation S under the
Securities Act, initially in the form of security entitlements to the Temporary
Regulation S Global Note.  As set forth in Section 2.13, beneficial interests in
the Temporary Regulation S Global Note may be exchanged for beneficial interests
in the Permanent Regulation S Global Note.

 

(ii)           It understands that the Notes have not been and will not be
registered under the Securities Act or any state or other applicable securities
law and that the Notes, or any interest or participation therein, may not be
offered, sold, pledged or otherwise transferred unless registered pursuant to,
or exempt from registration under, the Securities Act and any state or other
applicable securities law.

 

(iii)          It acknowledges that none of the Issuer or the Initial Purchasers
or any person representing the Issuer or the Initial Purchasers has made any
representation to it with respect to the Issuer or the offering or sale of any
Notes, other than the information contained in the Offering Circular, which has
been delivered to it and upon which it is relying in making its investment
decision with respect to the Notes.  It has had access to such financial and
other information concerning the Issuer and the Notes as it has deemed necessary
in connection with its decision to purchase the Notes.

 

(iv)          It acknowledges that the Notes will bear a legend to the following
effect unless the Issuer determines otherwise, consistent with applicable law:

 

“THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE
SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS
NOTE, OR ANY INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER
APPLICABLE LAWS AND ONLY (1) TO THE ISSUER, (2) PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A
“QIB”) PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A
QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE,
PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE
SECURITIES ACT, OR (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT.  EACH NOTE OWNER BY ACCEPTING
A BENEFICIAL INTEREST IN THIS NOTE, UNLESS SUCH PERSON ACQUIRED THIS NOTE IN A
TRANSFER

 

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DESCRIBED IN CLAUSE (3) ABOVE, IS DEEMED TO REPRESENT THAT IT IS EITHER A QIB
PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER
QIB.

 

PRIOR TO PURCHASING ANY NOTES, PURCHASERS SHOULD CONSULT COUNSEL WITH RESPECT TO
THE AVAILABILITY AND CONDITIONS OF EXEMPTION FROM THE RESTRICTION ON RESALE OR
TRANSFER.  THE ISSUER HAS NOT AGREED TO REGISTER THE NOTES UNDER THE SECURITIES
ACT, TO QUALIFY THE NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE
REGISTRATION RIGHTS TO ANY PURCHASER.

 

AS SET FORTH HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.”

 

(v)           If it is acquiring any Note, or any interest or participation
therein, as a fiduciary or agent for one or more investor accounts, it
represents that it has sole investment discretion with respect to such account
and that it has full power to make the acknowledgments, representations and
agreements contained herein on behalf of each such account.

 

(vi)          It (A)(i) is a QIB, (ii) is aware that the sale to it is being
made in reliance on Rule 144A and if it is acquiring such Notes or any interest
or participation therein for the account of another QIB, such other QIB is aware
that the sale is being made in reliance on Rule 144A and (iii) is acquiring such
Notes or any interest or participation therein for its own account or for the
account of a QIB, or (B) is not a U.S. person and is purchasing such Notes or
any interest or participation therein in an offshore transaction meeting the
requirements of Rule 903 or 904 of Regulation S.

 

(vii)         It is purchasing the Notes for its own account, or for one or more
investor accounts for which it is acting as fiduciary or agent, in each case for
investment, and not with a view to, or for offer or sale in connection with, any
distribution thereof in violation of the Securities Act, subject to any
requirements of law that the disposition of its property or the property of such
investor account or accounts be at all times within its or their control and
subject to its or their ability to resell such Notes, or any interest or
participation therein as described in the Offering Circular and pursuant to the
provisions of this Agreement.

 

(viii)        It agrees that if in the future it should offer, sell or otherwise
transfer such Note or any interest or participation therein, it will do so only
(A) to the Issuer, (B) pursuant to Rule 144A to a person it reasonably believes
is a QIB in a transaction meeting the requirements of Rule 144A, purchasing for
its own account or for the account of a QIB, whom it has informed that such
offer, sale or other transfer is being made in reliance on Rule 144A or (C) in
an offshore transaction meeting the requirements of Rule 903 or Rule 904 of
Regulation S under the Securities Act.

 

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(ix)           If it is acquiring such Note or any interest or participation
therein in an “offshore transaction” (as defined in Regulation S under the
Securities Act), it acknowledges that the Notes will initially be represented by
the Temporary Regulation S Global Note and that transfers thereof or any
interest or participation therein are restricted as set forth in this
Agreement.  If it is a QIB, it acknowledges that the Notes offered in reliance
on Rule 144A will be represented by a Rule 144A Global Note and that transfers
thereof or any interest or participation therein are restricted as set forth in
this Agreement.

 

(x)            It understands that the Temporary Regulation S Global Note will
bear a legend to the following effect unless the Issuer determines otherwise,
consistent with applicable law:

 

“THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR PURPOSES OF REGULATION S UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). 
NEITHER THIS TEMPORARY GLOBAL NOTE NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD
OR DELIVERED, EXCEPT AS PERMITTED UNDER THE AGREEMENT REFERRED TO BELOW.  NO
BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE
PAYMENT OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED CERTIFICATIONS HAVE
BEEN DELIVERED PURSUANT TO THE TERMS OF THE INDENTURE.”

 

(xi)           It acknowledges that the Depositor, the Issuer, the Initial
Purchasers and others will rely on the truth and accuracy of the foregoing
acknowledgments, representations and agreements, and agrees that if any of the
foregoing acknowledgments, representations and agreements deemed to have been
made by it are no longer accurate, it shall promptly notify the Issuer and the
Initial Purchasers.

 

(xii)          With respect to any foreign purchaser claiming an exemption from
United States income or withholding tax, that it has delivered to the Trustee a
true and complete Form W-8BEN or W-8ECI, indicating such exemption or any
successor or other forms and documentation as may be sufficient under the
applicable regulations for claiming such exemption.

 

(xiii)         It acknowledges that transfers of the Notes or any interest or
participation therein shall otherwise be subject in all respects to the
restrictions applicable thereto contained in this Agreement.

 

Any transfer, resale, pledge or other transfer of the Notes contrary to the
restrictions set forth above and elsewhere in this Agreement shall be deemed
void ab initio by the Trustee. As used in this Section 2.6, the terms “United
States” and “U.S. persons” have the meaning given them in Regulation S under the
Securities Act.

 

(e)           It understands and acknowledges that the Issuer has structured
this Agreement and the Notes with the intention that the Notes will qualify
under applicable tax law as indebtedness of the Issuer, and the Issuer and each
Noteholder by acceptance of its Note agree to

 

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treat the Notes (or interests therein) as indebtedness for purposes of federal,
state, local and foreign income or franchise taxes or any other applicable tax.

 

(f)            Notwithstanding anything to the contrary contained herein, each
Note and this Agreement may be amended or supplemented to modify the
restrictions on and procedures for resale and other transfers of the Notes to
reflect any change in applicable law or regulation (or the interpretation
thereof) or in practices relating to the resale or transfer of restricted
securities generally (provided, however, that no such amendment or supplement
shall in any way impact the Interest Rate Swap).  Each Noteholder shall, by its
acceptance of such Note, have agreed to any such amendment or supplement.

 

Section 2.7             Mutilated, Destroyed, Lost or Stolen Notes.  If (i) any
mutilated Note is surrendered to the Trustee, or the Trustee receives evidence
to its satisfaction of the destruction, loss or theft of any Note, and (ii) in
the case of a destroyed, lost or stolen Note, there is delivered to the Trustee
such security or indemnity as may be required by it to hold the Issuer and the
Trustee harmless, then, in the absence of notice to the Issuer, the Note
Registrar or the Trustee that such Note has been acquired by a protected
purchaser, and provided that the requirements of Section 8-405 of the UCC are
met, the Issuer shall execute and upon its request the Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note; provided, however, that if
any such destroyed, lost or stolen Note, but not a mutilated Note, shall have
become or within twenty (20) days shall be due and payable, or shall have been
called for redemption, instead of issuing a replacement Note, the Issuer may pay
such destroyed, lost or stolen Note when so due or payable or upon the
redemption date without surrender thereof.  If, after the delivery of such
replacement Note or payment of a destroyed, lost or stolen Note pursuant to the
proviso to the preceding sentence, a protected purchaser of the original Note in
lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer and the Trustee shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a
protected purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, claim, liability,
cost or expense incurred by the Issuer or the Trustee, its agents and/or
counsel, in connection therewith.

 

Upon the issuance of any replacement Note under this Section 2.7, the Issuer may
require the payment by the Holder of such Note of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other reasonable expenses (including the fees and expenses of the Trustee, its
agents and/or counsel) connected therewith.

 

Except as set forth in the first paragraph of this Section 2.7, every
replacement Note issued pursuant to this Section 2.7 in replacement of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Agreement equally and
proportionately with any and all other Notes duly issued hereunder.

 

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The provisions of this Section 2.7 are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.

 

Section 2.8             Persons Deemed Owner.  Prior to due presentment for
registration of transfer of any Note, the Issuer, the Trustee and any agent of
the Issuer or the Trustee may treat the Person in whose name any Note is
registered (as of the day of determination) as the owner of such Note for the
purpose of receiving payments of principal of and interest, if any, on such Note
and for all other purposes whatsoever, whether or not such Note is overdue, and
neither the Issuer, the Trustee nor any agent of the Issuer or the Trustee shall
be affected by notice to the contrary.

 

Section 2.9             Payment of Principal and Interest; Defaulted Interest.

 

(a)           The Notes of each Class shall accrue interest at the Note Interest
Rate for that Class.  The amount of interest due and payable on the Notes with
respect to each Payment Date shall be an amount equal to the Accrued Interest
with respect to such Payment Date plus any Interest Carry-Forward Amount.  Any
installment of interest or principal, if any, or any other amount, payable on
any Note which is punctually paid or duly provided for by the Issuer on the
applicable Payment Date shall be paid to the Person in whose name such Note (or
one or more Predecessor Notes) is registered on the Record Date, by check mailed
first-class, postage prepaid to such Person’s address as it appears on the Note
Register on such Record Date, (i) except that with respect to Notes registered
on the Record Date in the name of the nominee of the Clearing Agency (initially,
such nominee to be Cede & Co.), payment will be made by wire transfer in
immediately available funds to the account designated by such nominee, and (ii)
except for (A) the final installment of principal payable with respect to such
Note on a Payment Date and (B) the redemption price for any Note called for
redemption pursuant to Section 2.18, in each case which shall be payable as
provided below.

 

(b)           The principal amount of the Notes to the extent not previously
paid, shall be due and payable on the Maturity Date.  Notwithstanding the
foregoing, the entire unpaid principal amount of the Notes shall be due and
payable, if not previously paid, on the date on which an Event of Default
described in Section 11.1 shall have occurred and be continuing, if the Notes
have been declared to be immediately due and payable as provided in Section
11.1.  So long as no Sequential Order Event shall have occurred and be
continuing, principal payments on the Notes shall be made pro rata to the
Noteholders entitled thereto.

 

Notices in connection with redemptions of Notes shall be mailed or sent by
facsimile to Noteholders and the Swap Counterparty as provided in Section 15.5.

 

(c)           If the Issuer defaults in a payment of interest on the Notes when
such interest becomes due and payable on any Payment Date, the Issuer shall pay
defaulted interest (plus interest on such defaulted interest to the extent
lawful) at the applicable Note Interest Rate in any lawful manner.  The Issuer
may pay such defaulted interest to the persons who are Noteholders on a
subsequent special record date, which date shall be fixed or caused to be fixed
by the Issuer and shall be at least three Business Days prior to the payment
date.  The Issuer shall fix or cause to be fixed any such payment date, and,
prior to the third Business Day prior to any such special

 

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record date, the Issuer shall mail or transmit by facsimile to each Noteholder
and the Swap Counterparty a notice that states the special record date, the
payment date and the amount of defaulted interest to be paid.

 

(d)           Holders of a security entitlement to Notes sold in reliance on
Regulation S as Temporary Regulation S Global Notes are prohibited from
receiving payments or from exchanging security entitlements to such Temporary
Regulation S Global Notes for Permanent Regulation S Global Notes until the
later of (i) the expiration of the Distribution Compliance Period (the “Exchange
Date”) and (ii) the furnishing of a certificate, substantially in the form of
Exhibit C attached hereto, certifying that the beneficial owner of the Temporary
Regulation S Global Note is a non-U.S. person (a “Regulation S Certificate”) as
provided in Section 2.12.

 

Section 2.10           Cancellation.  All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee and shall, following
its receipt thereof, be promptly canceled by the Trustee. The Issuer may at any
time deliver to the Trustee for cancellation any Notes previously authenticated
and delivered hereunder which the Issuer may have acquired in any manner
whatsoever, and all Notes so delivered shall, following its receipt thereof, be
promptly canceled by the Trustee.  No Notes shall be authenticated in lieu of or
in exchange for any Notes canceled as provided in this Section 2.10, except as
expressly permitted by this Agreement.  All canceled Notes shall be returned to
the Issuer.

 

Section 2.11           Global Notes.  The Notes, upon original issuance, will be
issued in global form (i) to QIBs in transactions exempt from the registration
requirements of the Securities Act in reliance on Rule 144A, as a single note in
fully registered form, without interest coupons (the “Rule 144A Global Note”),
authenticated and delivered in substantially the forms attached hereto included
in Exhibits A through D and/or (ii) as a single note in “offshore transactions”
(within the meaning of Regulation S), in fully registered form, without interest
coupons (the “Temporary Regulation S Global Note”), authenticated and delivered
in substantially the forms attached hereto included in Exhibits A through D. 
Such Notes shall be delivered to The Depository Trust Company, the initial
Clearing Agency, by, or on behalf of, the Issuer and shall initially be
registered on the Note Register in the name of Cede & Co., the nominee of the
initial Clearing Agency, and no Note Owner will receive a Definitive Note
representing such Note Owner’s interest in such Note, except as provided in
Section 2.15.  Unless and until definitive, fully registered Notes (the
“Definitive Notes”) have been issued to Note Owners pursuant to Section 2.15:

 

(i)            the provisions of this Section 2.11 shall be in full force and
effect;

 

(ii)           the Note Registrar and the Indenture Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Indenture (including the
payment of principal of and interest on the Notes and the giving of instructions
or directions hereunder) as the sole holder of the Notes, and shall have no
obligation to the Note Owners;

 

(iii)          to the extent that the provisions of this Section 2.11 conflict
with any other provisions of this Agreement, the provisions of this Section 2.11
shall control;

 

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(iv)          the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and agreements
between such Note Owners and the Clearing Agency and/or the Clearing Agency
Participants pursuant to the Depository Agreement.  Unless and until Definitive
Notes are issued pursuant to Section 2.15, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive and
transmit payments of principal of and interest on the Notes to such Clearing
Agency Participants;

 

(v)           whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a specified
percentage of the Aggregate Principal Amount of the Notes, the Clearing Agency
shall be deemed to represent such percentage only to the extent that it has
received instructions to such effect from Note Owners and/or Clearing Agency
Participants owning or representing, respectively, such required percentage of
the Aggregate Principal Amount of the Notes and has delivered such instructions
to the Trustee; and

 

(vi)          the Notes may not be transferred as a whole except by the Clearing
Agency to a nominee of the Clearing Agency or by a nominee of the Clearing
Agency to the Clearing Agency or another nominee of the Clearing Agency or by
the Clearing Agency or any such nominee to a successor Clearing Agency or a
nominee of such successor Clearing Agency.

 

Section 2.12           Regulation S Global Notes.

 

(a)           Notes issued in reliance on Regulation S under the Securities Act
will initially be in the form of a Temporary Regulation S Global Note.  Any
security entitlement to a Note evidenced by the Temporary Regulation S Global
Note is exchangeable for a security entitlement to Note in fully registered,
global form, without interest coupons, authenticated and delivered in
substantially the form with respect to each Class attached hereto in each of
Exhibit A, B, C and D (the “Permanent Regulation S Global Note”), upon the later
of (i) the Exchange Date and (ii) the furnishing of a Regulation S Certificate.

 

(b)           (i)  On or prior to the Exchange Date, each owner of a security
entitlement to a Temporary Regulation S Global Note shall deliver to Euroclear
or Clearstream (as applicable) a Regulation S Certificate; provided, however,
that any owner of a security entitlement to a Temporary Regulation S Global Note
on the Exchange Date or on any Payment Date that has previously delivered a
Regulation S Certificate hereunder shall not be required to deliver any
subsequent Regulation S Certificate (unless the certificate previously delivered
is no longer true as of such subsequent date, in which case such owner shall
promptly notify Euroclear or Clearstream, as applicable, thereof and shall
deliver an updated Regulation S Certificate).  Euroclear and/or Clearstream, as
applicable, shall deliver to the Paying Agent or the Trustee a certificate
substantially in the form of Exhibit F (a “Non-U.S. Certificate”) attached
hereto promptly upon the receipt of each such Regulation S Certificate, and no
such owner (or transferee from such owner) shall be entitled to receive a
security entitlement to a Permanent Regulation S Global Note or any payment of
or principal of interest on or any other payment with respect to its security
entitlement to a Temporary Regulation S Global Note prior to the Paying Agent or
the Trustee receiving such Non-U.S. Certificate from Euroclear or Clearstream
with respect to the portion of the Temporary Regulation S Global Note owned by
such owner

 

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(and, with respect to a security entitlement to the Permanent Regulation S
Global Note, prior to the Exchange Date).

 

(c)           Any payments of principal of, interest on or any other payment on
a Temporary Regulation S Global Note received by Euroclear or Clearstream with
respect to any portion of such Regulation S Global Note owned by a Note Owner
that has not delivered the Regulation S Certificate required by this Section
2.12 shall be held by Euroclear and Clearstream solely as agents for the Paying
Agent and the Trustee.  Euroclear and Clearstream shall remit such payments to
the applicable Note Owner (or to a Euroclear or Clearstream member on behalf of
such Note Owner) only after Euroclear or Clearstream has received the requisite
Regulation S Certificate.  Until the Paying Agent or the Trustee has received a
Non-U.S. Certificate from Euroclear or Clearstream, as applicable, that it has
received the requisite Regulation S Certificate with respect to the ownership of
a security entitlement any portion of a Temporary Regulation S Global Note, the
Paying Agent or the Trustee may revoke the right of Euroclear or Clearstream, as
applicable, to hold any payments made with respect to such portion of such
Temporary Regulation S Global Note.  If the Paying Agent or the Trustee
exercises its right of revocation pursuant to the immediately preceding
sentence, Euroclear or Clearstream, as applicable, shall return such payments to
the Paying Agent or the Trustee and the Trustee shall hold such payments in the
Collection Account until Euroclear or Clearstream, as applicable, has provided
the necessary Non-U.S. Certificates to the Paying Agent or the Trustee (at which
time the Paying Agent shall forward such payments to Euroclear or Clearstream,
as applicable, to be remitted to the Note Owner that is entitled thereto on the
records of Euroclear or Clearstream (or on the records of their respective
members)).

 

Each Note Owner with respect to a Temporary Regulation S Global Note shall
exchange its security entitlement thereto for a security entitlement to a
Permanent Regulation S Global Note on or after the Exchange Date upon furnishing
to Euroclear or Clearstream (as applicable) the Regulation S Certificate and
upon receipt by the Paying Agent or the Trustee, as applicable of the Non-U.S.
Certificate thereof from Euroclear or Clearstream, as applicable, in each case
pursuant to the terms of this Section 2.12.  On and after the Exchange Date,
upon receipt by the Paying Agent or the Trustee of any Non-U.S. Certificate from
Euroclear or Clearstream described in the immediately preceding sentence (i)
with respect to the first such certification, the Issuer shall execute, upon
receipt of an order to authenticate, and the Trustee shall authenticate and
deliver to the Clearing Agency Custodian the applicable Permanent Regulation S
Global Note and (ii) with respect to the first and all subsequent
certifications, the Clearing Agency Custodian shall exchange on behalf of the
applicable owners the portion of the applicable Temporary Regulation S Global
Note covered by such certification for a comparable portion of the applicable
Permanent Regulation S Global Note.  Upon any exchange of a portion of a
Temporary Regulation S Global Note for a comparable portion of a Permanent
Regulation S Global Note, the Clearing Agency Custodian shall endorse on the
schedules affixed to each such Regulation S Global Note (or on continuations of
such schedules affixed to each such Regulation S Global Note and made parts
thereof) appropriate notations evidencing the date of transfer and (x) with
respect to the Temporary Regulation S Global Note, a decrease in the principal
amount thereof equal to the amount covered by the applicable certification and
(y) with respect to the Permanent Regulation S Global Note, an increase in the
principal amount thereof equal to the principal amount of the decrease in the
Temporary Regulation S Global Note pursuant to clause (x) above.

 

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Section 2.13           Special Transfer Provisions.

 

(a)           If a holder of a security entitlement to the Rule 144A Global Note
wishes at any time to exchange its security entitlement to the Rule 144A Global
Note for a security entitlement to the Regulation S Global Note, or to transfer
a security entitlement to the Rule 144A Global Note to a person who wishes to
take delivery thereof in the form of a security entitlement to the Regulation S
Global Note, such holder may, subject to the rules and procedures of the
Clearing Agency and to the requirements set forth in the following sentence,
exchange or cause the exchange or transfer or cause the transfer of the
securities entitlement for an equivalent security entitlement to the Regulation
S Global Note.  Upon receipt by the Trustee of (1) instructions given in
accordance with the Clearing Agency’s procedures from or on behalf of a Note
Owner of the Rule 144A Global Note, directing the Trustee (via the Clearing
Agency’s Deposit/Withdrawal of Custodian System (“DWAC”)), as transfer agent, to
credit or cause to be credited a security entitlement to the Regulation S Global
Note in an amount equal to the security entitlement to the Rule 144A Global Note
to be exchanged or transferred, (2) a written order in accordance with the
Clearing Agency’s procedures containing information regarding the Euroclear or
Clearstream account to be credited with such increase and the name of such
account, and (3) a certificate given by such Note Owner stating that the
exchange or transfer of such security entitlement has been made pursuant to and
in accordance with Rule 903 or Rule 904 of Regulation S under the Securities
Act, the Trustee, as transfer agent, shall promptly deliver appropriate
instructions to the Clearing Agency (via DWAC), its nominee, or the custodian
for the Clearing Agency, as the case may be, to reduce or reflect on its records
a reduction of the Rule 144A Global Note by the aggregate principal amount of
the security entitlement to the Rule 144A Global Note to be so exchanged or
transferred from the relevant participant, and the Trustee, as transfer agent,
shall promptly deliver appropriate instructions (via DWAC) to the Clearing
Agency, its nominee, or the custodian for the Clearing Agency, as the case may
be, concurrently with such reduction, to increase or reflect on its records an
increase of the principal amount of such Regulation S Global Note by the
aggregate principal amount of the beneficial interest in the Rule 144A Global
Note to be so exchanged or transferred, and to credit or cause to be credited to
the account of the person specified in such instructions (who may be Euroclear
Bank S.A./N.V., as operator of Euroclear or Clearstream or another agent member
of Euroclear, or Clearstream, or both, as the case may be, acting for and on
behalf of them) a security entitlement to such Regulation S Global Note equal to
the reduction in the principal amount of the Rule 144A Global Note. 
Notwithstanding anything to the contrary, the Trustee may conclusively rely upon
the completed schedule set forth in the certificate evidencing the Notes.

 

(b)           If a holder of a security entitlement to the Regulation S Global
Note wishes at any time to exchange its security entitlement to the Regulation S
Global Note for a security entitlement to the Rule 144A Global Note, or to
transfer a security entitlement to the Regulation S Global Note to a person who
wishes to take delivery thereof in the form of security entitlement to the Rule
144A Global Note, such holder may, subject to the rules and procedures of
Euroclear or Clearstream and the Clearing Agency, as the case may be, and to the
requirements set forth in the following sentence, exchange or cause the exchange
or transfer or cause the transfer of such security entitlement for an equivalent
security entitlement to the Rule 144A Global Note.  Upon receipt by the Trustee,
as transfer agent of (1) instructions given in accordance with the procedures of
Euroclear or Clearstream and the Clearing Agency, as the case may be, from or on

 

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behalf of a Note Owner of the Regulation S Global Note directing the Trustee, as
transfer agent, to credit or cause to be credited a security entitlement to the
Rule 144A Global Note in an amount equal to the security entitlement to the
Regulation S Global Note to be exchanged or transferred, (2) a written order
given in accordance with the procedures of Euroclear or Clearstream and the
Clearing Agency, as the case may be, containing information regarding the
account with the Clearing Agency to be credited with such increase and the name
of such account, and (3) prior to the expiration of the Distribution Compliance
Period, a certificate given by such Note Owner stating that the person
transferring such security entitlement to such Regulation S Global Note
reasonably believes that the person acquiring such security entitlement to the
Rule 144A Global Note is a QIB and is obtaining such security entitlement for
its own account or the account of a QIB in a transaction meeting the
requirements of Rule 144A under the Securities Act and any applicable securities
laws of any state of the United States or any other jurisdiction, the Trustee,
as transfer agent, shall promptly deliver (via DWAC) appropriate instructions to
the Clearing Agency, its nominee, or the custodian for the Clearing Agency, as
the case may be, to reduce or reflect on its records a reduction of the
Regulation S Global Note by the aggregate principal amount of the security
entitlement to such Regulation S Global Note to be exchanged or transferred, and
the Trustee, as transfer agent, shall promptly deliver (via DWAC) appropriate
instructions to the Clearing Agency, its nominee, or the custodian for the
Clearing Agency, as the case may be, concurrently with such reduction, to
increase or reflect on its records an increase of the principal amount of the
Rule 144A Global Note by the aggregate principal amount of the security
entitlement to the Regulation S Global Note to be so exchanged or transferred,
and to credit or cause to be credited to the account of the person specified in
such instructions a security entitlement to the Rule 144A Global Note equal to
the reduction in the principal amount of the Regulation S Global Note.  After
the expiration of the Distribution Compliance Period, the certification
requirement set forth in clause (3) of the second sentence of this subsection
2.13(b) will no longer apply to such exchanges and transfers.  Notwithstanding
anything to the contrary, the Trustee may conclusively rely upon the completed
schedule set forth in the certificate evidencing the Notes.

 

(c)           Any security entitlement to one of the Global Notes that is
transferred to a person who takes delivery in the form of a security entitlement
to the other Global Note will, upon transfer, cease to be an interest in such
Global Note and become a security entitlement to the other Global Note and,
accordingly, will thereafter be subject to all transfer restrictions and other
procedures applicable to security entitlements to such other Global Note for as
long as it remains such a security entitlement.

 

(d)           Until the later of the Exchange Date and the provision of the
certifications required by Section 2.9(d), security entitlements to a Regulation
S Global Note may only be held through Euroclear Bank S.A./N.V., as operator of
Euroclear or Clearstream or another agent member of Euroclear and Clearstream
acting for and on behalf of them.  During the Distribution Compliance Period,
security entitlements to the Regulation S Global Note may be exchanged for
security entitlements to the Rule 144A Global Note only in accordance with the
certification requirements described above.

 

Section 2.14           Notices to Clearing Agency.  Whenever a notice or other
communication to the Holders of the Notes is required under this Agreement,
unless and until Definitive Notes shall have been issued to Note Owners pursuant
to Section 2.15, the Trustee shall give all such

 

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notices and communications specified herein to be given to Holders of the Notes
to the Clearing Agency, and shall have no obligation to the Note Owners.

 

Section 2.15           Definitive Notes.  If (i) the Issuer advises the Trustee
in writing that the Clearing Agency is no longer willing or able to properly
discharge its responsibilities with respect to the Notes, and the Issuer is
unable to locate a qualified successor, or (ii) the Issuer, at its option
advises the Trustee in writing that it elects to terminate the book-entry system
through the Clearing Agency, or (iii) after the occurrence of an Event of
Default or a Servicer Default, Note Owners of security entitlements aggregating
a majority of the Aggregate Principal Amount of the Notes advise the Issuer and
the Clearing Agency in writing that the continuation of a book-entry system
through the Clearing Agency is no longer in the best interests of the Note
Owners, then the Clearing Agency shall notify all Note Owners and the Trustee of
the occurrence of any such event and of the availability of Definitive Notes to
Note Owners.  Upon surrender to the Trustee of the typewritten Note or Notes
representing the Global Notes by the Clearing Agency, accompanied by
registration instructions, the Issuer shall execute and the Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency.  None of the Issuer, the Note Registrar or the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions.  Upon the issuance
of Definitive Notes to Note Owners, the Trustee shall recognize the Holders of
such Definitive Notes as Noteholders.

 

Section 2.16           Payments on the Notes.

 

(a)           Subject to the availability of funds and to the Priority of
Payments, the Notes will provide for (i) the payment of Accrued Interest on each
Payment Date through the Maturity Date, (ii) absent the occurrence of a
Sequential Order Event the payment of a Principal Distribution Amount on each
Payment Date through the Maturity Date and (iii) if a Sequential Order Event has
occurred the payment of principal in Sequential Order until the earlier of the
date on which all Notes are paid in full or the Maturity Date.  All outstanding
principal of the Notes will be due and payable (unless paid on an earlier date)
on the Maturity Date.

 

(b)           Interest and principal payable in respect of the Notes of any
Class on any Payment Date shall be paid to the Holders of the Notes of such
Class as of the related Record Date.

 

(c)           All reductions in the principal amount of a Note (or one or more
predecessor Notes) effected by payments of installments of principal made on any
Payment Date shall be binding upon all future Holders of such Note and of any
Note issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, whether or not such payment is noted on such Note.

 

(d)           Notwithstanding any other provision of this Agreement, principal
of, interest on and all other amounts payable on or in respect of the Notes will
constitute limited recourse obligations of the Issuer secured by and payable
solely from the Collateral, and following realization of the Collateral any
claims of the Noteholders shall be extinguished and shall not revive
thereafter.  Neither the Issuer, nor any of its respective agents, members,
partners, beneficiaries, officers, directors, employees or any Affiliate of any
of them or any of their respective successors or assigns or any other Person or
entity shall be personally liable for any

 

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amounts payable, or performance due, under the Notes or this Agreement.  It is
understood that the foregoing provisions of this paragraph shall not (i) prevent
recourse to the Collateral for the sums due or to become due under any security,
instrument or agreement which is part of the Collateral, or (ii) constitute a
waiver, release or discharge of any indebtedness or obligation evidenced by the
Notes or secured by this Agreement until such Collateral has been realized
whereupon any outstanding indebtedness or obligation shall be extinguished.  It
is further understood that the foregoing provisions of this paragraph shall not
limit the right of any Person to name the Issuer as party defendant in any
action, suit or in the exercise of any other remedy under the Notes or in this
Agreement, so long as no judgment in the nature of a deficiency judgment or
seeking personal liability shall be asked for or (if obtained) enforced against
any such Person.

 

(e)           For so long as any of the Notes are listed on the Luxembourg Stock
Exchange or any other stock exchange, to the extent required by the rules of
such exchange, the Issuer or, upon Issuer Order, the Trustee, in the name and at
the expense of the Issuer, shall notify such stock exchange in the event that
the Notes do not receive scheduled payments of principal or interest on any
Payment Date and the Servicer at the expense of the Issuer will arrange for
publication of such information in a daily newspaper in Luxembourg.

 

Section 2.17           Limited Recourse to the Issuer.  The Notes are limited
recourse obligations of the Issuer payable only from and to the extent of the
Collateral.  The Holders of the Notes shall have recourse to the Issuer only to
the extent of the Collateral, and to the extent such Collateral is not
sufficient to pay the Notes and the interest thereon in full and all other
obligations of the Issuer under this Agreement, the Holders of the Notes and
holders of other obligations payable from the Collateral shall have no rights in
any other assets which the Issuer may have.

 

Section 2.18           Clean-Up Call.  The Notes are subject to redemption by
the Issuer, but only if the Issuer has been so directed by the Servicer to make
such redemption, on any Payment Date on or after the date on which the Aggregate
Loan Balance as of the end of the related Due Period is 10% or less of the
Aggregate Loan Balance as of the Cut-Off Date.  The redemption price will be
equal to the Aggregate Principal Amount plus accrued and unpaid interest to the
date of redemption; provided that any Termination Payments due to the Swap
Counterparty under the Interest Rate Swap will be required to be paid
concurrently with or prior to any such redemption.

 

At any time after the Issuer has delivered notice of an optional redemption, the
Issuer will deposit or cause to be deposited funds into the Collection Account
sufficient to pay all principal and interest due or to become due on the Notes
in connection with such redemption and related costs and expenses incurred or to
be incurred by the Trustee.  Upon the payment of the Notes and all interest
thereon and upon the payment of all amounts due to the Swap Counterparty, and at
the written direction of the Issuer, the Trustee will release its lien on the
Collateral.  The Trustee will invest the funds in the Collection Account in
specific investments pursuant to this Agreement and will apply such funds
deposited into the Collection Account and earnings on such funds to the payment
in full of all principal and interest due on the Notes.

 

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Section 2.19           Authentication Agent.

 

(a)           The Trustee may appoint one or more Authentication Agents with
respect to the Notes which shall be authorized to act on behalf of the Trustee
in authenticating the Notes in connection with the issuance, delivery,
registration of transfer, exchange or repayment of the Notes.  Whenever
reference is made in this Agreement to the authentication of Notes by the
Trustee or the Trustee’s certificate of authentication, such reference shall be
deemed to include authentication on behalf of the Trustee by an Authentication
Agent and a certificate of authentication executed on behalf of the Trustee by
an Authentication Agent.  Each Authentication Agent must be acceptable to the
Issuer and the Servicer.

 

(b)           Any institution succeeding to the corporate agency business of an
Authentication Agent shall continue to be an Authentication Agent without the
execution or filing of any paper or any further act on the part of the Trustee
or such Authentication Agent.

 

(c)           An Authentication Agent may at any time resign by giving notice of
resignation to the Trustee, the Swap Counterparty and to the Issuer.  The
Trustee may at any time terminate the agency of an Authentication Agent by
giving notice of termination to such Authentication Agent and to the Issuer, the
Swap Counterparty and the Servicer.  Upon receiving such a notice of resignation
or upon such a termination, or in case at any time an Authentication Agent shall
cease to be acceptable to the Trustee or the Issuer, the Trustee may promptly
appoint a successor Authentication Agent.  Any successor Authentication Agent
upon acceptance of its appointment hereunder shall become vested with all the
rights, powers and duties of its predecessor hereunder, with like effect as if
originally named as an Authentication Agent.  No successor Authentication Agent
shall be appointed unless acceptable to the Issuer and the Servicer.

 

(d)           The Issuer agrees to pay to each Authentication Agent from time to
time reasonable compensation for its services under this Section 2.19.

 

(e)           The provisions of Sections 13.1 and 13.3 shall be applicable to
any Authentication Agent.

 

(f)            Pursuant to an appointment made under this Section 2.19, the
Notes may have endorsed thereon, in lieu of or in addition to the Trustee’s
certificate of authentication, an alternative certificate of authentication in
substantially the following form:

 

“This is one of the Notes described in the within-mentioned Agreement.

 

 

 

 

 

 

 

 

 

 

 

as Authentication Agent
for the Trustee

 

 

 

 

 

 

 

 

By:

 

 

 

Authorized Signatory”

 

 

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Section 2.20           Appointment of Paying Agent.  The Paying Agent shall make
payments to Noteholders from the Collection Account or other applicable Account
pursuant to the provisions of this Agreement and shall report the amounts of
such distributions to the Issuer. Any Paying Agent shall have the revocable
power to withdraw funds from the Collection Account or other applicable Account
for the purpose of making the distributions referred to above. The Issuer may
revoke such power and remove the Paying Agent if the Issuer determines in its
sole discretion that the Paying Agent shall have failed to perform its
obligations under this Agreement in any material respect. The Issuer reserves
the right at any time to vary or terminate the appointment of a Paying Agent for
the Notes, and to appoint additional or other Paying Agents, provided that it
will at all times maintain the Trustee as a Paying Agent.  In the event that any
Paying Agent shall resign, the Issuer may appoint a successor to act as Paying
Agent.  Any reference in this Agreement to the Paying Agent shall include any
co-paying agent unless the context requires otherwise.

 

Section 2.21           Confidentiality.  The Trustee and the Collateral Agent
hereby agree not to disclose to any Person any of the names or addresses of the
Obligor under any Pledged Loan or other information contained in the Loan
Schedule or the data transmitted to the Trustee or the Collateral Agent
hereunder, except (i) as may be required by law, rule, regulation or order
applicable to it or in response to any subpoena or other valid legal process,
(ii) as may be necessary in connection with any request of any federal or state
regulatory authority having jurisdiction over it or the National Association of
Insurance Commissioners, (iii) in connection with the performance of its duties
hereunder, (iv) to a Successor Servicer appointed pursuant to Section 12.2, (v)
in enforcing the rights of Noteholders and (vi) as requested by any Person in
connection with the financing statements filed pursuant to this Agreement.  The
Trustee and the Collateral Agent hereby agree to take such measures as shall be
reasonably requested by the Issuer of it to protect and maintain the security
and confidentiality of such information.  The Trustee and the Collateral Agent
shall use reasonable efforts to provide the Issuer with written notice five days
prior to any disclosure pursuant to this Section 2.21.

 

Nothing in the foregoing paragraph should, however, be construed to limit the
ability of the Trustee and the Collateral Agent (and their respective
Affiliates, employees, officers, directors, agents and advisors) to disclose to
any and all Persons, without limitation of any kind, the tax structure and tax
treatment (as such terms are used in sections 6011, 6111, and 6112 of the Code
and the regulations promulgated thereunder) of the Notes, and all materials of
any kind (including opinions or other tax analyses) that have been provided to
the Trustee or the Collateral Agent related to such tax structure and tax
treatment.  In this regard, the Trustee and the Collateral Agent acknowledge and
agree that disclosure of the tax structure or tax treatment of the Notes is not
limited in any way by an express or implied understanding or agreement, oral or
written (whether or not such understanding or agreement is legally binding). 
Furthermore, the Trustee and the Collateral Agent acknowledge and agree that
they do not know or have reason to know that the use or disclosure of
information relating to the tax structure or tax treatment of the Notes is
limited in any other manner (such as where the Notes are claimed to be
proprietary or exclusive) for the benefit of any other Person.  Neither the
Trustee nor the Collateral Agent shall be permitted to disclose the tax
structure and tax treatment of the Notes to the extent that such disclosure
would constitute a violation of Federal or state securities laws.

 

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Section 2.22           144A Information.  The Issuer agrees to furnish to the
Trustee, for each Noteholder or any prospective transferee of a Note at such
Noteholder’s (or transferee’s) request, all information with respect to the
Issuer or the Servicer, the Pledged Loans or the Notes required pursuant to Rule
144A promulgated by the Securities and Exchange Commission under the Securities
Act, to enable such Noteholder to effect resales of the Notes (or interests
therein) pursuant to such rule.

 

ARTICLE III

 

PAYMENTS, SECURITY AND ALLOCATIONS

 

Section 3.1             Priority of Payments, Sequential Order.

 

(a)           The Servicer shall apply, or by written instruction to the Trustee
shall cause the Trustee to apply, on each Payment Date Available Funds for that
Payment Date on deposit in the Collection Account and, pursuant to Section
3.5(b), amounts on deposit in the Reserve Account, if any, to make the following
payments and in the following order of priority:

 

FIRST, to the Trustee the Monthly Trustee Fees and expenses of the Trustee and
indemnity amounts which relate to the Notes to the extent not paid by the
Servicer, plus accrued and unpaid Monthly Trustee Fees, expenses and indemnity
amounts for prior Payment Dates; provided, however, that (i) any expenses of the
Trustee related to the transfer of servicing to a successor servicer and payable
in priority FIRST will be limited to $100,000 per calendar quarter and $340,000
in the aggregate, and (ii) any other expenses of the Trustee will be limited to
$10,000 per calendar year as long as no Event of Default relating to a default
in the payment of interest or principal on the Notes has occurred, and the Notes
have not been accelerated, or the Collateral sold, pursuant to this Agreement;

 

SECOND, to the Servicer, the Monthly Servicer Fee plus any unreimbursed Servicer
Advances, plus any accrued and unpaid Monthly Servicer Fees and unreimbursed
Servicer Advances for prior Payment Dates;

 

THIRD, to the Swap Counterparty, the Net Swap Payment, if any;

 

FOURTH, to the extent not paid by the Servicer, to the Custodian the Monthly
Custodian Fee, plus any accrued and unpaid Monthly Custodian Fees for prior
Payment Dates, not to exceed an amount on such Payment Date equal to one-twelfth
of 0.06% of the Aggregate Loan Balance on such Payment Date;

 

FIFTH, to the extent not paid by the Servicer, to the Collateral Agent, the
Monthly Collateral Agent Fee, plus any accrued and unpaid Monthly Collateral
Agent Fees for prior Payment Dates;

 

SIXTH, to the Class A Noteholders, Accrued Interest on the Class A Notes and any
overdue interest from prior periods (and interest thereon);

 

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SEVENTH, to the Class B Noteholders, Accrued Interest on the Class B Notes and
any overdue interest from prior periods (and interest thereon);

 

EIGHTH, to the Class C Noteholders, Accrued Interest on the Class C Notes and
any overdue interest from prior periods (and interest thereon);

 

NINTH, to the Class D Noteholders, Accrued Interest on the Class D Notes and any
overdue interest from prior periods (and interest thereon); and so long as no
Sequential Order Event has occurred and is continuing, to the Swap Counterparty
any Termination Payments relating to a termination of the Interest Rate Swap
arising from (a) the Swap Counterparty not receiving any Net Swap Payment, (b)
bankruptcy, insolvency or similar event of the Issuer or (c) the liquidation of
the Collateral under this Agreement, pro rata in proportion to the amounts due;

 

TENTH, so long as no Sequential Order Event has occurred and is continuing to
the Class A Noteholders, the Class B Noteholders, the Class C Noteholders and
the Class D Noteholders, the Principal Distribution Amount pro rata in
proportion to their respective Class Percentages; if a Sequential Order Event
has occurred and is continuing all remaining Available Funds will be paid in
Sequential Order as set forth in subsection 3.1(b);

 

ELEVENTH, to (a) the Class A Noteholders, (b) the Class B Noteholders, (c) the
Class C Noteholders and (d) the Class D Noteholders, in that order,
reimbursement of any Interest Carry-Forward Amounts owing to such Class;

 

TWELFTH, if the amount on deposit in the Reserve Account is less than the
Reserve Required Amount, to the Reserve Account the remaining amount of
Available Funds to the extent needed to increase the amount on deposit in the
Reserve Account to the Reserve Required Amount;

 

THIRTEENTH, to the Trustee, any other amounts due to the Trustee in respect of
fees, expenses or indemnity to the extent not paid by the Servicer or pursuant
to priority FIRST;

 

FOURTEENTH, to the Swap Counterparty, any Termination Payments relating to a
termination of the Interest Rate Swap not paid pursuant to clause NINTH of this
subsection 3.1(a); and

 

FIFTEENTH, to the Issuer, any remaining Available Funds free and clear of the
Lien of this Agreement.

 

(b)           Sequential Order.  If a Sequential Order Event occurs and is
continuing, principal payments shall not be made to the Class A Notes, Class B
Notes, Class C Notes and Class D Notes on a pro rata basis but thereafter and so
long as the Sequential Order Event has not been cured, on each Payment Date all
Available Funds remaining after application of clause “NINTH” in subsection (a)
above shall be applied in the following order of priority (“Sequential Order”):

 

(i)                                     to principal on the Class A Notes until
the Class A Notes are paid in full;

 

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(ii)                                  to principal on the Class B Notes until
the Class B Notes are paid in full;

 

(iii)                               to principal on the Class C Notes until the
Class C Notes are paid in full;

 

(iv)                              to the Swap Counterparty, any Termination
Payments relating to a termination of the Interest Rate Swap arising from (a)
the Swap Counterparty not receiving any Net Swap Payment, (b) bankruptcy,
insolvency, or similar event of the Issuer or (c) the liquidation of the
Collateral under this Agreement; and

 

(iv)                              to principal on the Class D Notes until the
Class D Notes are paid in full.

 

Funds remaining on any Payment Date after making principal payments on the Notes
as described above while a Sequential Order Event shall be in effect, shall be
distributed as provided in provisions ELEVENTH through FIFTEENTH in subsection
(a) above.

 

Section 3.2             Information Provided to Trustee.  The Servicer shall
promptly provide the Trustee in writing with all information necessary to enable
the Trustee to make the payments and deposits required pursuant to Section 3.1
as required by Section 8.1 and the Trustee shall be entitled to rely thereon.

 

Section 3.3             Payments.  On each Payment Date, the Trustee, as Paying
Agent, shall distribute to the Holders and the other parties entitled thereto
herein the amounts due and payable under this Agreement and the Notes.

 

Section 3.4             Collection Account.

 

(a)           Collection Account.  The Trustee, for the benefit of the
Noteholders and the Swap Counterparty, shall establish and maintain in the name
of the Trustee, a segregated account designated as the “Sierra 2003-1
Receivables Funding Company, LLC Series 2003-1 Collection Account” bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Noteholders and the Swap Counterparty pursuant to this
Agreement.  Deposits made into the Collection Account shall be limited to
amounts deposited therein on the Closing Date, amounts paid to the Issuer under
the terms of the Interest Rate Swap, Collections and other Available Funds and
earnings on the Account.  If, at any time, the Collection Account ceases to be
an Eligible Account, the Trustee (or the Servicer on its behalf) shall within 10
Business Days establish a new Collection Account as an Eligible Account and
shall transfer any property in the Collection Account to the new Collection
Account.  So long as the Trustee is an Eligible Institution, the Collection
Account may be maintained with it in an Eligible Account.

 

(b)           Withdrawals.  The Trustee shall have the sole and exclusive right
to withdraw or order a transfer of funds from the Collection Account, in all
events in accordance with the terms and provisions of this Agreement and the
information most recently delivered to the Trustee pursuant to Section 8.1;
provided, however, that the Trustee shall be authorized to accept and act upon
instructions from the Servicer regarding withdrawals or transfers of funds from
the Collection Account, in all events in accordance with the provisions of this
Agreement and the information most recently delivered pursuant to Sections 3.1
and 8.1.  In addition, notwithstanding anything in the foregoing to the
contrary, the Trustee shall be authorized to

 

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accept instructions from the Servicer on a daily basis regarding withdrawals or
order transfers of funds from the Collection Account, to the extent such funds
either (i) have been mistakenly deposited into the Collection Account (including
without limitation funds representing assessments or dues payable by Obligors to
property owners associations or other entities) or (ii) relate to items
subsequently returned for insufficient funds or as a result of stop payments. 
In the case of any withdrawal or transfer pursuant to the foregoing sentence,
the Servicer shall provide the Trustee and the Swap Counterparty with notice of
such withdrawal or transfer, together with reasonable supporting details, on the
next Monthly Servicing Report to be delivered by the Servicer following the date
of such withdrawal or transfer (or in such earlier written notice as may be
required by the Trustee from the Servicer from time to time).  Notwithstanding
anything therein to the contrary, the Trustee shall be entitled to make
withdrawals or order transfers of funds from the Collection Account, in the
amount of all reasonable and appropriate out-of-pocket costs and expenses
incurred by the Trustee in connection with any misdirected funds described in
clause (i) and (ii) of the second foregoing sentence.  Within two Business Days
of receipt, the Servicer shall transfer all Collections processed by the
Servicer to the Trustee for deposit into the Collection Account.  The Trustee
shall deposit or cause to be deposited into the Collection Account upon receipt
the Release Price in respect of releases of Pledged Loans by the Issuer.  On
each Payment Date, the Trustee shall apply amounts in the Collection Account to
make the payments and disbursements described in Section 3.1 and this Section
3.4.

 

(c)           Administration of the Collection Account.  Funds in the Collection
Account shall, at the direction of the Servicer, at all times be invested in
Permitted Investments; provided, however, that all Permitted Investments shall
mature on or before the next Payment Date, in order to ensure that funds on
deposit therein will be available on such Payment Date.  The Trustee shall
maintain or cause to be maintained possession of any negotiable instruments or
security certificates evidencing the Permitted Investments from the time of
purchase thereof until the time of sale or maturity.  Subject to the
restrictions set forth in the first sentence of this subsection 3.4(c), the
Servicer shall instruct the Trustee in writing regarding the investment of funds
on deposit in the Collection Account.  All investment earnings on such funds
shall be deemed to be available to the Trustee for the uses specified in this
Agreement.  The Trustee shall be fully protected in following the investment
instructions of the Servicer, and shall have no obligation for keeping the funds
fully invested at all times or for making any investments other than in
accordance with such written investment instructions.  If no investment
instructions are received from the Servicer, the Trustee is authorized to invest
the funds in Permitted Investments described in clause (v) of the definition
thereof.  In no event shall the Trustee be liable for any investment losses
incurred in connection with the investment of funds on deposit in the Collection
Account by the Trustee pursuant to this Agreement.

 

(d)           Irrevocable Deposit.  Any deposit made into the Collection Account
hereunder shall, except as otherwise provided herein, be irrevocable and the
amount of such deposit and any money, instrument, investment property or other
property on deposit in, carried in or credited to such Account hereunder and all
interest thereon shall be held in trust by the Trustee and applied solely as
provided herein.

 

(e)           Source.  All amounts delivered to the Trustee shall be accompanied
by information in reasonable detail and in writing specifying the source and
nature of the amounts.

 

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Section 3.5             Reserve Account

 

(a)           Creation and Funding of the Reserve Account.  The Trustee shall
establish and maintain in the name of the Trustee, an Eligible Account
designated as the “Sierra 2003-1 Receivables Funding Company, LLC Reserve
Account” bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Noteholders and the Swap Counterparty
pursuant to this Agreement.  The Reserve Account shall be under the sole
dominion and control of the Trustee; however, if so directed by the Servicer,
the Reserve Account may be an Eligible Account in the name of the Trustee opened
at another Eligible Institution.  If, at any time, the Reserve Account ceases to
be an Eligible Account, the Trustee (or the Servicer on its behalf) shall within
10 Business Days establish a new Reserve Account as an Eligible Account and
shall transfer any property in the Reserve Account to such new Reserve Account. 
So long as the Trustee is an Eligible Institution, the Reserve Account may be
maintained with it in an Eligible Account.

 

A deposit shall be made to the Reserve Account on the Closing Date in an amount
equal to the Reserved Required Amount and, on each Payment Date, deposits shall
be made to the Reserve Account to the extent provided in provision TWELFTH of
subsection 3.1(a).

 

(b)           If on any Payment Date, the Available Funds are not sufficient to
pay those amounts described in provisions FIRST through TENTH of subsection
3.1(a), the Trustee, at the direction of the Servicer, shall withdraw an amount
equal to the lesser of (i) the excess of those amounts described in provisions
FIRST through TENTH of subsection 3.1(a), over the Available Funds available to
pay such amounts and (ii) the Reserve Account Amount and use such amount to pay
amounts due but unpaid, in the order set forth in provisions FIRST through TENTH
of subsection 3.1(a).

 

(c)           Release of Funds from Reserve Account.  Upon the termination of a
Cash Accumulation Event, the Trustee shall release all cash on deposit in the
Reserve Account in excess of the Reserve Required Amount to the Issuer free and
clear of the lien of this Agreement; provided, however, that such amounts shall
first be used to pay any amounts owing to the Trustee pursuant to priority
THIRTEENTH of subsection 3.1(a) before being released to the Issuer.

 

(d)           Termination of Reserve Account.  Any funds remaining in the
Reserve Account after all Notes (including both principal and interest thereon)
have been paid in full and in cash and all other obligations of the Issuer under
this Agreement and the Notes have been paid in full and in cash shall be
remitted by the Trustee to the Issuer free and clear of the lien of this
Agreement.

 

(e)           Administration of the Reserve Account.  Funds in the Reserve
Account shall be invested in Permitted Investments as directed by the Servicer;
provided, however, that all Permitted Investments shall mature on or before the
next Payment Date.  All such Permitted Investments shall be held by the
Trustee.  Subject to the restrictions set forth in the first sentence of this
subsection (e), the Servicer shall instruct the Trustee in writing regarding the
investment of funds on deposit in the Reserve Account.  The Trustee shall be
fully protected in following the investment instructions of the Servicer, and
shall have no obligation for keeping the funds fully

 

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invested at all times or for making any investments other than in accordance
with such written investment instructions.  If no investment instructions are
received from the Servicer, the Trustee is authorized to invest the funds in
Permitted Investments described in clause (v) of the definition thereof.  In no
event shall the Trustee be liable for any investment losses incurred in
connection with the investment of funds on deposit in the Reserve Account by the
Trustee pursuant to this Agreement.

 

(f)            Deposit Irrevocable.  Any deposit made into the Reserve Account
hereunder shall, except as otherwise provided herein, be irrevocable and the
amount of such deposit and any money, instruments, investment property, or other
property credited to, carried in, or deposited in the Reserve Account hereunder
and all interest thereon shall be held in trust by the Trustee and applied
solely as provided herein.

 

Section 3.6             Interest Rate Swap.

 

(a)           The Issuer shall enter into the Interest Rate Swap, certain terms
of which are set forth herein for the convenience of the parties thereto for
incorporation therein by reference, with the Swap Counterparty on the Closing
Date.  The Interest Rate Swap shall have a termination date which is the
earliest of January 15, 2014 or when the notional amount thereunder has been
reduced to zero, subject to early termination in accordance with the terms of
the Interest Rate Swap.  The Interest Rate Swap shall have a notional amount for
each Accrual Period equal to the Adjusted Principal Amount of the Class D Notes
as of the close of business on the first day of such Accrual Period.  Under the
Interest Rate Swap, the Issuer shall be the fixed rate payer and shall pay a
fixed rate of 7.16% and the Swap Counterparty shall be the floating rate payer
and shall pay a floating rate of LIBOR plus 4.50%.  Pursuant to the terms of the
Interest Rate Swap, the Swap Counterparty shall pay to the Trustee, on behalf of
the Issuer, on each Payment Date, the Net Swap Receipt, if any, plus the amount
of any Net Swap Receipt due but not paid with respect to any previous Payment
Date.  The Trustee shall deposit such Net Swap Receipts, if any, into the
Collection Account and shall apply such amounts as Available Funds pursuant to
subsection 3.1 of this Agreement.  In addition, in accordance with the terms of
the Interest Rate Swap, the Issuer shall pay to the Swap Counterparty the Net
Swap Payment, if any, for such Payment Date, plus the amount of any Net Swap
Payment due but not paid on any previous Payment Date, from amounts available
pursuant to provision THIRD of subsection 3.1(a).

 

(b)           Following the termination of the Interest Rate Swap pursuant to
the terms thereof, the Swap Counterparty shall pay to the Trustee for the
benefit of the Issuer the amount of the Termination Receipt, if any, to be made
by the Swap Counterparty pursuant to the Interest Rate Swap.  The Trustee shall,
promptly upon receipt of any such Termination Receipt, if any, at the written
direction of the Servicer, deposit such Termination Receipt into the Collection
Account to be applied as Available Funds.

 

(c)           Following the termination of Interest Rate Swap pursuant to the
terms thereof, the Issuer shall pay to the Swap Counterparty the amount of the
Termination Payment, if any, to be made by the Issuer pursuant to the Interest
Rate Swap to the extent of funds available therefore under provision NINTH of
subsection 3.1(a), if applicable, or provision FOURTEENTH, if applicable, or if
a Sequential Order Event has occurred and is continuing, as provided in
subsection 3.1(b).

 

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(d)           The Interest Rate Swap shall provide that if a Ratings Event (as
defined below) shall occur and be continuing with respect to the Swap
Counterparty, then the Swap Counterparty shall (A) within five Business Days of
such Ratings Event, give notice to the Issuer of the occurrence of such Ratings
Event, and (B) use reasonable efforts to transfer (at its own cost) the Swap
Counterparty’s rights and obligations under the Interest Rate Swap to another
party, subject to satisfaction of the Rating Agency Condition.  If a Ratings
Event occurs, the Issuer, to the extent it has been notified of such event,
shall notify the Trustee and the Servicer.  Unless such a transfer by the Swap
Counterparty has occurred within 20 Business Days after the occurrence of a
Ratings Event, the Issuer shall demand that the Swap Counterparty post Eligible
Collateral, as defined in the Interest Rate Swap, to secure the Issuer’s
exposure or potential exposure to the Swap Counterparty.  The Eligible
Collateral to be posted shall be subject to the Rating Agency Condition. 
Valuation and posting of Eligible Collateral shall be made as of each Payment
Date as provided in the Interest Rate Swap.  Notwithstanding the posting of
Eligible Collateral, the Swap Counterparty shall continue to use reasonable
efforts to transfer its rights and obligations under the Interest Rate Swap to
an acceptable third party; provided, however, that the Swap Counterparty’s
obligations to find a transferee and to post Eligible Collateral shall remain in
effect only for so long as a Ratings Event is continuing.

 

(e)           The Interest Rate Swap shall provide that a “Ratings Event” will
occur with respect to the Swap Counterparty if the long-term and short-term
senior unsecured deposit ratings of the Swap Counterparty cease to be at least A
and A-1 by S&P, or at least A1 and P-1 by Moody’s, or at least A and F1 by
Fitch, to the extent such obligations are rated by S&P or Moody’s or Fitch.

 

The Interest Rate Swap shall further provide that if the long-term and
short-term senior unsecured deposit ratings of the Swap Counterparty cease to be
at least A2 and P-1 by Moody’s, then the Swap Counterparty shall not be entitled
to post Eligible Collateral, as defined in the Interest Rate Swap, but rather
shall be required to use reasonable efforts to transfer the Swap Counterparty’s
rights and obligations under the Interest Rate Swap to an eligible transferee
within 20 Business Days of the publication date of such downgrade.

 

If the Interest Rate Swap is terminated for any reason and no successor swap is
entered into, the Servicer shall solicit bids from three or more prospective
replacement swap counterparties for the price of a replacement swap agreement
with a notional amount equal to the outstanding principal amount of the Class D
Notes.  With the consent of Noteholders representing 51% or more of the
Aggregate Principal Amount at such time, and upon satisfaction of the Rating
Agency Condition, the Issuer will enter into such replacement swap agreement. 
If Noteholders representing 51% or more of the Aggregate Principal Amount do not
consent to such replacement swap agreement, or if the Rating Agency Condition is
not met, the Issuer will not enter into a replacement swap agreement.

 

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ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF THE ISSUER

 

Section 4.1             Representations and Warranties Regarding the Issuer. 
The Issuer hereby represents and warrants to the Trustee and the Collateral
Agent on the date of execution of this Agreement as follows:

 

(a)           Due Formation and Good Standing.  The Issuer is a limited
liability company duly formed, validly existing and in good standing under the
laws of the State of Delaware, and has full power, authority and legal right to
own its properties and conduct its business as such properties are presently
owned and such business is presently conducted, and to execute, deliver and
perform its obligations under each of the Transaction Documents to which it is a
party.  The Issuer is duly qualified to do business and is in good standing as a
foreign entity, and has obtained all necessary licenses and approvals in each
jurisdiction in which failure to qualify or to obtain such licenses and
approvals would render any Pledged Loan unenforceable by the Issuer or would
otherwise have a Material Adverse Effect.

 

(b)           Due Authorization and No Conflict.  The execution, delivery and
performance by the Issuer of each of the Transaction Documents to which it is a
party, and the consummation by the Issuer of each of the transactions
contemplated hereby and thereby, including without limitation the acquisition of
the Pledged Loans under the Series 2003-1 Term Purchase Agreement and the making
of the Grants contemplated hereunder, have in all cases been duly authorized by
the Issuer by all necessary action, do not contravene (i) the Issuer’s
certificate of formation or the LLC Agreement, (ii) any existing law, rule or
regulation applicable to the Issuer, (iii) any contractual restriction contained
in any material indenture, loan or credit agreement, lease, mortgage, deed of
trust, security agreement, bond, note, or other material agreement or instrument
binding on or affecting the Issuer or its property or (iv) any order, writ,
judgment, award, injunction or decree binding on or affecting the Issuer or its
property (except where such contravention would not have a Material Adverse
Effect), and do not result in or require the creation of any Lien upon or with
respect to any of its properties (except as provided in such Transaction
Documents); and no transaction contemplated hereby requires compliance with any
bulk sales act or similar law.  Each of the other Transaction Documents to which
the Issuer is a party have been duly executed and delivered by the Issuer.

 

(c)           Governmental and Other Consents.  All approvals, authorizations,
consents, orders of any court or governmental agency or body required in
connection with the execution and delivery by the Issuer of any of the
Transaction Documents to which the Issuer is a party, the consummation by the
Issuer of the transactions contemplated hereby or thereby, the performance by
the Issuer of and the compliance by the Issuer with the terms hereof or thereof,
have been obtained, except where the failure so to do would not have a Material
Adverse Effect on the Issuer.

 

(d)           Enforceability of Transaction Documents.  Each of the Transaction
Documents to which the Issuer is a party have been duly and validly executed and
delivered by the Issuer and constitute the legal, valid and binding obligation
of the Issuer, enforceable against the Issuer in accordance with their
respective terms, except as enforceability may be subject to or limited by

 

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Debtor Relief Laws or by general principles of equity (whether considered in a
suit at law or in equity).

 

(e)           No Litigation.  There are no proceedings or investigations pending
or, to the best knowledge of the Issuer, threatened, against the Issuer before
any court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity of this Agreement or
any of the other Transaction Documents, (ii) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement or any of the other
Transaction Documents, (iii) seeking any determination or ruling that would
adversely affect the performance by the Issuer of its obligations under this
Agreement or any of the other Transaction Documents to which the Issuer is a
party, (iv) seeking any determination or ruling that would adversely affect the
validity or enforceability of this Agreement or any of the other Transaction
Documents or (v) seeking any determination or ruling which would be reasonably
likely to have a Material Adverse Effect on the Issuer.

 

(f)            Use of Proceeds.  All proceeds of the issuance of the Notes shall
be used by the Issuer to acquire Loans from the Depositor under the Series
2003-1 Term Purchase Agreement, to pay costs related to the issuance of the
Notes, to pay principal and/or interest on any Notes or to otherwise fund costs
and expenses permitted to be paid under the terms of the Transaction Documents.

 

(g)           Governmental Regulations.  The Issuer is not (1) an “investment
company” registered or required to be registered under the Investment Company
Act of 1940, as amended, or (2) a “public utility company” or a “holding
company,” a “subsidiary company” or an “affiliate” of any public utility company
within the meaning of Section 2(a)(5), 2(a)(7), 2(a)(8)or 2(a)(11) of the Public
Utility Holding Company Act of 1935, as amended.

 

(h)           Margin Regulations.  The Issuer is not engaged, principally or as
one of its important activities, in the business of extending credit for the
purpose of “purchasing” or “carrying” any “margin stock” (as each of the quoted
terms is defined or used in any of Regulations T, U or X of the Board of
Governors of the Federal Reserve System, as in effect from time to time).  No
part of the proceeds of any of the Notes has been used for so purchasing or
carrying margin stock or for any purpose which violates, or which would be
inconsistent with, the provisions of any of Regulations T, U or X of the Board
of Governors of the Federal Reserve System, as in effect from time to time.

 

(i)            Location of Chief Executive Office and Records.  As of the date
hereof, the principal place of business and chief executive office of the Issuer
is located at 10750 West Charleston Boulevard, Suite 130, Mail Stop 2045, Las
Vegas, Nevada 89135.  As of the date hereof, the principal place of business and
chief executive office of the Servicer is located at 10750 West Charleston
Boulevard, Suite 130, Las Vegas, Nevada 89135.  As of the date hereof, neither
the Issuer nor the Servicer operates its business or maintains the Records at
any other locations.  As of the date hereof, the issuer is a limited liability
company organized under the law of the State of Delaware, whose correct name is
set forth in the signature pages hereof.

 

(j)            Lockbox Accounts.  Except in the case of any Lockbox Account
pursuant to which only collections in respect of loans subject to a PAC or
Credit Card Account are

 

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deposited, the Issuer has filed or has caused to be filed a standing delivery
order with the United States Postal Service authorizing each Lockbox Bank to
receive mail delivered to the related Post Office Box.  The account numbers of
all Lockbox Accounts, together with the names, addresses, ABA numbers and names
of contact persons of all the Lockbox Banks maintaining such Lockbox Accounts
and the related Post Office Boxes, are specified in the exhibits to this
Agreement.  From and after the Closing Date, except as provided in the
Intercreditor Agreement, the Trustee shall hold all right and title to and
interest in all of the monies, checks, instruments, depository transfers or
automated clearing house electronic transfers and other items of payment and
their proceeds and all monies and earnings, if any, thereon in the Lockbox
Accounts.  The Issuer has no other lockbox accounts for the collection of
Scheduled Payments in respect of Pledged Loans except for the Lockbox Accounts.

 

(k)           No Trade Names.  The Issuer has no trade names, fictitious names,
assumed names or “doing business as” names, and has not had any such names or
had any other legal name at any time since its formation.

 

(l)            Subsidiaries.  The Issuer has no Subsidiaries and does not own or
hold, directly or indirectly, any capital stock or equity security of, or any
equity interest in, any Person, other than Permitted Investments.

 

(m)          Transaction Documents.  The Series 2003-1 Term Purchase Agreement
is the only agreement pursuant to which the Issuer purchases the Pledged Loans
and the related Pledged Assets.  The Issuer has furnished to the Trustee and the
Collateral Agent, true, correct and complete copies of each Transaction Document
to which the Issuer is a party, each of which is in full force and effect. 
Neither the Issuer nor any Affiliate thereof is in default of any of its
obligations thereunder in any material respect.  The Issuer is the lawful owner
of, and has good title to, each Pledged Loan and all related Pledged Assets,
free and clear of any Liens (other than the Lien of this Agreement and any
Permitted Encumbrances on the related Timeshare Properties), or has a
first-priority perfected security interest therein.  All such Pledged Loans and
other related Pledged Assets are purchased without recourse to the Depositor
except as described in the Series 2003-1 Term Purchase Agreement.  The purchase
by the Issuer under the Series 2003-1 Term Purchase Agreement constitute either
a sale or a first-priority perfected security interest, enforceable against
creditors of the Depositor.

 

(n)           Business.  Since its formation, the Issuer has conducted no
business other than the execution, delivery and performance of the Transaction
Documents contemplated hereby, the purchase of Loans thereunder, the issuance
and payment of the Notes and such other activities as are incidental to the
foregoing. The Issuer has incurred no Debt except that expressly incurred
hereunder and under the other Transaction Documents.

 

(o)           Ownership of the Issuer.  One hundred percent (100%) of the
outstanding equity interest in the Issuer is directly owned (both beneficially
and of record) by the Depositor.

 

(p)           Taxes.  The Issuer has timely filed or caused to be timely filed
all federal, state, and local and foreign tax returns which are required to be
filed by it, and has paid or caused to be paid all taxes due and owing by it,
other than any taxes or assessments, the validity of which are being contested
in good faith by appropriate proceedings timely instituted and diligently
pursued

 

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and with respect to which the Issuer has set aside adequate reserves on its
books in accordance with GAAP and which proceedings have not given rise to any
Lien.

 

(q)           Tax Classification.  Since its formation, for federal income tax
purposes, the Issuer (i) has been classified as a disregarded entity or
partnership and (ii) has not been classified as an association taxable as a
corporation or a publicly traded partnership.

 

(r)            Solvency.  The Issuer (i) is not “insolvent” (as such term is
defined in the Bankruptcy Code); (ii) is able to pay its debts as they become
due; and (iii) does not have unreasonably small capital for the business in
which it is engaged or for any business or transaction in which it is about to
engage.

 

(s)           ERISA.  There has been no (i) occurrence or expected occurrence of
any Reportable Event with respect to any Benefit Plan subject to Title IV of
ERISA of the Issuer or any of its ERISA Affiliates, or any withdrawal from, or
the termination, Reorganization or Plan Insolvency of any Multiemployer Plan or
(ii) institution of proceedings or the taking of any other action by the Pension
Benefit Guaranty Corporation or the Issuer or any of its ERISA Affiliates or any
such Multiemployer Plan with respect to the withdrawal from, or the termination,
Reorganization or Plan Insolvency of, any such Plan.

 

(t)            No Adverse Selection.  No selection procedures materially adverse
to the Noteholders, the Trustee or the Collateral Agent have been employed in
selecting the Pledged Loans for inclusion in the Collateral on the Closing Date.

 

Section 4.2             Representations and Warranties Regarding the Loan Files.
The Issuer represents and warrants to each of the Trustee, the Collateral Agent,
the Servicer and the Noteholders as to each Pledged Loan that:

 

(a)           Possession.  On or immediately prior to the Closing Date the
Custodian will have possession of each original Pledged Loan and the related
Loan File, and will have acknowledged such receipt and its undertaking to hold
such documents for purposes of perfection of the Collateral Agent’s interests in
such original Pledged Loan and the related Loan File; provided, however, that
the fact that any of the Loans not required to be in its respective Loan File
under the terms of the respective Purchase Agreements is not in the possession
of the Custodian in its respective Loan File does not constitute a breach of
this representation; and provided that, possession of Loan Documents may be in
the form of microfiche or other electronic copies of the Loan Documents to the
extent provided in the Custodial Agreement.

 

(b)           Marking Records.  On or before the Closing Date, each of the
Issuer and the Servicer shall have caused the portions of the computer files
relating to the Pledged Loans Granted to the Collateral Agent on such date to be
clearly and unambiguously marked to indicate that such Loans constitute part of
the Collateral Granted by the Issuer in accordance with the terms of this
Agreement.

 

The representations and warranties of the Issuer set forth in this Section 4.2
shall be deemed to be remade without further act by any Person on and as of each
Substitution Date with respect to each Loan Granted by the Issuer on and as of
each such date. The representations and

 

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warranties set forth in this Section 4.2 shall survive any Grant of the
respective Loans by the Issuer.

 

Section 4.3             Rights of Obligors and Release of Loan Files.

 

(a)           Notwithstanding any other provision contained in this Agreement,
including the Collateral Agent’s, the Trustee’s and the Noteholders’ remedies
pursuant hereto and pursuant to the Collateral Agency Agreement, the rights of
any Obligor to any Timeshare Property subject to a Pledged Loan shall, so long
as such Obligor is not in default thereunder, be superior to those of the
Collateral Agent, the Trustee and the Noteholders, and none of the Collateral
Agent, the Trustee or the Noteholders, so long as such Obligor is not in default
thereunder, shall interfere with such Obligor’s use and enjoyment of the
Timeshare Property subject thereto.

 

(b)           If pursuant to the terms of this Agreement, the Collateral Agent
or the Trustee shall acquire through foreclosure the Issuer’s interest in any
portion of the Timeshare Property subject to a Pledged Loan, the Collateral
Agent and the Trustee hereby specifically agree to release or cause to be
released any Timeshare Property from any Lien hereunder upon completion of all
payments and the performance of all the terms and conditions required to be made
and performed by such Obligor under such Pledged Loan, and each of the
Collateral Agent and the Trustee hereby consents to any such release by, or at
the direction of, the Collateral Agent.

 

(c)           At such time as an Obligor has paid in full the purchase price or
the requisite percentage of the purchase price for deeding pursuant to a Pledged
Loan and has otherwise fully discharged all of such Obligor’s obligations and
responsibilities required to be discharged as a condition to deeding, the
Servicer shall notify the Trustee by a certificate substantially in the form
attached hereto as Exhibit E (which certificate shall include a statement to the
effect that all amounts received in connection with such payment have been
deposited in the Collection Account) of a Servicing Officer and shall request
delivery to the Servicer from the Custodian of the related Loan Files.  Upon
receipt of such certificate and request or at such earlier time as is required
by applicable law, the Trustee and the Collateral Agent (a) shall be deemed,
without the necessity of taking any action, to have approved release by the
Custodian of the Loan Files to the Servicer (in all cases in accordance with the
provisions of the Custodial Agreement), (b) shall be deemed to approve the
release by the Nominee of the related deed of title, and any documents and
records maintained in connection therewith, to the Obligor as provided in the
Title Clearing Agreement, provided that title to the Timeshare Property has not
already been deeded to the Obligor and/or (c) shall execute such documents and
instruments of transfer and assignment and take such other action as is
necessary to release its interest in the Timeshare Property subject to deeding
(in the case of any Pledged Loan which has been paid in full).  The Servicer
shall cause each Loan File or any document therein so released which relates to
a Pledged Loan for which the Obligor’s obligations have not been fully
discharged to be returned to the Custodian for the sole benefit of the
Collateral Agent when the Servicer’s need therefor no longer exists.

 

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ARTICLE V

 

REPRESENTATIONS AND WARRANTIES OF THE ISSUER;
ASSIGNMENT OF REPRESENTATIONS AND WARRANTIES

 

Section 5.1             Representations and Warranties of the Issuer.  The
Issuer hereby represents and warrants to the Trustee, the Collateral Agent and
the Noteholders on the Closing Date as follows:

 

(a)           Perfection of Security Interests in Collateral.

 

(i)            Payment of principal and interest on the Notes and the prompt
observance and performance by the Issuer of all of the terms and provisions of
this Agreement are secured by the Collateral.  Upon the issuance of the Notes
and at all times thereafter so long as any Notes are outstanding, this Agreement
creates a security interest (as defined in the applicable UCC) in the Collateral
in favor of the Collateral Agent for the benefit of the Trustee, the Noteholders
and the Swap Counterparty to secure amounts payable under the Notes which
security interest is perfected and prior to all other Liens (other than any
Permitted Encumbrances) and is enforceable as such against all creditors of and
purchasers from the Issuer; and

 

(ii)           the Collateral constitutes either “accounts,” “chattel paper,”
“instruments” or “general intangibles” within the meaning of the applicable UCC.

 

Section 5.2             Eligible Loans.  The Issuer hereby represents and
warrants to the Trustee and the Collateral Agent that each of the Pledged Loans
is an Eligible Loan.  For purposes of this Agreement, the term “Eligible Loan”
means a Loan purchased by the Issuer under the Series 2003-1 Term Purchase
Agreement which has the following characteristics as of the Cut-Off Date:

 

(a)           with respect to which (i) the related Timeshare Property is not a
Lot, (ii) the related Timeshare Property has been purchased by an Obligor, (iii)
except in the case of a Green Loan, a certificate of occupancy for the related
Timeshare Property has been issued, (iv) except in the case of a Green Loan, the
unit for the related Timeshare Property is complete and ready for occupancy, is
not in need of material maintenance or repair, except for ordinary, routine
maintenance and repairs that are not substantial in nature or cost and contains
no structural defects materially affecting its value, (v) the related Timeshare
Property Regime is not in need of maintenance or repair, except for ordinary,
routine maintenance and repairs that are not substantial in nature or cost and
contains no structural defects materially affecting its value, (vi) there is no
legal, judicial or administrative proceeding pending, or to the Issuer’s
knowledge threatened, for the total condemnation of the related Timeshare
Property or partial condemnation of any portion of the related Timeshare
Property Regime that would have a material adverse effect on the value of the
related Timeshare Property and (vii) the related Timeshare Property, if not
Vacation Credits, is not related to a Resort located outside of the United
States;

 

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(b)           with respect to which the rights of the Obligor thereunder are
subject to declarations, covenants and restrictions of record affecting the
Resort; provided, however, that a Pledged Loan shall not fail to be an Eligible
Loan solely because the rights of the Obligor thereunder have been subjected to
the FairShare Plus Program;

 

(c)           in the case of a Pledged Loan that is an Installment Contract,
with respect to which the Issuer has a valid ownership or security interest in
an underlying Timeshare Property, subject only to Permitted Encumbrances, unless
the criteria in paragraph (d) are satisfied;

 

(d)           with respect to which (i) if the related Timeshare Property has
been deeded to the Obligor of the related Pledged Loan, (A) the Issuer has a
valid and enforceable first lien Mortgage on such Timeshare Property, except as
such enforceability may be limited by Debtor Relief Laws and as such
enforceability may be limited by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at law,
(B) such Mortgage and related mortgage note have been assigned to the Collateral
Agent, (C) such Mortgage and the related note have been transferred to the
custody of the Custodian in accordance with the provisions of Section 6(c)(i) of
the applicable Purchase Agreement and (D) if any Mortgage relating to such
Pledged Loan is a deed of trust, a trustee duly qualified under applicable law
to serve as such has been properly designated in accordance with applicable law
and currently so serves or (ii) if the related Timeshare Property has not been
deeded to the Obligor of the related Pledged Loan, a nominee has legal title to
such Timeshare Property and the Issuer has an equitable interest in such
Timeshare Property underlying the related Pledged Loan;

 

(e)           that was issued in a transaction that complied, and is in
compliance, in all material respects with all requirements of applicable
federal, state and local law, including applicable laws relating to usury,
truth-in-lending, property sales, consumer credit protection and disclosure;

 

(f)            that requires the Obligor to pay the unpaid principal balance
over an original term of not greater than 120 months;

 

(g)           the Scheduled Payments on which are denominated and payable in
United States dollars;

 

(h)           that is not a Defective Loan either under this Agreement or under
the terms of the Purchase Agreement applicable to such Pledged Loan or a
Defaulted Loan;

 

(i)            the Scheduled Payments on which are not 30 days or more
delinquent and has never been a Defaulted Loan as of the Cut-Off Date;

 

(j)            that does not (i) finance the purchase of credit life insurance
and (ii) finance, and was not originated in connection with, the Trendwest
“Explorer” program, unless such Loan has been converted to a Loan in connection
with the WorldMark program;

 

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(k)           with respect to which the related Timeshare Property (i) if the
Loan is a Fairfield Loan (A) consists of a Fixed Week or a UDI and (B) if it
consists of a Fixed Week, it has been converted into a UDI or has become subject
to the FairShare Plus Program, which conversion or other modification does not
give rise to the extension of the maturity of any payments under such Pledged
Loan or (ii) if the Loan is a Trendwest Loan, consists of Vacation Credits;

 

(l)            that, if it is a Fairfield Loan (i) either (A) was transferred by
FRI to FAC pursuant to the Operating Agreement, (B) in the case of any Pledged
Loan originated by an Originator other than FRI or any Loan related to the
Dolphin’s Cove Resort or a Kona Loan, was transferred by such Originator to FRI
pursuant to the Operating Agreement, (C) in the case of any Loan related to the
Dolphin’s Cove Resort, was originated by Dolphin’s Cove Resort, Ltd., a
California limited partnership, and was transferred to FRI pursuant to a
receivables purchase agreement dated December 29, 2000 by and between Dolphin’s
Cove Resort, Ltd. and FRI or (D) in the case of a Kona Loan was transferred to
FRI under the terms of a July 2002 agreement or (ii) was purchased by FAC from
Fairfield Receivables Corporation pursuant to an Assignment of Contracts and
Mortgages, dated as of August 29, 2002;

 

(m)          that (i) if it is a Fairfield Loan, it was, except with respect to
a Loans related to Dolphin’s Cove Resort, Ltd. and Kona Loans, originated by a
Fairfield Originator and has been consistently serviced by FAC, in each case in
the ordinary course of its respective business and in accordance with Customary
Practices and Credit Standards and Collection Policies, (ii) if it is a
Fairfield Loan related to Dolphin’s Cove Resort, Ltd., it was acquired by FRI in
December 2000 and has since that date been consistently serviced by FAC and if
it is a Kona Loan, it was originated by Kona and has since December 1, 2002 been
consistently serviced by FAC, in each case, in the ordinary course of its
respective business and in accordance with Customary Practices and Credit
Standards and Collection Policies and (iii) if it is a Trendwest Loan, was
originated by Trendwest and has been consistently serviced by Trendwest, in each
case in the ordinary course of its business and in accordance with Trendwest’s
Customary Practices and Credit Standards and Collection Policies;

 

(n)           that has not been specifically reserved against by the Issuer or
classified as uncollectible or charged off;

 

(o)           that arises from transactions in a jurisdiction in which (i) with
respect to Fairfield Loans, FRI and each Subsidiary of FRI (other than the
Depositor, the Issuer and Sierra 2002) that conducts business in such
jurisdiction is duly qualified to do business, except where the failure to so
qualify will not adversely affect or impair the legality, validity, binding
effect and enforceability of such Pledged Loan and (ii) with respect to
Trendwest Loans, Trendwest is duly qualified to do business, except where the
failure to so qualify will not adversely affect or impair the legality,
validity, binding effect and enforceability of such Pledged Loan;

 

(p)           that constitutes a legal, valid, binding and enforceable
obligation of the related Obligor, except as such enforceability may be limited
by Debtor Relief Laws and

 

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as such enforceability may be limited by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law;

 

(q)           that is fully amortizing pursuant to a required schedule of
substantially equal monthly payments of principal and interest;

 

(r)            with respect to which (i) the downpayment has been made and (ii)
no statutory rescission rights with respect to the related Obligor are
continuing as of the Cut-Off Date;

 

(s)           that had an Equity Percentage of 10% or more at the time of the
sale of the related Timeshare Property to the related Obligor (or, in the case
of a Loan relating to a Timeshare Upgrade originated by Trendwest, an Equity
Percentage of 10% or more of the value of all Vacation Credits owned by the
related Obligor);

 

(t)            with respect to which at least one Scheduled Payment has been
made by the Obligor; and

 

(u)           that, in the case of a Green Loan, (i) satisfies each of the
eligibility criteria set forth in paragraphs (a) through (t) above other than
any such criteria that cannot be satisfied due solely to (A) the related Green
Timeshare Property being located in a Resort that is not yet complete and ready
for occupancy; (B) the Issuer not having a valid ownership interest in the
related Green Timeshare Property; or (C) the related Green Timeshare Property
not having been deeded to the Obligor or legal title not being held by the
Nominee; and (ii) the related Green Timeshare Property has a scheduled
completion date no more than six months following the Cut-Off Date.

 

Section 5.3             Assignment of Representations and Warranties.  The
Issuer hereby assigns to the Trustee and the Collateral Agent all of its rights
relating to the Pledged Loans and related Pledged Assets under the Series 2003-1
Term Purchase Agreement including the rights assigned to the Issuer by the
Depositor of the Depositor’s rights to payment due from the related Seller for
repurchases of Defective Loans (as such term is defined in such Purchase
Agreement) resulting from the breach of representations and warranties under
such Purchase Agreement and the Depositor’s rights under the First Guaranty
Agreement.

 

Section 5.4             Release of Defective Loans.

 

(a)           Deposit of Release Price or Substitution of Qualified Substitute
Loan.  Subject to subsection (b) of this section, upon discovery by the Issuer
or upon written notice from the Depositor or the Trustee that any Pledged Loan
is a Defective Loan, the Issuer shall, within 90 days after the earlier of its
discovery or receipt of notice thereof (i) if such Defective Loan constitutes a
Defective Loan as defined in the Purchase Agreement pursuant to which the
Depositor acquired such Defective Loan, direct the applicable Seller to perform
its obligation under such Purchase Agreement to either (A) deposit the Release
Price with the Trustee or (B) deliver to the Trustee one or more Qualified
Substitute Loans in substitution for such Defective Loan and pay to the Trustee
the Substitution Adjustment Amount, or (ii) if such Defective Loan does not
constitute a Defective Loan as defined in the Purchase Agreement pursuant to
which the Depositor acquired such Defective Loan, deposit the Release Price with
the Trustee.  If such

 

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Defective Loan constitutes a Defective Loan as defined in the Purchase Agreement
pursuant to which the Depositor acquired such Defective Loan, then,
notwithstanding any other provision of this Agreement, the Issuer shall have no
obligation or liability with respect to such Defective Loan should the
applicable Seller fail to perform its obligations under the Purchase Agreement
with respect to such Defective Loan.  For purposes of this Agreement, the term
“Release Price” shall mean an amount equal to the outstanding Loan Balance of
such Defective Loan as of the close of business on the Due Date immediately
preceding the Payment Date on which the repurchase is to be made, plus accrued
but unpaid interest thereon to the date of the repurchase.

 

(b)           Substitution.  If under a Purchase Agreement, a Seller delivers a
Qualified Substitute Loan for release of a Defective Loan,  the Issuer shall
execute a Supplemental Grant in substantially the form of Exhibit J hereto and
deliver such Supplemental Grant to the Trustee and the Collateral Agent. 
Payments due with respect to Qualified Substitute Loans prior to the last day of
the Due Period next preceding the date of substitution shall not be property of
the Issuer, but will be retained by the Servicer and remitted by the Servicer to
the Seller on the next succeeding Payment Date.  Scheduled Payments due on a
Defective Loan prior to the last day of the Due Period next preceding the date
of substitution shall be property of the Issuer, and after such last day of the
Due Period next preceding the date of substitution the Seller shall be entitled
to retain all Scheduled Payments due thereafter and other amounts received in
respect of such Defective Loan.  The Issuer shall cause the Servicer to deliver
a schedule of any Defective Loans so removed and Qualified Substitute Loans so
substituted to the Trustee and the Collateral Agent and such schedule shall be
an amendment to the Loan Schedule.  Upon such substitution, the Qualified
Substitute Loan or Loans shall be subject to the terms of this Agreement in all
respects, the Issuer shall be deemed to have made the representations, and
warranties with respect to each Qualified Substitute Loan set forth in Section
5.1 and 5.2 of this Agreement, in each case as of the date of substitution, and
the Issuer shall be deemed to have made a representation and warranty that each
Loan so substituted is a Qualified Substitute Loan as of the date of
substitution.  The provisions of Section 5.4(a) shall apply to any Qualified
Substitute Loan as to which the Issuer has breached the Issuer’s representations
and warranties in Section 5.1 and 5.2 to the same extent as for any other
Pledged Loan.  In connection with the substitution of one or more Qualified
Substitute Loans for one or more Defective Loans, the Servicer shall determine
the amount (such amount, a “Substitution Adjustment Amount”), if any, by which
the aggregate principal balance of all such Qualified Substitute Loans as of the
date of substitution is less than the aggregate principal balance of all such
Defective Loans (after application of the principal portion of the Scheduled
Payments due in the month of substitution that are to be distributed to the
Issuer in the month of substitution).  If such Defective Loan constitutes a
Defective Loan as defined in the Purchase Agreement pursuant to which the
Depositor acquired such Defective Loan, the Issuer shall direct the applicable
Seller to perform its obligation under such Purchase Agreement to pay to the
Trustee the Substitution Adjustment Amount in immediately available funds.  Such
Substitution Adjustment Amount shall be treated as if it were a portion of the
Release Price for the Defective Loan and included in Available Funds as such. 
If such Defective Loan constitutes a Defective Loan as defined in the Purchase
Agreement pursuant to which the Depositor acquired such Defective Loan, then,
notwithstanding any other provision of this Agreement, the Issuer shall have no
obligation or liability to pay the Substitution Adjustment Amount with respect
to such Defective Loan should the applicable Seller fail to perform its
obligation under the Purchase Agreement to pay such Substitution Adjustment
Amount to the Trustee.

 

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If a Seller repurchases a Pledged Loan as a Defective Loan or provides a
Qualified Substitute Loan for a Defective Loan, then the Issuer shall
automatically and without further action sell, transfer, assign, set over and
otherwise convey to such Seller, without recourse, representation or warranty,
all of the Issuer’s right, title and interest in and to the related Defective
Loan, the related Timeshare Property, the Loan File relating thereto and any
other related Pledged Assets, all monies due or to become due with respect
thereto and all Collections with respect thereto (including payments received
from Obligors from and including the last day of the Due Period next preceding
the date of transfer, subject to the payment of any Substitution Adjustment
Amount).  The Issuer shall execute such documents, releases and instruments of
transfer or assignment and take such other actions as shall reasonably be
requested by the applicable Seller to effect the conveyance of such Defective
Loan, the related Timeshare Property and related Loan File pursuant to this
Section 5.4(b).

 

Promptly after the repurchase of Defective Loans in respect of which the Release
Price has been paid or a Qualified Substitute Loan has been provided, on such
date, the Issuer shall direct the Servicer to delete such Defective Loans from
the Loan Schedule.

 

The obligations of the Issuer set forth in Section 5.4(a) shall constitute the
sole remedy against the Issuer with respect to any breach of the representations
and warranties set forth in Section 5.1 and Section 5.2 available hereunder to
the Trustee or the Collateral Agent.

 

ARTICLE VI

 

ADDITIONAL COVENANTS OF ISSUER

 

Section 6.1             Affirmative Covenants.  The Issuer shall:

 

(a)           Compliance with Laws, Etc.  Comply in all material respects with
all applicable laws, rules, regulations and orders with respect to it, its
business and properties, and all Pledged Loans and Transaction Documents to
which it is a party (including without limitation the laws, rules and
regulations of each state governing the sale of timeshare contracts).

 

(b)           Preservation of Existence.  Preserve and maintain its existence,
rights, franchises and privileges in the jurisdiction of its organization, and
qualify and remain qualified in good standing as a foreign entity, and maintain
all necessary licenses and approvals, in each jurisdiction in which it does
business, except where the failure to preserve and maintain such existence,
rights, franchises, privileges, qualifications, licenses and approvals would not
have a Material Adverse Effect.

 

(c)           Adequate Capitalization.  Ensure that at all times it is
adequately capitalized to engage in the transactions contemplated by this
Agreement.

 

(d)           Keeping of Records and Books of Account.  Maintain and implement
administrative and operating procedures (including without limitation an ability
to recreate records evidencing the Pledged Loans in the event of the destruction
or loss of the originals thereof) and keep and maintain, all documents, books,
records and other information reasonably necessary or advisable for the
collection of all Pledged Loans (including without limitation

 

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records adequate to permit the daily identification of all Collections with
respect to, and adjustments of amounts payable under, each Pledged Loan).

 

(e)           Performance and Compliance with Receivables and Loans.  At its
expense, timely and fully perform and comply in all material respects with all
material provisions, covenants and other promises required to be observed by it
under the Pledged Loans.

 

(f)            Credit Standards and Collection Policies.  Comply in all material
respects with the Credit Standards and Collection Policies and Customary
Practices in regard to each Pledged Loan and the related Pledged Assets.

 

(g)           Collections.  (1) Instruct or cause all Obligors to be instructed
to either:

 

(A)          send all Collections directly to a Post Office Box for credit to a
Lockbox Account or directly to a Lockbox Account, or

 

(B)           in the alternative, make Scheduled Payments by way of
pre-authorized debits from a deposit account of such Obligor pursuant to a PAC
or from a credit card of such Obligor pursuant to a Credit Card Account from
which Scheduled Payments shall be electronically transferred directly to a
Lockbox Account immediately upon each such debit (provided that, for the
avoidance of doubt, each Obligor may at any time cease to pay its Scheduled
Payments directly to a Post Office Box or a Lockbox Account or pursuant to a PAC
or Credit Card Account, so long as the Servicer promptly instructs such Obligor
to commence one of the two alternative methods of funds transfer provided for in
either of sub-clauses (A) or (B) of this clause (1)).

 

(2)           In the case of funds transfers pursuant to a PAC or Credit Card
Account, take, or cause each of the Servicer, a Lockbox Bank and/or the Trustee
to take, all necessary and appropriate action to ensure that each such
pre-authorized debit is credited directly to a Lockbox Account.

 

(3)           If the Issuer shall receive any Collections, the Issuer shall hold
such Collections in trust for the benefit of the Trustee, the Noteholders and
the Swap Counterparty and deposit such Collections into a Lockbox Account or the
Collection Account within two Business Days following the Issuer’s receipt
thereof.

 

(h)           Compliance with ERISA.  Comply in all material respects with the
provisions of ERISA, the Code, and all other applicable laws and the regulations
and interpretations thereunder.

 

(i)            Perfected Security Interest.  Take such action with respect to
each Pledged Loan as is necessary to ensure that the Collateral Agent maintains
on behalf of the Trustee, a first priority perfected security interest in such
Pledged Loan and the Pledged Assets relating thereto, in each case free and
clear of any Liens (other than the Lien created by this Agreement and in the
case of any Timeshare Properties, any Permitted Encumbrance).

 

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(j)            No Release.  Not take any action and shall use its best efforts
not to permit any action to be taken by others that would release any Person
from any of such Person’s material covenants or material obligations under any
document, instrument or agreement included in the Collateral, or which would
result in the amendment, hypothecation, subordination, termination or discharge
of, or impair the validity or effectiveness of, any such document, instrument or
agreement except as expressly provided in this Agreement or such other
instrument or document.

 

(k)           Insurance and Condemnation.

 

(i)            The Issuer shall do or cause to be done all things that it may
accomplish with a reasonable amount of cost or effort to cause each of the POAs
for each Resort to (A) maintain one or more policies of “all-risk” property and
general liability insurance with financially sound and reputable insurers,
providing coverage in scope and amount which (x) satisfies the requirements of
the declarations (or any similar charter document) governing the POA for the
maintenance of such insurance policies and (y) is at least consistent with the
scope and amount of such insurance coverage obtained by prudent POAs and/or
management of other similar developments in the same jurisdiction; and (B) apply
the proceeds of any such insurance policies in the manner specified in the
relevant declarations (or any similar charter document) governing the POA and/or
any similar charter documents of such POA.  For the avoidance of doubt, the
parties hereto acknowledge that the ultimate discretion and control relating to
the maintenance of any such insurance policies is vested in the POAs in
accordance with the respective declaration (or any similar charter document)
relating to each Timeshare Property Regime.

 

(ii)           The Issuer shall remit to the Collection Account the portion of
any proceeds received pursuant to a condemnation of property in any Resort to
the extent that such proceeds relate to any of the Timeshare Properties.

 

(l)            Custodian.

 

(i)            On or before the Closing Date, the Issuer shall deliver or cause
to be delivered directly to the Custodian for the benefit of the Collateral
Agent pursuant to the Custodial Agreement the Loan File for each Pledged Loan. 
Such Loan File may be provided in microfiche or other electronic form to the
extent permitted under the Custodial Agreement.  The Issuer shall cause the
Custodian to hold, maintain and keep custody of the Loan Files for the benefit
of the Collateral Agent in a secure fire retardant location at an office of the
Custodian, which location shall be reasonably acceptable to the Collateral Agent
and the Trustee.

 

(ii)           The Issuer shall cause the Custodian at all times to maintain
control of the Loan Files for the benefit of the Collateral Agent on behalf of
the Trustee in each case pursuant to the Custodial Agreement.  Each of the
Issuer and the Servicer may access the Loan Files at the Custodian’s storage
facility only for the purposes and upon the terms and conditions set forth
herein and in the Custodial Agreement.  Each of the Issuer and the Servicer may
only remove documents from the Loan File for collection services and other
routine servicing requirements from such facility in accordance with the terms
of the Custodial Agreement, all as set forth and pursuant to the “Bailment
Agreement” (as defined in and attached as an exhibit to the Custodial
Agreement).

 

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(iii)          The Issuer shall at all times comply in all material respects
with the terms of its obligations under the Custodial Agreement and shall not
enter into any modification, amendment or supplement of or to, and shall not
terminate, the Custodial Agreement, without the Collateral Agent’s and Trustee’s
prior written consent.

 

(m)          Separate Identity.  Take all actions required to maintain the
Issuer’s status as a separate legal entity. Without limiting the foregoing, the
Issuer shall:

 

(i)            Maintain in full effect its existence, rights and franchises as a
limited liability company under the laws of the state of its formation and will
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and the other Transaction Documents to which
the Issuer is a party and each other instrument or agreement necessary or
appropriate to proper administration hereof and permit and effectuate the
transactions contemplated hereby.

 

(ii)           Except as provided herein, maintain its own deposit, securities
and other account or accounts with financial institutions, separate from those
of any Affiliate of the Issuer.  The funds of the Issuer will not be diverted to
any other Person or for other than the use of the Issuer, and, except as may be
expressly permitted by this Agreement or any other Transaction Document to which
the Issuer is a party, the funds of the Issuer shall not be commingled with
those of any other Person.

 

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

 

(iv)          Ensure that, to the extent that it jointly contracts with any of
its stockholders, members or managers or other Affiliates to do business with
vendors or service providers or to share overhead expenses, the costs incurred
in so doing shall be allocated fairly among such entities, and each such entity
shall bear its fair share of such costs.  To the extent that the Issuer
contracts or does business with vendors or service providers where the goods and
services provided are partially for the benefit of any other Person, the costs
incurred in so doing shall be fairly allocated to or among such entities for
whose benefit the goods and services are provided, and each such entity shall
bear its fair share of such costs.

 

(v)           Ensure that all material transactions between the Issuer and any
of its Affiliates shall be only on an arm’s-length basis and shall not be on
terms more favorable to either party than the terms that would be found in a
similar transaction involving unrelated third parties.  All such transactions
shall receive the approval of the Issuer’s board of directors including at least
one Independent Director (defined below).

 

(vi)          Maintain a principal executive and administrative office through
which its business is conducted and a telephone number separate from those of
its members,

 

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managers and other Affiliates.  To the extent that the Issuer and any of its
members, managers or other Affiliates have offices in contiguous space, there
shall be fair and appropriate allocation of overhead costs (including rent)
among them, and each such entity shall bear its fair share of such expenses.

 

(vii)         Conduct its affairs strictly in accordance with its certificate of
formation and limited liability company agreement and observe all necessary,
appropriate and customary formalities, including, but not limited to, holding
all regular and special meetings of the board of directors appropriate to
authorize all actions of the Issuer, keeping separate and accurate minutes of
such meetings, passing all resolutions or consents necessary to authorize
actions taken or to be taken, and maintaining accurate and separate books,
records and accounts, including, but not limited to, intercompany transaction
accounts.  Regular meetings of the board of directors shall be held at least
annually.

 

(viii)        Ensure that its board of directors shall at all times include at
least one Independent Director (for purposes hereof, “Independent Director”
shall mean any member of the board of directors of the Issuer that is not and
has not at any time been (x) an officer, agent, advisor, consultant, attorney,
accountant, employee or shareholder of any Affiliate of the Issuer which is not
a special purpose entity, (y) a director of any Affiliate of the Issuer other
than an independent director of any Affiliate which is a special purpose entity
or (z) a member of the immediate family of any of the foregoing).

 

(ix)           Ensure that decisions with respect to its business and daily
operations shall be independently made by the Issuer (although the officer
making any particular decision may also be an officer or director of an
Affiliate of the Issuer) and shall not be dictated by an Affiliate of the
Issuer.

 

(x)            Act solely in its own company name and through its own authorized
members, managers, officers and agents, and no Affiliate of the Issuer shall be
appointed to act as agent of the Issuer.  The Issuer shall at all times use its
own stationery and business forms and describe itself as a separate legal
entity.

 

(xi)           Except as contemplated by the Transaction Documents, ensure that
no Affiliate of the Issuer shall loan money to the Issuer, and no Affiliate of
the Issuer will otherwise guaranty debts of the Issuer.

 

(xii)          Other than organizational expenses and as contemplated by the
Transaction Documents, pay all expenses, indebtedness and other obligations
incurred by it using its own funds.

 

(xiii)         Except as provided herein and in any other Transaction Document,
not enter into any guaranty, or otherwise become liable, with respect to or hold
its assets or creditworthiness out as being available for the payment of any
obligation of any Affiliate of the Issuer nor shall the Issuer make any loans to
any Person.

 

(xiv)        Ensure that any financial reports required of the Issuer shall
comply with generally accepted accounting principles and shall be issued
separately from, but may be

 

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consolidated with, any reports prepared for any of its Affiliates so long as
such consolidated reports contain footnotes describing the effect of the
transactions between the Issuer and such Affiliate and also state that the
assets of the Issuer are not available to pay creditors of the Affiliate.

 

(xv)         Ensure that at all times it is adequately capitalized to engage in
the transactions contemplated in its certificate of formation and its limited
liability company agreement.

 

(n)           Computer Files.  Mark or cause to be marked each Pledged Loan in
its computer files as described in Section 4.2(b).

 

(o)           Taxes.  File or cause to be filed, and cause each of its
Affiliates with whom it shares consolidated tax liability to file, all federal,
state, and foreign local tax returns which are required to be filed by it,
except where the failure to file such returns could not reasonably be expected
to have a Material Adverse Effect.  The Issuer shall pay or cause to be paid all
taxes due and owing by it, other than any taxes or assessments, the validity of
which are being contested in good faith by appropriate proceedings and with
respect to which the Issuer or the applicable Affiliate shall have set aside
adequate reserves on its books in accordance with GAAP, and which proceedings
could not reasonably be expected to have a Material Adverse Effect.

 

(p)           Tax Classification.  For as long as the Notes are outstanding, the
Issuer shall not take any action, or fail to take any action, that would cause
the Issuer to not remain classified, for Federal income tax purposes, as a
disregarded entity or a partnership that is not classified as a publicly traded
partnership.

 

(q)           Tax Sharing Agreement.  For as long as the Notes are outstanding,
(i) the Tax Sharing Agreement among Cendant, FAC and the Issuer, dated March 31,
2003 (the “Tax Sharing Agreement”) shall remain in effect and (ii) no amendment
shall be made to the Tax Sharing Agreement without the prior written consent of
a majority of the Noteholders if such amendment (i) would reduce the amount or
timing of payments for which Cendant is responsible, or (ii) would effect any
limitations on payments required to be made by the Issuer pursuant to the Tax
Sharing Agreement as in effect as of the date hereof.

 

(r)            Transaction Documents.  Comply in all material respects with the
terms of, employ the procedures outlined in and enforce the obligations of the
Depositor under the Series 2003-1 Term Purchase Agreement and of the parties to
each of the other Transaction Documents to which the Issuer is a party, and take
all such action as may reasonably be required to maintain all such Transaction
Documents to which the Issuer is a party in full force and effect.

 

(s)           Loan Schedule.  At least once each calendar month, provide to the
Trustee an amendment to the Loan Schedule, or cause the Servicer to provide an
amendment to the Loan Schedule, listing the Pledged Loans released from the
Collateral and adding to the Loan Schedule any Qualified Substitute Loans and
amending the Loan Schedule to reflect terms or discrepancies in such schedule
that become known to the Issuer since the filing of the original Loan Schedule
or since the most recent amendment thereto.

 

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(t)            Segregation of Collections.  (a) Prevent the deposit into any
Account of any funds other than Collections or other funds to be deposited into
such Accounts under this Agreement or the other Transaction Documents (provided
that, this covenant shall not be breached to the extent that funds are
inadvertently deposited into any of such Accounts and are promptly segregated
and removed from the Account); and

 

(b)           With respect to each Lockbox Account either (i) prevent the
deposit into such account of any funds other than Collections in respect of
Pledged Loans or (ii) enter into an intercreditor agreement with other entities
which have an interest in the amounts in the Lockbox Account to allocate the
Collections with respect to the Pledged Loans to the Issuer and transfer such
amounts to the Trustee for deposit into the appropriate Collection Account;
(provided that, the covenant in clause (i) of this paragraph (b) shall not be
breached to the extent that funds not constituting Collections in respect of the
Pledged Loans are inadvertently deposited into such Lockbox Account and are
promptly segregated and remitted to the owner thereof).

 

(u)           Filings; Further Assurances.  (a)  On or prior to the Closing
Date, the Issuer shall have caused at its sole expense the Financing Statements,
assignments and amendments thereof necessary to perfect the security interest in
the Collateral to be filed or recorded in the appropriate offices.

 

(b)           The Issuer shall, at its sole expense, from time to time
authorize, prepare, execute and deliver, or authorize and cause to be prepared,
executed and delivered, all such Financing Statements, continuation statements,
amendments, instruments of further assurance and other instruments, in such
forms, and shall take such other actions, as shall be required by the Servicer
or the Trustee or as the Servicer or the Trustee otherwise deems reasonably
necessary or advisable to perfect the Lien created in the Collateral.  The
Servicer agrees, at its sole expense, to cooperate with the Issuer in taking any
such action (whether at the request of the Issuer or the Trustee).  Without
limiting the foregoing, the Issuer shall from time to time, at its sole expense,
authorize, execute, file, deliver and record all such supplements and amendments
hereto and all such Financing Statements, amendments thereto, continuation
statements, instruments of further assurance, or other statements, specific
assignments or other instruments or documents and take any other action that is
reasonably necessary to, or that any of the Servicer or the Trustee deems
reasonably necessary or advisable to: (i) Grant more effectively all or any
portion of the Collateral; (ii) maintain or preserve the Lien Granted hereunder
(and the priority thereof) or carry out more effectively the purposes hereof;
(iii) perfect, maintain the perfection of, publish notice of, or protect the
validity of any Grant made pursuant to this Agreement; (iv) enforce any of the
Pledged Loans or any of the other Pledged Assets (including without limitation
by cooperating with the Trustee, at the expense of the Issuer, in filing and
recording such Financing Statements against such Obligors as the Servicer or the
Trustee shall deem necessary or advisable from time to time); (v) preserve and
defend title to any Pledged Loans or all or any other part of the Pledged
Assets, and the rights of the Trustee in such Pledged Loans or other related
Pledged Assets, against the claims of all Persons and parties; or (vi) pay any
and all taxes levied or assessed upon all or any part of any Collateral.

 

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(iii)          The Issuer shall, on or prior to the date of Grant of any Pledged
Loans hereunder, deliver or cause to be delivered all original copies of the
Pledged Loan (other than in the case of any Pledged Loans not required under the
terms of the relevant Purchase Agreement to be in the relevant Loan File),
together with the related Loan File, to the Custodian, in suitable form for
transfer by delivery, or accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Trustee. 
Such “original copies” may be provided in microfiche or other electronic form to
the extent permitted under the Custodial Agreement.  In the event that the
Issuer receives any other instrument or any writing which, in either event,
evidences a Pledged Loan or other Pledged Assets, the Issuer shall deliver such
instrument or writing to the Custodian to be held as collateral in which the
Collateral Agent has a security interest for the benefit of the Trustee within
two Business Days after the Issuer’s receipt thereof, in suitable form for
transfer by delivery, or accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Trustee.

 

(iv)          The Issuer hereby authorizes the Trustee, and gives the Collateral
Agent its irrevocable power of attorney (which authorization is coupled with an
interest and is irrevocable), in the name of the Issuer or otherwise, to
execute, deliver, file and record any Financing Statement, continuation
statement, amendment, specific assignment or other writing or paper and to take
any other action that the Trustee in its sole discretion, may deem necessary or
appropriate to further perfect the Lien created hereby.  Any expenses incurred
by the Trustee or the Collateral Agent pursuant to the exercise of its rights
under this Section 6.1 shall be for the sole account and responsibility of the
Issuer and payable under Section 3.1 to the Trustee.

 

(v)           Management of Resorts.  The Issuer hereby covenants and agrees
that it will with respect to each Resort cause the Originator with respect to
that Resort (to the extent that such Originator is otherwise responsible for
maintaining such Resort) to do or cause to be done all things which it may
accomplish with a reasonable amount of cost or effort, in order to maintain each
such Resort (including without limitation all grounds, waters and improvements
thereon) in at least as good condition, repair and working order as would be
customary for prudent managers of similar timeshare properties.

 

Section 6.2             Negative Covenants of the Issuer.  So long as any of the
Notes are outstanding, the Issuer shall not:

 

(a)           Sales, Liens, Etc., Against Receivables and Related Security. 
Except for the releases contemplated under Sections 5.4, 14.6, 14.7, 14.8 and
14.9 of this Agreement, sell, assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist, any Lien (other than the
Lien created by this Agreement or, with respect to Timeshare Properties relating
to Pledged Loans, any Permitted Encumbrances thereon) upon or with respect to,
any Pledged Loan or any other Pledged Assets, or any interests in either
thereof, or upon or with respect to any Collateral hereunder.  The Issuer shall
immediately notify the Trustee and the Collateral Agent of the existence of any
Lien on any Pledged Loan or any other Pledged Assets, and the Issuer shall
defend the right, title and interest of each of the Issuer and the Collateral
Agent, Trustee and Noteholders in, to and under the Pledged Loans and all other
Pledged Assets, against all claims of third parties.

 

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(b)           Extension or Amendment of Loan Terms.  Extend (other than as a
result of a Timeshare Upgrade or in accordance with Customary Practices), amend,
waive or otherwise modify the terms of any Pledged Loan or permit the rescission
or cancellation of any Pledged Loan, whether for any reason relating to a
negative change in the related Obligor’s creditworthiness or inability to make
any payment under the Pledged Loan or otherwise.

 

(c)           Change in Business or Credit Standard and Collection Policies. 
(i)  Make any change in the character of its business or (ii) make any change in
the Credit Standards and Collection Policies or (iii) deviate from the exercise
of Customary Practices, which change or deviation would, in any such case,
materially impair the value or collectibility of any Pledged Loan.

 

(d)           Change in Payment Instructions to Obligors.  Add or terminate any
bank as a Lockbox Bank from those listed in Schedule 3 hereto or make any change
in the instructions to Obligors regarding payments to be made to any Lockbox
Account at a Lockbox Bank, unless the Trustee shall have received (i) 30 days’
prior notice of such addition, termination or change; (ii) written confirmation
from the Issuer that after the effectiveness of any such termination, there
shall be at least one (1) Lockbox Account in existence; and (iii) prior to the
effective date of such addition, termination or change, (x) executed copies of
Lockbox Agreements executed by each new Lockbox Bank, the Issuer, the Trustee
and the Servicer and (y) copies of all agreements and documents signed by either
the Issuer or the respective Lockbox Bank with respect to any new Lockbox
Account.

 

(e)           Stock, Merger, Consolidation, Etc.  Consolidate with or merge into
or with any other Person, or purchase or otherwise acquire all or substantially
all of the assets or capital stock, or other ownership interest of, any Person
or sell, transfer, lease or otherwise dispose of all or substantially all of its
assets to any Person, except as expressly permitted under the terms of this
Agreement.

 

(f)            No Change in Control.  At any time fail to be (i) a wholly owned
member of the Cendant Group, as defined in the Tax Sharing Agreement and (ii) an
entity wholly owned directly or indirectly by FAC.

 

(g)           Change in Name, Etc.  Use any trade names, fictitious names,
assumed names or “doing business as” names.

 

(h)           ERISA Matters. (i) Engage or permit any ERISA Affiliate to engage
in any prohibited transaction for which an exemption is not available or has not
previously been obtained from the U.S. Department of Labor; (ii) permit to exist
any accumulated funding deficiency (as defined in Section 302(a) of ERISA and
Section 412(a) of the Code) or funding deficiency with respect to any Benefit
Plan other than a Multiemployer Plan; (iii) fail to make any payments to any
Multiemployer Plan that the Issuer or any of its ERISA Affiliates may be
required to make under the agreement relating to such Multiemployer Plan or any
law pertaining thereto; (iv) terminate any Benefit Plan so as to result in any
liability; or (v) permit to exist any occurrence of any Reportable Event that
represents a material risk of a liability of the Issuer or any of its ERISA
Affiliates under ERISA or the Code; provided, however, that the ERISA Affiliates
of the Issuer may take or allow such prohibited transactions, accumulated
funding

 

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deficiencies, payments, terminations and Reportable Events described in clauses
(i) through (v) above so long as such events occurring within any fiscal year of
the Issuer, in the aggregate, involve a payment of money by or an incurrence of
liability of any such ERISA Affiliate (collectively, “ERISA Liabilities”) in an
amount that does not exceed $2,000,000.

 

(i)            Terminate or Reject Loans.  Without limiting anything in
subsection 6.2(b), terminate or reject any Pledged Loan prior to the end of the
term of such Loan, whether such rejection or early termination is made pursuant
to an equitable cause, statute, regulation, judicial proceeding or other
applicable law, unless prior to such termination or rejection, such Pledged Loan
and any related Pledged Assets have been released from the Lien created by this
Agreement.

 

(j)            Debt.  Create, incur, assume or suffer to exist any Debt except
as contemplated by the Transaction Documents.

 

(k)           Guarantees.  Guarantee, endorse or otherwise be or become
contingently liable (including by agreement to maintain balance sheet tests) in
connection with the obligations of any other Person, except endorsements of
negotiable instruments for collection in the ordinary course of business and
reimbursement or indemnification obligations as provided for under this
Agreement or as contemplated by the Transaction Documents.

 

(l)            Limitation on Transactions with Affiliates.  Enter into, or be a
party to any transaction with any Affiliate, except for:

 

(i)                                     the transactions contemplated hereby and
by the other Transaction Documents; and

 

(ii)                                  to the extent not otherwise prohibited
under this Agreement, other transactions upon fair and reasonable terms
materially no less favorable to the Issuer than would be obtained in a
comparable arm’s-length transaction with a Person not an Affiliate.

 

(m)          Lines of Business.  Conduct any business other than that described
in the LLC Agreement, or enter into any transaction with any Person which is not
contemplated by or incidental to the performance of its obligations under the
Transaction Documents to which it is a party.

 

(n)           Limitation on Investments.  Make or suffer to exist any loans or
advances to, or extend any credit to, or make any investments (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of indebtedness, acquisition of the business or assets or
otherwise) in, any Affiliate or any other Person except for (i) Permitted
Investments and (ii) the purchase of Loans pursuant to the terms of the Series
2003-1 Term Purchase Agreement.

 

(o)           Insolvency Proceedings.  Seek dissolution or liquidation in whole
or in part of the Issuer.

 

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(p)           Distributions to Member.  Make any distribution to its Member
except as provided in the LLC Agreement.

 

(q)           Place of Business; Change of Name.  Change (x) its type or
jurisdiction of organization from that listed in Section 4.1(a), (y) its name or
(z) the location of its Records relating to the Collateral or its chief
executive office from the location listed in Section 4.1(i), unless in any such
event the Issuer shall have given the Trustee and the Collateral Agent and the
Swap Counterparty at least thirty (30) days prior written notice thereof and, in
the case of (x) or (y) shall take all action necessary or reasonably requested
by the Trustee or the Collateral Agent within 30 days of such request, to amend
its existing Financing Statements and file additional Financing Statements in
all applicable jurisdictions necessary or advisable to maintain the perfection
of the Lien of the Collateral Agent under this Agreement.

 

ARTICLE VII

 

SERVICING OF PLEDGED LOANS

 

Section 7.1             Responsibility for Loan Administration.  The Servicer
shall manage, administer, service and make collections on the Pledged Loans on
behalf of the Trustee and Issuer.  Without limiting the generality of the
foregoing, but subject to all other provisions hereof, the Trustee and the
Issuer grant to the Servicer a limited power of attorney to execute and the
Servicer is hereby authorized and empowered to so execute and deliver, on behalf
of itself, the Issuer and the Trustee or any of them, any and all instruments of
satisfaction or cancellation or of partial or full release or discharge and all
other comparable instruments with respect to the Pledged Loans, any related
Mortgages and the related Timeshare Properties, but only to the extent deemed
necessary by the Servicer.

 

The Trustee, the Issuer and the Collateral Agent, at the request of a Servicing
Officer, shall furnish the Servicer with any reasonable documents or take any
action reasonably requested, necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder (subject, in the
case of requests for documents contained in any Loan Files, to the requirements
of Section 6.1(l)).

 

Fairfield Acceptance Corporation - Nevada is hereby appointed as the Servicer
until such time as another entity becomes the Servicer under subsection 7.12(b)
or until such time as any Service Transfer shall be effected under Article XII.

 

Section 7.2             Standard of Care.  In managing, administering, servicing
and making collections on the Pledged Loans pursuant to this Agreement, the
Servicer will exercise that degree of skill and care consistent with Customary
Practices and the Credit Standards and Collection Policies.

 

Section 7.3             Records.  The Servicer shall, during the period it is
Servicer hereunder, maintain such books of account, computer data files and
other records as will enable the Trustee to determine the status of each Pledged
Loan and will enable such Loan to be serviced in accordance with the terms of
this Agreement by a Successor Servicer following a Service Transfer.

 

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Section 7.4             Loan Schedule.  The Servicer shall at all times maintain
the Loan Schedule and provide to the Trustee, the Issuer, the Collateral Agent
and the Custodian a current, complete copy of the Loan Schedule.  The Loan
Schedule may be in one or multiple documents including an original listing and
monthly amendments listing changes.

 

Section 7.5             Enforcement.

 

(a)           The Servicer will, consistent with Section 7.2, act with respect
to the Pledged Loans in such manner as will maximize the receipt of Collections
in respect of such Pledged Loans (including, to the extent necessary,
instituting foreclosure proceedings against the Timeshare Property, if any,
underlying a Pledged Loan or disposing of the underlying Timeshare Property, if
any).  The Servicer will diligently monitor the integration of the collection
functions of FAC and Trendwest and to the extent the Servicer detects any
deterioration in collections or any increase in delinquencies or defaults or
other factors which indicate or might indicate any deterioration in collections,
the Servicer will use its best efforts to determine the source of the problem
and will use its best efforts to remedy such problem.

 

(b)           The Servicer may sue to enforce or collect upon Pledged Loans, in
its own name, if possible, or as agent for the Issuer.  If the Servicer elects
to commence a legal proceeding to enforce a Pledged Loan, the act of
commencement shall be deemed to be an automatic assignment of the Pledged Loan
to the Servicer for purposes of collection only.  If, however, in any
enforcement suit or legal proceeding it is held that the Servicer may not
enforce a Pledged Loan on the grounds that it is not a real party in interest or
a holder entitled to enforce the Pledged Loan, the Trustee on behalf of the
Issuer shall, at the Servicer’s expense, take such steps as the Servicer and the
Trustee may mutually agree are necessary (such agreement not to be unreasonably
withheld) to enforce the Pledged Loan, including bringing suit in its name or
the name of the Issuer.  The Servicer shall provide to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred thereby.

 

(c)           The Servicer, upon notice to the Trustee, may grant to the Obligor
on any Pledged Loan any rebate, refund or adjustment out of the appropriate
Collection Account that the Servicer in good faith believes is required as a
matter of law; provided that, on any Business Day on which such rebate, refund
or adjustment is to be paid hereunder, such rebate, refund or adjustment shall
only be paid to the extent of funds otherwise available for distribution from
the Collection Account.

 

(d)           The Servicer will not extend, amend, waive or otherwise modify the
terms of any Pledged Loan (other than in accordance with Customary Practices) or
permit the rescission or cancellation of any Pledged Loan, whether for any
reason relating to a negative change in the related Obligor’s creditworthiness
or inability to make any payment under the Pledged Loan or otherwise.

 

(e)           The Servicer shall have discretion to sell the collateral which
secures any Defaulted Loans free and clear of the Lien of this Agreement, in
exchange for cash, in accordance with Customary Practices and Credit Standards
and Collection Policies.  All proceeds of any such sale of such collateral shall
be deposited by the Servicer into the Collection Account.

 

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(f)            The Servicer shall not sell any Defaulted Loan or any collateral
securing a Defaulted Loan to any Seller or Originator except for amount at least
equal to the fair market value thereof.

 

(g)           Notwithstanding any other provision of this Agreement, the
Servicer shall have no obligation to, and shall not, foreclose on the collateral
securing any Pledged Loan unless the proceeds from such foreclosure will be
sufficient to cover the expenses of such foreclosure. Notwithstanding any other
provision of this Agreement, proceeds from the foreclosure by the Servicer on
the collateral securing any Pledged Loans shall first be applied by the Servicer
to reimburse itself for the expenses of such foreclosure, and any remaining
proceeds shall be deposited into the Collection Account.

 

Section 7.6             Trustee and Collateral Agent to Cooperate.  Upon request
of a Servicing Officer, the Trustee and the Collateral Agent shall perform such
other acts as are reasonably requested by the Servicer (including without
limitation the execution of documents) and otherwise cooperate with the Servicer
in enforcement of the Trustee’s rights and remedies with respect to Pledged
Loans.

 

Section 7.7             Other Matters Relating to the Servicer.  The Servicer is
hereby authorized and empowered to:

 

(a)           advise the Trustee in connection with the amount of withdrawals
from Accounts in accordance with the provisions of this Agreement;

 

(b)           execute and deliver, on behalf of the Issuer, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Pledged
Loans and, after the delinquency of any Pledged Loan and to the extent permitted
under and in compliance with applicable law and regulations, to commence
enforcement proceedings with respect to such Pledged Loan including without
limitation the exercise of rights under any power-of-attorney granted in any
Pledged Loan; and

 

(c)           make any filings, reports, notices, applications, registrations
with, and to seek any consents or authorizations from the Securities and
Exchange Commission and any state securities authority on behalf of the Issuer
as may be necessary or advisable to comply with any federal or state securities
or reporting requirements laws.

 

Prior to the occurrence of an Event of Default hereunder, the Trustee agrees
that it shall promptly follow the instructions of the Servicer duly given to
withdraw funds from the Accounts.

 

Section 7.8             Servicing Compensation.  As compensation for its
servicing activities hereunder the Servicer shall be entitled to receive the
Monthly Servicer Fee.

 

Section 7.9             Costs and Expenses.  The costs and expenses incurred by
the Servicer in carrying out its duties hereunder, including without limitation
the fees and expenses incurred in connection with the enforcement of Pledged
Loans, shall be paid by the Servicer and the Servicer shall be entitled to
reimbursement hereunder from the Issuer as provided in Section 3.1.  Failure

 

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by the Servicer to receive reimbursement shall not relieve the Servicer of its
obligations under this Agreement.

 

Section 7.10           Representations and Warranties of the Servicer.  The
Servicer hereby represents and warrants to the Trustee, the Collateral Agent and
the Noteholders as of the date of this Agreement:

 

(a)           Organization and Good Standing.  The Servicer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power, authority, and legal right to
own its property 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.  The Servicer is duly qualified to do
business and is in good standing as a foreign corporation, and has obtained all
necessary licenses and approvals in each jurisdiction necessary for the
enforcement of each Pledged Loan or in which failure to qualify or to obtain
such licenses and approvals would have a Material Adverse Effect on the
Noteholders.

 

(b)           Due Authorization.  The execution and delivery by the Servicer of
each of the Transaction Documents to which it is a party, and the consummation
by the Servicer of the transactions contemplated hereby and thereby have been
duly authorized by the Servicer by all necessary corporate action on the part of
the Servicer.

 

(c)           Binding Obligations.  Each of the Transaction Documents to which
Servicer is a party constitutes a legal, valid and binding obligation of the
Servicer enforceable against the Servicer in accordance with its terms, except
as such enforceability may be subject to or limited by applicable Debtor Relief
Laws and except as such enforceability may be limited by general principles of
equity (whether considered in a suit at law or in equity).

 

(d)           No Conflict; No Violation.  The execution and delivery by the
Servicer of each of the Transaction Documents to which the Servicer is a party,
and the performance by the Servicer of the transactions contemplated by such
agreements and the fulfillment by the Servicer of the terms hereof and thereof
applicable to the Servicer, will not conflict with, violate, result in any
breach of the terms and provisions of, or constitute (with or without notice or
lapse of time or both) a default under any provision of any existing law or
regulation or any order or decree of any court applicable to the Servicer or its
certificate of incorporation or bylaws or any material indenture, contract,
agreement, mortgage, deed of trust or other material instrument, to which the
Servicer is a party or by which it is bound, except where such conflict,
violation, breach or default would not have a Material Adverse Effect.

 

(e)           No Proceedings.  There are no proceedings or investigations
pending or, to the knowledge of the Servicer threatened, against the Servicer,
before any court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity of this Agreement or
any of the other Transaction Documents, (ii) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement or any of the other
Transaction Documents, (iii) seeking any determination or ruling that, in the
reasonable judgment of the Servicer, would adversely affect the performance by
the Servicer of its obligations under this Agreement or any of the other
Transaction Documents, (iv) seeking any

 

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determination or ruling that would adversely affect the validity or
enforceability of this Agreement or any of the other Transaction Documents or
(v) seeking any determination or ruling that would have a Material Adverse
Effect.

 

(f)            All Consents Required.  All approvals, authorizations, consents,
orders or other actions of any Person or any governmental body or official
required in connection with the execution and delivery by the Servicer of this
Agreement or of the other Transaction Documents to which it is a party or the
performance by the Servicer of the transactions contemplated hereby and thereby
and the fulfillment by the Servicer of the terms hereof and thereof, have been
obtained, except where the failure so to do would not have a Material Adverse
Effect.

 

Section 7.11           Additional Covenants of the Servicer.  The Servicer
further agrees as provided in this Section 7.11.

 

(a)           Change in Payment Instructions to Obligors.  The Servicer will not
add or terminate any bank as a Lockbox Bank from those listed in Schedule 3 to
this Agreement or make any change in the instructions to Obligors regarding
payments to be made to any Lockbox Bank, unless the Trustee shall have received
(i) 30 Business Days’ prior notice of such addition, termination or change and
(ii) prior to the effective date of such addition, termination or change, (x)
fully executed copies of the new or revised Lockbox Agreements executed by each
new Lockbox Bank, the Issuer, the Trustee and the Servicer and (y) copies of all
agreements and documents signed by either the Issuer or the respective Lockbox
Bank with respect to any new Lockbox Account.

 

(b)           Collections.  If the Servicer receives any Collections, the
Servicer shall hold such Collections in trust for the benefit of the Trustee and
deposit such Collections into a Lockbox Account or the Collection Account as
soon as practicable but in any event within two Business Days following the
Servicer’s receipt thereof.

 

(c)           Compliance with Requirements of Law.  The Servicer will maintain
in effect all qualifications required under all relevant laws, rules,
regulations and orders in order to service each Pledged Loan, and shall comply
in all material respects with all applicable laws, rules, regulations and orders
with respect to it, its business and properties, and the servicing of the
Pledged Loans (including without limitation the laws, rules and regulations of
each state governing the sale of timeshare contracts).

 

(d)           Protection of Rights.  The Servicer will take no action that would
impair in any material respect the rights of any of the Collateral Agent or the
Trustee in the Pledged Loans or any other Collateral, or violate the Collateral
Agency Agreement.

 

(e)           Credit Standards and Collection Policies.  The Servicer will
comply in all material respects with the Credit Standards and Collection
Policies and Customary Practices with respect to each Pledged Loan.

 

(f)            Notice to Obligors.  The Servicer will ensure that the Obligor of
each Pledged Loan either:

 

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(1)           has been instructed, pursuant to the Servicer’s routine
distribution of a periodic statement to such Obligor next succeeding:

 

(A)          the date the Loan becomes a Pledged Loan, or

 

(B)                                the day on which a PAC ceased to apply to
such Pledged Loan, in the case of a Pledged Loan formerly subject to a PAC,

 

but in no event later than the then next succeeding due date for a Scheduled
Payment under the related Pledged Loan, to remit Scheduled Payments thereunder
to a Post Office Box for credit to a Lockbox Account, or directly to a Lockbox
Account, in each case maintained at a Lockbox Bank pursuant to the terms of a
Lockbox Agreement, or

 

(2)           has entered into a PAC, pursuant to which a deposit account of
such Obligor is made subject to a pre-authorized debit in respect of Scheduled
Payments as they become due and payable, and the Issuer has, and has caused each
of the Servicer, a Lockbox Bank and/or the Trustee, to take all necessary and
appropriate action to ensure that each such pre-authorized debit is credited
directly to a Lockbox Account.

 

(g)           Relocation of Servicer.  The Servicer shall give the Trustee, the
Collateral Agent, the Swap Counterparty and each Rating Agency at least 30 day’s
prior written notice of any relocation of any office from which it services
Pledged Loans or keeps records concerning the Pledged Loans.  The Servicer shall
at all times maintain each office from which it services Pledged Loans within
the United States of America.

 

(h)           Instruments.  The Servicer will not remove any portion of the
Pledged Loans or other collateral that consists of money or is evidenced by an
instrument, certificate or other writing (including any Pledged Loan) from the
jurisdiction in which it is then held unless the Trustee has first received an
Opinion of Counsel to the effect that the Lien created by this Agreement with
respect to such property will continue to be maintained after giving effect to
such action or actions; provided, however, that the Custodian, the Collateral
Agent and the Servicer may remove Loans from such jurisdiction to the extent
necessary to satisfy any requirement of law or court order, in all cases in
accordance with the provisions of the Custodial Agreement, the Collateral Agency
Agreement and this Agreement.

 

(i)            Loan Schedule.  The Servicer will promptly amend the Loan
Schedule to reflect terms or discrepancies that become known to the Servicer at
any time.

 

(j)            Segregation of Collections.  The Servicer will:

 

(a)           prevent the deposit into any Account of any funds other than
Collections or other funds to be deposited into such Account under this
Agreement (provided that, this covenant shall not be breached to the extent that
funds are inadvertently deposited into any of such Accounts and are promptly
segregated and removed from the Account); and

 

(b)           with respect to each the Lockbox Account either (i) prevent the
deposit into such account of any funds other than Collections in respect of
Pledged Loans or

 

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(ii) enter into an intercreditor agreement with other entities which have an
interest in the amounts in the Lockbox Account to allocate the Collections with
respect to Pledged Loans to the Issuer and transfer such amounts to the Trustee
for deposit into the appropriate Collection Account (provided that, the covenant
in clause (i) of this paragraph (b) shall not be breached to the extent funds
not constituting Collections in respect of Pledged Loans are inadvertently
deposited into such Lockbox Account and are promptly segregated and remitted to
the owner thereof).

 

(k)           Terminate or Reject Loans.  Without limiting anything in
subsection 6.2(b), the Servicer will not terminate any Pledged Loan prior to the
end of the term of such Loan, whether such early termination is made pursuant to
an equitable cause, statute, regulation, judicial proceeding or other applicable
law, unless prior to such termination, the Issuer consents and any related
Pledged Assets have been released from the Lien of this Agreement.

 

(l)            Change in Business or Credit Standards and Collection Policies. 
The Servicer will not make any change in the Credit Standards and Collection
Policies or deviate from the exercise of Customary Practices, which change or
deviation would materially impair the value or collectibility of any Pledged
Loan.

 

(m)          Keeping of Records and Books of Account.  The Servicer shall
maintain and implement administrative and operating procedures (including
without limitation an ability to recreate records evidencing the Pledged Loans
in the event of the destruction or loss of the originals thereof) and keep and
maintain, all documents, books, records and other information reasonably
necessary or advisable for the collection of all Pledged Loans (including
without limitation records adequate to permit the daily identification of all
Collections with respect to, and adjustments of amounts payable under, each
Pledged Loan).

 

(n)           Recordation of Collateral Assignments  The Servicer will cause
collateral Assignment of Mortgage to the Collateral Agent to be perfected as
provided in the Fairfield Master Loan Purchase Agreement, except that the
Servicer shall not be required to file or cause the filing of such collateral
Assignment of Mortgage to the extent (a) the related Timeshare Property is
located in the State of Florida and the Servicer shall have received an Opinion
of Counsel to the effect that recordation of the Assignment of Mortgage is not
necessary to perfect a security interest therein in favor of the Collateral
Agent and (b) the long-term debt rating assigned by Moody’s to the obligations
of Cendant has not been withdrawn or reduced below Baa1.  If the Servicer is
unable to obtain the opinion described in clause (a) of the preceding sentence
or if the rating described in clause (b) is withdrawn or reduced, then the
Servicer will take or cause to be taken such action as is required to record the
Assignment of Mortgages with respect to the Timeshare Properties located in the
State of Florida.

 

Section 7.12           Servicer not to Resign.

 

(a)           Resignation.  The entity then serving as Servicer shall not resign
from the obligations and duties hereby imposed on it hereunder except as
provided in Section 7.12(b) or except upon determination that (i) the
performance of its duties hereunder is no longer permissible under applicable
law, (ii) there is no reasonable action which can be taken to make the
performance of its duties hereunder permissible under applicable law and (iii) a
Successor

 

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Servicer shall have been appointed and accepted the duties as Servicer pursuant
to Section 12.2.  Any such determination permitting the resignation of the
Servicer pursuant to clause (i) of the preceding sentence shall be evidenced by
an Opinion of Counsel to such effect delivered to the Trustee.  No such
resignation shall be effective until a Successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section
12.2.

 

(b)           Transfer to Certain Cendant Affiliates.  FAC, as Servicer, may
resign as Servicer and be replaced by Trendwest, and Trendwest, as Servicer, may
resign as Servicer and be replaced by FAC, in either case, only upon the
following terms and conditions:

 

(i)            the resigning Servicer shall give the Trustee, the Swap
Counterparty, the Issuer, the Collateral Agent and S&P not less than 10 Business
Days notice of the resignation and substitution of Trendwest in place of FAC or
FAC in place of Trendwest as Servicer;

 

(ii)           Cendant shall have given its written consent to the substitution
by delivering such written consent to the Trustee and the Performance Guaranty
shall be amended to cover the performance of the new Servicer;

 

(iii)          the entity which is to become the new Servicer, shall enter into
a written supplement to this Agreement and deliver such supplement to the
Trustee, the Collateral Agent and the Issuer and in such supplement the new
Servicer shall assume all of the rights, obligations and responsibilities of the
Servicer under this Agreement; and

 

(iv)          the entity resigning as Servicer and the entity becoming Servicer
shall deliver to the Trustee a certificate to the effect that the resignation of
the existing Servicer and replacement will not cause a Material Adverse Effect
and as of the date of the substitution, there has been no material adverse
change with respect to the servicing business of the new Servicer which will
have a Material Adverse Effect (within the meaning of clause (d) or clause (e)
of the definition thereof) with respect to it.

 

Section 7.13           Merger or Consolidation of, or Assumption of the
Obligations of Servicer.

 

The Servicer shall not consolidate with or merge into any other corporation or
convey or transfer its properties and assets substantially as an entirety to any
Person unless:

 

(i)            the corporation formed by such consolidation or into which the
Servicer is merged or the Person which acquires by conveyance or transfer the
properties and assets of the Servicer substantially as an entirety shall be a
corporation organized and existing under the laws of the United States of
America or any state or the District of Columbia and, if the Servicer is not the
surviving entity, shall expressly assume by an agreement supplemental hereto,
executed and delivered to the Trustee in form satisfactory to the Trustee, the
performance of every covenant and obligation of the Servicer hereunder;

 

(ii)           the Servicer has delivered to the Trustee an Officer’s
Certificate and an Opinion of Counsel each stating that such consolidation,
merger, conveyance or transfer and such supplemental agreement comply with this
Section 7.13, and all conditions precedent provided for herein relating to such
transaction have been satisfied;

 

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(iii)          the Rating Agency Condition has been satisfied with respect to
such consolidation, amendment, merger, conveyance or transfer; and

 

(iv)          immediately prior to and after the consummation of such merger,
consolidation, conveyance or transfer, no event which, with notice or passage of
time or both, would become a Servicer Default under the terms of this Agreement
shall have occurred and be continuing.

 

Section 7.14           Examination of Records.  Each of the Issuer and the
Servicer shall clearly and unambiguously identify each Pledged Loan in its
respective computer or other records to reflect that such Pledged Loan has been
Granted to the Collateral Agent pursuant to this Agreement.  Each of the Issuer
and the Servicer shall, prior to the sale or transfer to a third party of any
Loan similar to the Pledged Loans held in its custody, examine its computer and
other records to determine that such Loan is not a Pledged Loan.

 

Section 7.15           Subservicing Agreements.  The Servicer, including any
Successor Servicer, may enter into the Subservicing Agreements with the
Subservicers for the servicing and administration of all or a part of the
Pledged Loans for which the Servicer is responsible hereunder, provided that, in
each case, the Subservicing Agreement is not inconsistent with this Agreement. 
References in this Agreement to actions taken or to be taken by the Servicer
include actions taken or to be taken by a Subservicer.  As part of its servicing
activities hereunder, the Servicer shall monitor the performance and enforce the
obligations of each Subservicer retained by it under the related Subservicing
Agreement.  Subject to the terms of the Subservicing Agreement, the Servicer
shall have the right to remove a Subservicer retained by it at any time it
considers to be appropriate provided that no subservicer shall be removed unless
Cendant has given its prior written consent to the Servicer and the Trustee. 
Upon the resignation or removal of a Servicer, all Subservicing Agreements shall
also be terminated unless accepted or reaffirmed by the Successor Servicer.

 

Notwithstanding anything to the contrary contained herein, or any Subservicing
Agreement, the Servicer shall remain obligated and liable to the Trustee, the
Issuer, the Collateral Agent and the Noteholders for the servicing and
administration of the Pledged Loans in accordance with the provisions of this
Agreement to the same extent and under the same terms and conditions as if it
alone were servicing and administering the Pledged Loans.

 

The fees of a Subservicer shall be the obligation of the Servicer and neither
the Issuer nor any other Person shall bear any responsibility for such fees.

 

Section 7.16.          Servicer Advances.  On or before each Determination Date
the Servicer may deposit into the Collection Account an amount equal to the
aggregate amount of Servicer Advances, if any, with respect to Scheduled
Payments on Pledged Loans for the preceding Due Period which are not received on
or prior to such Payment Date.  Such Servicer Advances shall be included as
Available Funds.  Neither the Servicer, any Successor Servicer nor the Trustee,
acting as Servicer, shall have any obligation to make any Servicer Advance and
may refuse to make a Servicer Advance for any reason or no reason.  The Servicer
shall not make any Servicer Advance that, after reasonable inquiry and in its
sole discretion, it determines is unlikely to be

 

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ultimately recoverable from subsequent payments or collections or otherwise with
respect to the Pledged Loan with respect to which such Servicer Advance is
proposed to be made.

 

ARTICLE VIII

 

REPORTS

 

Section 8.1             Monthly Report to Trustee.  On or before the
Determination Date prior to each Payment Date the Servicer shall transmit to the
Trustee in a form substantially like that attached as Exhibit G to this
Agreement information necessary to make payments and transfer funds as provided
in Sections 3.1 and 3.4 and the Servicer shall produce the Settlement Statement
for such Payment Date.  Transmission of such information to the Trustee shall be
deemed to be a representation and warranty by the Servicer to the Trustee and
the Noteholders that such information is true and correct in all material
respects.  At the option of the Servicer, the Settlement Statement may be
combined with the Monthly Servicing Report described in Section 8.2 and
delivered to the Trustee as one report.

 

Section 8.2             Monthly Servicing Report.  On each Determination Date,
the Servicer shall deliver to the Trustee, the Issuer and S&P the Monthly
Servicing Report in the form set forth in Exhibit G to this Agreement with such
additions as the Trustee may from time to time request, together with a
certificate of a Servicing Officer substantially in the form of Exhibit G
certifying the accuracy of such report and that no Event of Default or event
that with the giving of notice or lapse of time or both would become an Event of
Default has occurred, or if such event has occurred and is continuing,
specifying the event and its status.  Such certificate shall state whether or
not a Sequential Order Event has occurred and shall also identify which, if any,
Pledged Loans have been identified as Defective Loans or have become Defaulted
Loans during the preceding Due Period and if a Cash Accumulation Event has
occurred.

 

Section 8.3             Other Data.  In addition, the Servicer shall at the
reasonable request of the Trustee, the Issuer or a Rating Agency, furnish to the
Trustee, the Issuer or such Rating Agency such underlying data as can be
generated by the Servicer’s existing data processing system without undue
modification or expense; provided, however, nothing in this Section 8.3 shall
permit any of the Trustee, the Issuer or any Rating Agency to materially change
or modify the ongoing data reporting requirements under this Article VIII.

 

Section 8.4             Annual Servicer’s Certificate.  The Servicer will
deliver to the Issuer, the Trustee and each Rating Agency within forty-five (45)
days after the end of each fiscal year, beginning with the fiscal year ending
December 31, 2003, an Officer’s Certificate stating that (a) a review of the
activities of the Servicer during the preceding calendar year (or, in the case
of the first such Officer’s Certificate, the period since the Closing Date) and
of its performance under this Agreement during such period was made under the
supervision of the officer signing such certificate and (b) to the Servicer’s
knowledge, based on such review, the Servicer has fully performed all of its
obligations under this Agreement for the relevant time period, or, if there has
been a default in the performance of any such obligation, specifying each such
default known to such officer and the nature and status thereof.

 

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Section 8.5             Notices to FAC.  In the event that neither FAC nor
Trendwest is acting as Servicer, any Successor Servicer appointed and acting
pursuant to Section 12.2 shall deliver or make available to FAC each certificate
and report required to be prepared, forwarded or delivered thereafter pursuant
to the provisions of this Article VIII.

 

Section 8.6             Tax Reporting.  The Trustee shall file or cause to be
filed with the Internal Revenue Service and furnish or cause to be furnished to
Noteholders Information Reporting Forms 1099, together with such other
information reports or returns at the time or times and in the manner required
by the Code consistent with the treatment of the Notes as indebtedness of the
Issuer for federal income tax purposes.

 

ARTICLE IX

 

LOCKBOX ACCOUNTS

 

Section 9.1             Lockbox Accounts.  The Issuer has established or has
caused to be established and shall maintain or cause to be maintained a system
of operations, accounts and instructions with respect to the Obligors and
Lockbox Accounts at the Lockbox Banks as described in Sections 4.1(i) and 6.1. 
Pursuant to the Lockbox Agreement to which it is party, each Lockbox Bank shall
be irrevocably instructed to initiate an electronic transfer of all funds on
deposit in the relevant Lockbox Account or to the extent the Lockbox Account is
operated under an intercreditor agreement all funds in the Lockbox Account that
are derived from Pledged Loans, to the Collection Account on the Business Day on
which such funds become available.  Prior to the occurrence of an Event of
Default, the Trustee shall be authorized to allow the Servicer to effect or
direct deposits into the Lockbox Accounts.  The Trustee is hereby irrevocably
authorized and empowered, as the Issuer’s attorney-in-fact, to endorse any item
deposited in a Lockbox Account, or presented for deposit in any Lockbox Account
or the Collection Account, requiring the endorsement of the Issuer, which
authorization is coupled with an interest and is irrevocable.

 

All funds in each Lockbox Account shall be transferred daily by or upon the
order of the Trustee by electronic funds transfer or intra-bank transfer to the
Collection Account.

 

ARTICLE X

 

INDEMNITIES

 

Section 10.1           Liabilities to Obligors.  No obligation or liability to
any Obligor under any of the Pledged Loans is intended to be assumed by the
Trustee or the Noteholders under or as a result of this Agreement and the
transactions contemplated hereby and, to the maximum extent permitted by law,
the Trustee and the Noteholders expressly disclaim any such obligation and
liability.

 

Section 10.2           Tax Indemnification.  The Issuer agrees to pay, and to
indemnify, defend and hold harmless the Trustee, the Noteholders and the Swap
Counterparty from, any taxes which may at any time be asserted with respect to,
and as of the date of, the Grant of the Pledged Loans to the Collateral Agent
for the benefit of the Trustee, the Noteholders and the Swap

 

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Counterparty, including without limitation any sales, gross receipts, general
corporation, personal property, privilege or license taxes (but not including
any federal, state or other income or intangible asset taxes arising out of the
issuance of the Notes or distributions with respect thereto, other than any such
intangible asset taxes in respect of a jurisdiction in which the indemnified
person is not otherwise subject to tax on its intangible assets) and costs,
expenses and reasonable counsel fees in defending against the same.

 

Section 10.3           Servicer’s Indemnities.  Each entity serving as Servicer
shall defend and indemnify the Issuer and the Trustee against any and all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel and expenses of litigation, in respect of any action taken,
or failure to take any action by such entity as Servicer (but not by any
predecessor or successor Servicer) with respect to this Agreement or any Pledged
Loan; provided, however, such indemnity shall apply only in respect of any
negligent action taken, or negligent failure to take any action, or reckless
disregard of duties hereunder, or bad faith or willful misconduct by the
Servicer. This indemnity shall survive any Service Transfer (but a Servicer’s
obligations under this Section 10.3 shall not relate to any actions of any
Successor Servicer after a Service Transfer) and any payment of the amount owing
hereunder or any release by the Issuer of any such Pledged Loan.

 

Section 10.4           Operation of Indemnities.  Indemnification under this
Article X shall include without limitation reasonable fees and expenses of
counsel and expenses of litigation. If the Servicer has made any indemnity
payments to the Trustee, the Noteholders, the Swap Counterparty or the Issuer
pursuant to this Article X and if either the Trustee or the Issuer thereafter
collect any of such amounts from others, the Trustee, the Noteholders, the Swap
Counterparty or the Issuer will promptly repay such amounts collected to the
Servicer without interest.

 

ARTICLE XI

 

EVENTS OF DEFAULT

 

Section 11.1           Events of Default.  If any one of the following events
shall occur:

 

(a)           default in the payment of any Accrued Interest on any Note when
the same becomes due and payable, and such default shall continue for five
Business Days; or

 

(b)           default in the payment of the principal of any Note when the same
becomes due and payable on the Maturity Date; or

 

(c)           default in the observance or performance of any material covenant
or agreement of the Issuer made with respect to itself or of the Servicer made
with respect to itself in this Agreement (other than a covenant or agreement, a
default in the observance or performance of which is elsewhere in this Section
11.1 specifically dealt with), or any representation or warranty of the Issuer
made as to itself or the Servicer made with respect to itself in this Agreement
or in any certificate or other writing delivered pursuant hereto or in
connection herewith proving to have been incorrect in any material respect as of
the time when the same shall have been made, and such default shall continue or
not be cured, or the circumstance or condition in respect of

 

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which such representation or warranty was incorrect shall not have been
eliminated or otherwise cured, for a period of thirty (30) days after there
shall have been given, by registered or certified mail, return receipt requested
to the Issuer and to the Servicer if the Servicer is in default by the Trustee
or to the Issuer and the Servicer, as applicable, and the Trustee by the Holders
of at least 25% of the Aggregate Principal Amount of the Notes, a written notice
specifying such default or incorrect representation or warranty and requiring it
to be remedied and stating that such notice is a “Notice of Default” hereunder;
or

 

(d)           (1) the Issuer shall consent to the appointment of a conservator,
receiver or liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to the Issuer or to
all or substantially all of its property, as the case may be; (2) a decree or
order of a court, agency or supervisory authority having jurisdiction for the
appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the Issuer and such decree or order shall have remained in
force undischarged or unstayed for a period of 60 days; or (3) the Issuer shall
become insolvent or admit in writing its inability to pay its debts generally as
they become due, file a petition to take advantage of any applicable insolvency
or reorganization statute, make an assignment for the benefit of its creditors
or voluntarily suspend payment of its obligations.

 

(e)           the Issuer shall become an “investment company” or shall become
under the control of an “investment company” within the meaning of the
Investment Company Act;

 

(f)            failure on the part of FAC or Trendwest, if any, to (i)
repurchase any Defective Loan or provide a Qualified Substitute Loan if required
to do so under the terms of the applicable Purchase Agreement or (ii) maintain
the perfection and first priority status of the security interest granted to the
Depositor upon the sale of the Pledged Loans and such failure continues for a
period of thirty (30) days after there shall have been given, by registered or
certified mail, return receipt requested to the Issuer, and to FAC or Trendwest,
as applicable, by the Trustee or to the Issuer and FAC or Trendwest, as
applicable, and the Trustee by the Holders of at least 25% of the Aggregate
Principal Amount of the Notes, a written notice specifying such failure and
requiring it to be remedied and stating that such notice is a “Notice of
Default” hereunder;

 

THEN, with respect to the event described in subparagraph (d), an Event of
Default shall occur as of the date of such event and with respect to each of the
events described in subparagraphs (a), (b), (c), (e) and (f) an Event of Default
shall occur upon the occurrence of the event, the passage of the applicable
grace period, if any and the declaration that such event shall constitute an
Event of Default which declaration shall be made by the Trustee or the Holders
of at least 25% of the Aggregate Principal Amount of the Notes.  If an Event of
Default has occurred, it shall continue unless waived in writing by the Holders
of at least 50% of the Aggregate Principal Amount of the Notes.

 

Promptly after the automatic occurrence of an Event of Default, and, in any
event, within two Business Days thereafter, the Trustee shall notify each
Noteholder and each Rating Agency of the occurrence thereof to the extent a
Responsible Officer of the Trustee has actual knowledge thereof based upon
receipt of written information or other communication.

 

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Section 11.2           Acceleration of Maturity; Rescission and Annulment

 

(a)           If any Event of Default occurs under subparagraph (d) of Section
11.1, the principal of each Class of Notes then outstanding, together with
accrued and unpaid interest thereon, will automatically be accelerated and
become immediately due and payable.  If any other Event of Default occurs, the
Majority Holders of the Notes may accelerate the Notes by declaring the
principal of all the Notes then outstanding, together with accrued and unpaid
interest thereon to be immediately due and payable, by a notice in writing to
the Issuer, the Trustee and the Swap Counterparty and upon any such declaration
such principal and interest shall become immediately due and payable.

 

(b)           At any time after such an acceleration or declaration of
acceleration of the Notes has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as provided in this
Agreement, such acceleration may be rescinded by the Holders of at least 50% of
the Aggregate Principal Amount by written notice to the Issuer, the Trustee and
the Swap Counterparty.  No such rescission shall affect any subsequent Event of
Default or impair any right consequent thereon.

 

(c)           If an Event of Default has occurred and the Notes have been
accelerated, payments will continue to be made in accordance with the Priority
of Payment unless a Sequential Order Event has also occurred, in which case
payments will be made as provided in Section 3.1 upon the occurrence of a
Sequential Order Event; provided however, if the Trustee has sold the Collateral
under this Agreement, then payments shall be made as provided in Section 11.7.

 

Section 11.3           Collection of Indebtedness and Suits for Enforcement by
Trustee.  The Issuer covenants that if the Notes of a Series are accelerated
following the occurrence of an Event of Default, and such acceleration has not
been rescinded and annulled, the Issuer shall, upon demand of the Trustee, pay
to it, for the benefit of the Noteholders and the Swap Counterparty the whole
amount then due and payable on the Notes for principal and interest, with
interest upon the overdue principal and upon overdue installments of interest,
as determined for each Class, and any amounts due to the Swap Counterparty, to
the extent that payment of such interest shall be legally enforceable; and, in
addition thereto, such further amount as shall be sufficient to cover the
reasonable costs and expenses of collection, including the compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel;
provided, however, the amount due under this Section 11.3 shall not exceed the
aggregate proceeds from the sale of the relevant Collateral and amounts
otherwise held by the Issuer and available for such purpose.

 

Until such demand is made by the Trustee, the Issuer shall pay the principal of
and interest on the Notes to the Trustee for the benefit of the registered
Holders to be applied as provided in this Agreement, whether or not the Notes
are overdue.

 

If the Issuer fails to pay such amounts forthwith upon such demand, then the
Trustee for the benefit of the Noteholders and the Swap Counterparty and as
trustee of an express trust, may, with the prior written consent of or at the
direction of the Majority Holders, institute suits in equity, actions at law or
other legal, judicial or administrative proceedings (each, a

 

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“Proceeding”) for the collection of the sums so due and unpaid, and may
prosecute such Proceeding to judgment or final decree, and may enforce the same
against the Issuer and collect the monies adjudged or decreed to be payable in
the manner provided by law out of the Collateral wherever situated.  In the
event a Proceeding shall involve the liquidation of Collateral, the Trustee
shall pay all costs and expenses for such Proceeding and shall be reimbursed for
such costs and expenses from the resulting liquidation proceeds. In the event
that the Trustee determines that liquidation proceeds will not be sufficient to
fully reimburse the Trustee, the Trustee shall receive indemnity satisfactory to
it against such costs and expenses from the Noteholders (which indemnity may
include, at the Trustee’s option, consent by each Noteholder authorizing the
Trustee to be reimbursed from amounts available in the Collection Account).

 

If an Event of Default occurs and is continuing, the Trustee may, and with the
prior written consent of or at the direction of the Majority Holders, shall,
proceed to protect and enforce its rights and the rights of the Noteholders
hereunder and under the Notes, by such appropriate Proceedings as are necessary
to effectuate, protect and enforce any such rights, whether for the specific
enforcement of any covenant, agreement, obligation or indemnity in this
Agreement or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.

 

Section 11.4           Trustee May File Proofs of Claim.  In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other Proceeding
relative to the Issuer or the property of the Issuer or its creditors, the
Trustee (irrespective of whether the principal of the Notes shall then be due
and payable as therein expressed or by declaration or otherwise) shall be
entitled and empowered, by intervention in such Proceeding or otherwise,

 

(a)           to file a proof of claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes and to file such other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of the
Noteholders allowed in such Proceeding, and

 

(b)           to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same to the Noteholders;

 

and any receiver, assignee, trustee, liquidator or sequestrator (or other
similar official) in any such Proceeding is hereby authorized by each Noteholder
to make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Noteholders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due to the Trustee under Article XIII.

 

Nothing contained herein shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Noteholder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such Proceeding.

 

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Section 11.5           Remedies.

 

(a)           If an Event of Default shall have occurred and be continuing, the
Trustee and the Collateral Agent (upon direction by the Trustee) may, with the
prior written consent of or at the direction of the Majority Holders, do one or
more of the following (subject to Section 11.6):

 

(1)           institute Proceedings in its own name and as trustee of an express
trust for the collection of all amounts then payable on the Notes or under this
Agreement, whether by declaration or otherwise, enforce any judgment obtained,
and collect from the Collateral monies adjudged due;

 

(2)           obtain possession of the Pledged Loans in accordance with the
terms of the Custodial Agreement and sell the Collateral or any portion thereof
or rights or interests therein, at one or more public or private sales called
and conducted in any manner permitted by law and in accordance with Section
11.13;

 

(3)           institute Proceedings in its own name and as trustee of an express
trust from time to time for the complete or partial foreclosure of this
Agreement with respect to the Collateral; and

 

(4)           exercise any remedies of a secured party under the UCC with
respect to the Collateral (including any Accounts) and take any other
appropriate action to protect and enforce the rights and remedies of the Trustee
or the Holders and each other agreement contemplated hereby (including retaining
the Collateral pursuant to Section 11.6 and applying distributions from the
Collateral pursuant to Section 11.7);

 

provided, however, that neither the Trustee nor the Collateral Agent may sell or
otherwise liquidate the Collateral which constitutes Pledged Loans and Pledged
Assets following an Event of Default other than an Event of Default described in
this Agreement resulting from an Insolvency Event, unless either (i) the Holders
of 100% of the Aggregate Principal Amount of the Notes then outstanding consent
thereto, (ii) the proceeds of such sale or liquidation distributable to the
Noteholders are sufficient to discharge in full the amounts then due and unpaid
upon the Notes for principal and accrued interest and the fees and other amounts
required to be paid prior to payment of amounts due on the Notes pursuant to
Section 11.7 or (iii) the Holders of 66 2/3% of the principal amount of each
Class consent thereto and the Trustee determines that the Collateral will not
continue to provide sufficient funds for the payment of principal of, and
interest on, the Notes as they would have become due if such Notes would not
have been declared due and payable.

 

For purposes of clause (ii) or clause (iii) of the preceding paragraph and
Section 11.6, the Trustee may, but need not, obtain and rely upon an opinion of
an independent accountant or an independent investment banking firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the distributions and other amounts receivable with respect to
the Collateral to make the required payments of principal of and interest on the
Notes, and any such opinion shall be conclusive evidence as to such feasibility
or sufficiency.  The Issuer shall bear the reasonable costs and expenses of any
such opinion.

 

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(b)           In addition to the remedies provided in Section 11.5(a), the
Trustee may, and at the request of the Majority Holders shall, institute a
Proceeding in its own name and as trustee of an express trust solely to compel
performance of a covenant, agreement, obligation or indemnity or to cure the
representation or warranty or statement, the breach of which gave rise to the
Event of Default; and the Trustee may enforce any equitable decree or order
arising from such Proceeding.

 

Section 11.6           Optional Preservation of Collateral.  If the Notes have
been accelerated following an Event of Default and such acceleration and its
consequences have not been rescinded and annulled, to the extent permitted by
law, the Trustee may, and at the request of Holders of 66 2/3% of the Aggregate
Principal Amount of the Notes shall, elect to retain the Collateral securing the
Notes intact for the benefit of the Holders of the Notes and the Swap
Counterparty and in such event it shall deposit all funds received with respect
to the Collateral into the Collection Account and apply such funds in accordance
with the payment priorities set forth in this Agreement, as if there had not
been such an acceleration; provided that, the Trustee shall have determined that
the distributions and other amounts receivable with respect to the Collateral
are sufficient to provide the funds required to pay the principal of and
interest on the Notes as and when such principal and interest would have become
due and payable pursuant to the terms of this Agreement and of such Notes if
there had not been a declaration of acceleration of maturity of the Notes.

 

Until the Trustee has elected, or has determined not to elect, to retain the
Collateral pursuant to this Section 11.6, the Trustee shall continue to apply
all distributions received on such Collateral in accordance with this Agreement.
If the Trustee determines to retain the Collateral as provided in this Section
11.6, such determination shall be deemed to be a rescission and annulment (but
not a waiver) of the aforementioned Event of Default and its consequences
pursuant to Section 11.2, but no such rescission and annulment shall extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon.

 

Section 11.7           Application of Monies Collected During Event of Default. 
If the Notes have been accelerated following an Event of Default and such
acceleration and its consequences have not been rescinded and annulled, and the
Trustee has sold the Collateral, the proceeds collected by the Trustee pursuant
to this Article XI or otherwise with respect to such Notes shall be applied as
provided below:

 

FIRST, to the Trustee in payment of the Monthly Trustee Fees and in
reimbursement of permitted expenses of the Trustee under each of the Transaction
Documents to which the Trustee is a party and amounts due to the Trustee as
indemnification; in the event of a Servicer Default and the replacement of the
Servicer with the Trustee or a Successor Servicer, the costs and expenses of
replacing the Servicer shall be permitted expenses of the Trustee;

 

SECOND, to the Servicer, the Monthly Servicer Fee plus any unreimbursed Servicer
Advances plus any accrued and unpaid Monthly Servicer Fees and any unreimbursed
Servicer Advances for prior Payment Dates;

 

THIRD, to the Swap Counterparty, the Net Swap Payment, if any;

 

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FOURTH, to the extent not paid by the Servicer, to the Custodian the Monthly
Custodian Fee, plus any accrued and unpaid Monthly Custodian Fees for prior
Payment Dates;

 

FIFTH, to the extent not paid by the Servicer, to the Collateral Agent, the
Monthly Collateral Agent Fee plus any accrued and unpaid Monthly Collateral
Agent Fees for prior Payment Dates;

 

SIXTH, Accrued Interest, Overdue Interest from prior periods (and interest
thereon) on the Class A Notes and any Interest Carry-Forward Amounts owing to
such Class plus interest at the applicable Note Interest Rate on such
unreimbursed Interest Carry-Forward Amounts and principal on the Class A Notes
until the Class A Notes are paid in full;

 

SEVENTH, Accrued Interest and Overdue Interest from prior periods (and interest
thereon) on the Class B Notes and any Interest Carry-Forward Amounts owing to
such Class plus interest at the applicable Note Interest Rate on such
unreimbursed Interest Carry-Forward Amounts and principal on the Class B Notes
until the Class B Notes are paid in full;

 

EIGHTH, Accrued Interest and Overdue Interest from prior periods (and interest
thereon) on the Class C Notes and any Interest Carry-Forward Amounts owing to
such Class plus interest at the applicable Note Interest Rate on such
unreimbursed Interest Carry-Forward Amounts and principal on the Class C Notes
until the Class C Notes are paid in full;

 

NINTH, Accrued Interest and Overdue Interest from prior periods (and interest
thereon) on the Class D Notes and any Interest Carry-Forward Amounts owing to
such Class plus interest at the applicable Note Interest Rate on such
unreimbursed Interest Carry-Forward Amounts and principal on the Class D Notes
until the Class D Notes are paid in full; and any termination payments due to
the Swap Counterparty as a result of the termination of the Interest Rate Swap;

 

TENTH, to the Trustee, any other amounts due to the Trustee under this
Agreement; and

 

ELEVENTH, to Issuer, any remaining amounts free and clear of the Lien of this
Agreement.

 

Section 11.8           Limitation on Suits by Individual Noteholders.  Subject
to Section 11.9, no Noteholder shall have any right to institute any Proceeding
with respect to this Agreement, or for the appointment of a receiver or trustee,
or for any other remedy hereunder or thereunder, unless:

 

(a)           such Holder has previously given written notice to the Trustee of
a continuing Event of Default;

 

(b)           the Majority Holders shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;

 

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(c)           such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request; and

 

(d)           the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such Proceeding,

 

it being understood and intended that no one or more Noteholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Agreement to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Agreement, except in the manner
herein provided.

 

Section 11.9           Unconditional Rights of Noteholders to Receive Principal
and Interest.  Notwithstanding any other provision in this Agreement, the Holder
of any Note shall have the right, which right is absolute and unconditional, to
receive payment of the principal and interest on such Note on or after the
respective due dates thereof expressed in such Note or in this Agreement and to
institute suit for the enforcement of any such payment, and such right shall not
be impaired without the consent of such Noteholder.

 

Section 11.10         Restoration of Rights and Remedies.  If the Trustee or any
Noteholder has instituted any Proceeding to enforce any right or remedy under
this Agreement and such Proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Noteholder,
then and in every such case the Issuer, the Trustee and the Noteholders shall,
subject to any determination in such Proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Trustee and the Noteholders shall continue as though no such
Proceeding had been instituted.

 

Section 11.11         Waiver of Event of Default.  Prior to the Trustee’s
acquisition of a money judgment or decree for payment, in either case for the
payment of all amounts owing by the Issuer in connection with this Agreement and
the Notes issued thereunder the Holders of 50% or more of the Aggregate
Principal Amount of Notes have the right to waive any Event of Default and its
consequences.

 

Upon any such waiver, such Event of Default shall cease to exist, and be deemed
to have been cured, for every purpose of this Agreement but no such waiver shall
extend to any subsequent or other Event of Default or impair any right
consequent thereon.

 

Section 11.12         Waiver of Stay or Extension Laws.  The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Agreement; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, on the basis of any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.

 

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Section 11.13         Sale of Collateral.

 

(a)           The power to effect any sale (a “Sale”) of any portion of the
Collateral pursuant to Section 11.5 shall not be exhausted by any one or more
Sales as to any portion of such Collateral remaining unsold, but shall continue
unimpaired until the entire Collateral shall have been sold or all amounts
payable on the Notes shall have been paid, whichever occurs later.  The Trustee
may from time to time postpone any Sale by public announcement made at the time
and place of such Sale.  The Trustee hereby expressly waives its right to any
amount fixed by law as compensation for any Sale.  The Trustee may reimburse
itself from the proceeds of any sale for the reasonable costs and expenses
incurred in connection with such sale.  The net proceeds of such sale shall be
applied as provided in this Agreement.

 

(b)           The Trustee and the Collateral Agent shall execute and deliver an
appropriate instrument of conveyance transferring its interest in any portion of
the Collateral in connection with a Sale thereof. In addition, the Trustee is
hereby irrevocably appointed the agent and attorney-in-fact of the Issuer to
transfer and convey the Issuer’s interest in any portion of the Collateral in
connection with a Sale thereof, and to take all action necessary to effect such
Sale. No purchaser or transferee at such Sale shall be bound to ascertain the
Trustee’s authority, inquire into the satisfaction of any conditions precedent
or see to the application of any monies.

 

Section 11.14         Action on Notes.  The Trustee’s right to seek and recover
judgment on the Notes or under this Agreement shall not be affected by the
seeking, obtaining or application of any other relief under or with respect to
this Agreement.  None of the rights or remedies of the Trustee or the
Noteholders hereunder shall be impaired by the recovery of any judgment by the
Trustee or any Noteholder against the Issuer or by the levy of any execution
under such judgment upon any portion of the Collateral.

 

Section 11.15.        Control by Noteholders.  If an Event of Default has
occurred and is continuing, the Majority Holders shall have the right to direct
the time, method and place of conducting any Proceeding for any remedy available
to the Trustee with respect to the Notes or exercising any trust or power
conferred on the Trustee; provided that

 

(i)            such direction shall not be in conflict with any rule of law or
with this Agreement;

 

(ii)           any direction to the Trustee to sell or liquidate the Collateral
which constitutes Loans and the related Pledged Assets shall be subject to the
provisions of Sections 11.5 and 11.6;

 

(iii)          if the conditions set forth in Section 11.6 have been satisfied
and the Trustee elects to retain the Collateral pursuant to such Section, then
any direction to the Indenture Trustee by Holders of Notes representing less
than 66 2/3% of the Notes Principal Amount to sell or liquidate the Collateral
shall be of no force and effect; and

 

(iv)          the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction;

 

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provided, however, that, subject to Section 13.1, the Trustee need not take any
action that it determines might involve it in liability.

 

ARTICLE XII

 

SERVICER DEFAULTS

 

Section 12.1           Servicer Defaults.  If any one of the following events
(each, a “Servicer Default”) shall occur and be continuing:

 

(a)           any failure by the Servicer to make any payment, transfer or
deposit on or before the date such payment, transfer or deposit is required to
be made or given under the terms of this Agreement and such failure remains
unremedied for three Business Days; provided, however, that if the Servicer is
unable to make a payment, transfer or deposit when due and such failure is as a
result of circumstances beyond the Servicer’s control, the grace period shall be
extended to five Business Days;

 

(b)           failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer set forth in this Agreement or any
other Transaction Document to which the Servicer is a party and such failure
continues unremedied for a period of 30 days after the earlier of the date on
which the Servicer has actual knowledge of the failure and the date on which
written notice of such failure, requiring the same to be remedied, shall have
been given to the Servicer by the Trustee, or to the Servicer and the Trustee by
the Holders of 25% or more of the Aggregate Principal Amount of the Notes;

 

(c)           any representation and warranty made by the Servicer in this
Agreement shall prove to have been incorrect in any material respect when made
and has a material and adverse impact on the Trustee’s interest in the Pledged
Loans and other Pledged Assets and the Servicer is not in compliance with such
representation or warranty within 30 Business Days after the earlier of the date
on which the Servicer has actual knowledge of such breach and the date on which
written notice of such breach requiring that such breach be remedied, shall have
been given to the Servicer by the Trustee or to the Servicer and the Trustee by
the Holders of 25% or more of the Aggregate Principal Amount of the Notes;

 

(d)           an Insolvency Event shall occur with respect to the Servicer or
Cendant; or

 

(e)           the Servicer shall fail to deliver the reports described in
Sections 8.1 and 8.2 of this Agreement and such failure shall continue for five
Business Days.

 

THEN, so long as such Servicer Default shall be continuing, either the Trustee,
or the Majority Holders of all Notes by notice then given in writing to the
Servicer, the Swap Counterparty, the Issuer and each Rating Agency (and to the
Trustee if given by the Majority Holders) (a “Termination Notice”), may
terminate all of the rights and obligations of the Servicer as Servicer under
this Agreement (such termination being herein called a “Service Transfer”). 
After receipt by the Servicer and the Trustee of such Termination Notice and
subject to the terms of Section 12.2(a), the Trustee shall automatically assume
the responsibilities of the Servicer hereunder until the date that a Successor
Servicer shall have been appointed pursuant to Section 12.2 and all authority
and power of the Servicer under this Agreement shall pass to and be vested in
the

 

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Trustee or such Successor Servicer, as the case may be, without further action
on the part of any Person, and, without limitation, the Trustee at the direction
of the Majority Holders is hereby authorized and empowered (upon the failure of
the Servicer to cooperate) to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, all documents and other instruments upon the
failure of the Servicer to execute or deliver such documents or instruments, and
to do and accomplish all other acts or things necessary or appropriate to effect
the purposes of such transfer of servicing rights.

 

The Servicer agrees to cooperate with the Trustee and such Successor Servicer in
effecting the termination of the responsibilities and rights of the Servicer to
conduct servicing hereunder, including without limitation the transfer to such
Successor Servicer of all authority of the Servicer to service the Pledged Loans
provided for under this Agreement, including without limitation all authority
over any Collections which shall on the date of transfer be held by the Servicer
for deposit in a Lockbox Account or which shall thereafter be received by the
Servicer with respect to the Pledged Loans, and in assisting the Successor
Servicer in enforcing all rights under this Agreement including, without
limitation, allowing the Successor Servicer’s personnel access to the Servicer’s
premises for the purpose of collecting payments on the Pledged Loans made at
such premises.  The Servicer shall promptly transfer its electronic records
relating to the Pledged Loans to the Successor Servicer in such electronic form
as the Successor Servicer may reasonably request and shall promptly transfer to
the Successor Servicer all other records, correspondence and documents necessary
for the continued servicing of the Pledged Loans in the manner and at such times
as the Successor Servicer shall reasonably request.  The Servicer shall allow
the Successor Servicer access to the Servicer’s officers and employees.  To the
extent that compliance with this Section 12.1 shall require the Servicer to
disclose to the Successor Servicer information of any kind which the Servicer
reasonably deems to be confidential, the Successor Servicer shall be required to
enter into such customary licensing and confidentiality agreements as the
Servicer shall deem necessary to protect its interest and as shall be
satisfactory in form and substance to the Successor Servicer.  The Servicer
hereby consents to the entry against it of an order for preliminary, temporary
or permanent injunctive relief by any court of competent jurisdiction, to ensure
compliance by the Servicer with the provisions of this paragraph.

 

Section 12.2           Appointment of Successor

 

(a)           Appointment.  On and after the receipt by the Servicer of a
Termination Notice pursuant to Section 12.1, or any permitted resignation of the
Servicer pursuant to Section 7.12, the Servicer shall continue to perform all
servicing functions under this Agreement until the date specified in the
Termination Notice or otherwise specified by the Trustee or until a date
mutually agreed upon by the Servicer and the Trustee.  Upon receipt by the
Servicer of a Termination Notice, the Trustee shall as promptly as possible
after the giving of a Termination Notice appoint a successor servicer (in any
case, the “Successor Servicer”) and such Successor Servicer shall accept its
appointment by a written assumption in a form acceptable to the Trustee;
provided that such appointment shall be subject to satisfaction of the Rating
Agency Condition.  In the event a Successor Servicer has not been appointed and
accepted the appointment by the date of termination stated in the Termination
Notice the Trustee shall automatically assume responsibility for performing the
servicing functions under this Agreement on the date of such termination.  In
the event that a Successor Servicer has not been appointed and has not accepted
its appointment and the Trustee is legally unable or otherwise not capable of
assuming

 

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responsibility for performing the servicing functions under this Agreement, the
Trustee shall petition a court of competent jurisdiction to appoint any
established financial institution having a net worth of not less than
$100,000,000 and whose regular business includes the servicing of receivables
similar to the Pledged Loans or other consumer finance receivables; provided,
however, pending the appointment of a Successor Servicer, the Trustee will act
as the Successor Servicer.

 

(b)           Duties and Obligations of Successor Servicer.  Upon its
appointment, the Successor Servicer shall be the successor in all respects to
the Servicer with respect to servicing functions under this Agreement and shall
be subject to all the responsibilities and duties relating thereto placed on the
Servicer by the terms and provisions hereof, and all references in this
Agreement to the Servicer shall be deemed to refer to the Successor Servicer.

 

(c)           Compensation of Successor Servicer; Costs and Expenses of
Servicing Transfer.  In connection with such appointment and assumption, the
Trustee may make such arrangements for the compensation of the Successor
Servicer.  The costs and expenses of transferring servicing shall be paid by the
Servicer which is resigning or being replaced and to the extent such costs and
expenses are not so paid, shall be paid from Collections as provided herein in
Sections 3.1 and 11.7.

 

Section 12.3           Notification to Noteholders.  Upon the occurrence of any
Servicer Default or any event which, with the giving of notice or passage of
time or both, would become a Servicer Default, the Servicer shall give prompt
written notice thereof to the Trustee and the Issuer and the Trustee shall give
notice to the Noteholders at their respective addresses appearing in the Note
Register and to the Swap Counterparty.  Upon any termination or appointment of a
Successor Servicer pursuant to this Article XII, the Trustee shall give prompt
written notice thereof to the Issuer and to the Noteholders at their respective
addresses appearing in the Note Register and to the Swap Counterparty.

 

Section 12.4           Waiver of Past Defaults.  With respect to a Servicer
Default described in Section 12.1, the Majority Holders of the Notes may, on
behalf of all Holders, waive any default by the Servicer in the performance of
its obligations hereunder and its consequences.  Upon any such waiver of a past
default, such default shall cease to exist, and any default arising therefrom
shall be deemed to have been remedied for every purpose of this Agreement. No
such waiver shall extend to any subsequent or other default or impair any right
consequent thereon except to the extent expressly so waived.

 

Section 12.5           Termination of Servicer’s Authority.  All authority and
power granted to the Servicer under this Agreement shall automatically cease and
terminate upon termination of this Agreement pursuant to Section 12.1, and shall
pass to and be vested in the Issuer and without limitation the Issuer is hereby
authorized and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, all documents and other instruments, and to do
and accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of servicing rights upon termination of this
Agreement.  The Servicer shall cooperate with the Issuer in effecting the
termination of the responsibilities and rights of the Servicer to conduct
servicing on the Pledged Loans.  The Servicer shall transfer its electronic
records relating to the Pledged Loans to the Issuer in such electronic form as
Issuer may

 

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reasonably request and shall transfer all other records, correspondence and
documents relating to the Pledged Loans to the Issuer in the manner and at such
times as the Issuer shall reasonably request.  To the extent that compliance
with this Section 12.5 shall require the Servicer to disclose information of any
kind which the Servicer deems to be confidential, the Issuer shall be required
to enter into such customary licensing and confidentiality agreements as the
Servicer shall deem necessary to protect its interests and as shall be
reasonably satisfactory in form and substance to the Issuer.

 

Section 12.6           Matters Related to Successor Servicer.

 

The Successor Servicer will not be responsible for delays attributable to the
Servicer’s failure to deliver information, defects in the information supplied
by the Servicer or other circumstances beyond the control of the Successor
Servicer.

 

The Successor Servicer will make arrangements with the Servicer for the prompt
and safe transfer of, and the Servicer shall provide to the Successor Servicer,
all necessary servicing files and records, including (as deemed necessary by the
Successor Servicer at such time):  (i) microfiche loan documentation, (ii)
servicing system tapes, (iii) Pledged Loan payment history, (iv) collections
history and (v) the trial balances, as of the close of business on the day
immediately preceding conversion to the Successor Servicer, reflecting all
applicable Pledged Loan information.

 

The Successor Servicer shall have no responsibility and shall not be in default
hereunder nor incur any liability for any failure, error, malfunction or any
delay in carrying out any of its duties under this Agreement if any such failure
or delay results from the Successor Servicer acting in accordance with
information prepared or supplied by a Person other than the Successor Servicer
or the failure of any such Person to prepare or provide such information.  The
Successor Servicer shall have no responsibility, shall not be in default and
shall incur no liability (i) for any act or failure to act by any third party,
including the Servicer, the Issuer or the Trustee or for any inaccuracy or
omission in a notice or communication received by the Successor Servicer from
any third party or (ii) which is due to or results from the invalidity,
unenforceability of any Pledged Loan under applicable law or the breach or the
inaccuracy of any representation or warranty made with respect to any Pledged
Loan.

 

If the Trustee or any other Successor Servicer assumes the role of Successor
Servicer hereunder, such Successor Servicer shall be entitled to appoint
subservicers whenever it shall be deemed necessary by such Successor Servicer.

 

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ARTICLE XIII

 

THE TRUSTEE; THE COLLATERAL AGENT; THE CUSTODIAN

 

Section 13.1           Duties of Trustee.

 

(a)           The Trustee, prior to the occurrence of an Event of Default of
which a Responsible Officer of the Trustee shall have actual knowledge and after
the curing of all such Events of Default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement.  If an Event of Default of which a Responsible Officer of the Trustee
shall have actual knowledge has occurred and has not been cured or waived, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise, as a
prudent institutional trustee would exercise or use under the circumstances in
the conduct of such institution’s own affairs.  The Trustee is hereby authorized
and empowered to make the withdrawals and payments from the Accounts in
accordance with the instructions set forth in this Agreement until the
termination of this Agreement in accordance with Section 14.1 unless this
appointment is earlier terminated pursuant to the terms hereof.

 

(b)           The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to such requirements; provided, however, that the Trustee shall not be
responsible for the accuracy or content of any resolution, certificate,
statement, opinion, report, document, order or other instrument furnished by the
Servicer, the Issuer or any other Person hereunder (other than the Trustee). 
The Trustee shall give prompt written notice to the Noteholders of any material
lack of conformity of any such instrument to the applicable requirements of this
Agreement discovered by the Trustee.

 

(c)           Subject to Section 13.1(a), no provision of this Agreement shall
be construed to relieve the Trustee from liability for its own gross negligence,
reckless disregard of its duties, bad faith or misconduct; provided, however,
that:

 

(i)            the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or employees of the
Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;

 

(ii)           the Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in accordance
with this Agreement or at the direction of the Majority Holders relating to the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising or omitting to exercise any trust or power conferred
upon the Trustee, under this Agreement;

 

(iii)          the Trustee shall not be charged with knowledge of any failure by
any other party hereto to comply with its obligations hereunder or of the
occurrence of any Event of Default or Servicer Default unless a Responsible
Officer of the Trustee obtains actual knowledge of such failure based upon
receipt of written information or other

 

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communication or a Responsible Officer of the Trustee receives written notice of
such failure from the Servicer or any Noteholder.  In the absence of receipt of
notice or actual knowledge by a Responsible Officer the Trustee may conclusively
assume there is no Event of Default or Servicer Default; and

 

(iv)          Prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee shall have actual knowledge or have received
notice and after all the curing of all such Events of Default which may have
occurred, the duties and obligations of the Trustee shall be determined solely
by the express provisions of this Agreement, the Trustee shall not be liable
except for the performance of such duties and obligations as are specifically
set forth in this Agreement, no implied covenants or obligations shall be read
into this Agreement against the Trustee and, in the absence of bad faith,
willful misconduct or negligence on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions furnished to the
Trustee and conforming to the requirements of this Agreement.

 

(d)           The Trustee shall not be required to expend or risk its own funds
or otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it (which
adequate indemnity may include, at the Trustee’s option, consent by the Majority
Holders authorizing the Trustee to be reimbursed for any funds from amounts
available in the Collection Account for such Series), and none of the provisions
contained in this Agreement shall in any event require the Trustee to perform,
or be responsible for the manner of performance of, any of the obligations of
the Servicer under this Agreement except during such time, if any, as the
Trustee shall be the successor to, and be vested with the rights, duties, powers
and privileges of, the Servicer in accordance with the terms of this Agreement.

 

(e)           Except for actions expressly authorized by this Agreement, the
Trustee shall take no action reasonably likely to impair the interests of the
Issuer in any Pledged Loan now existing or hereafter created or to impair the
value of any Pledged Loan now existing or hereafter created.

 

(f)            Except as provided in this Agreement, the Trustee shall have no
power to dispose of or vary any Collateral.

 

(g)           In the event that the Note Registrar shall fail to perform any
obligation, duty or agreement in the manner or on the day required to be
performed by the Note Registrar, as the case may be, under this Agreement, the
Trustee (if it is not then the Note Registrar) shall be obligated promptly to
perform such obligation, duty or agreement in the manner so required.

 

(h)           The Trustee shall have no duty to (A) see to any recording, filing
or depositing of this Agreement or any agreement referred to herein or any
financing statement or continuation statement evidencing a security interest, or
to see to the maintenance of any such recording or filing or depositing or to
any rerecording, refiling or redepositing of any thereof, (B) see to any
insurance, (C) see to the payment or discharge of any tax, assessment, or other
governmental charge or any lien or encumbrance of any kind owing with respect
to, assessed or levied against,

 

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any part of any Collateral other than from funds available in the Collection
Account, or (D) confirm or verify the contents of any reports or certificates of
the Servicer delivered to the Trustee pursuant to this Agreement believed by the
Trustee to be genuine and to have been signed or presented by the proper party
or parties.

 

Section 13.2           Certain Matters Affecting the Trustee.  Except for its
own gross negligence, reckless disregard of its duties, bad faith or misconduct:

 

(a)           the Trustee may rely on and shall be protected from liability to
the Issuer and the Noteholders in acting on, or in refraining from acting in
accord with, any resolution, Officer’s Certificate, certificate of auditors or
any other certificate, statement, conversation, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other paper or document
believed by it to be genuine and to have been signed, sent or made by the proper
Person or Persons;

 

(b)           the Trustee may consult with counsel and any advice of counsel
(including without limitation counsel to the Issuer or the Servicer) shall be
full and complete authorization and protection from liability to the Issuer and
the Noteholders in respect to any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such advice or opinion of
counsel;

 

(c)           the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation hereunder or in relation hereto, at the request, order or
direction of any of the Noteholders, pursuant to the provisions of this
Agreement, unless such Noteholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby; nothing contained herein shall, however, relieve
the Trustee of the obligations, upon the occurrence of any Servicer Default of
which a Responsible Officer of the Trustee shall have actual knowledge or have
received notice (which has not been cured), to exercise such of the rights and
powers vested in it by this Agreement, and to use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person’s own affairs;

 

(d)           neither the Trustee nor any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be personally liable for any
action taken, suffered or omitted to be taken by the Trustee or such Person in
good faith and believed by such Person to be authorized or within the discretion
or rights or powers conferred upon it by this Agreement, nor for any action
taken or omitted to be taken by any other party hereto;

 

(e)           the Trustee shall not be bound to make any investigation into the
facts of matters stated in any Monthly Servicing Report or Settlement Statement,
any other report or statement delivered to the Trustee by the Servicer,
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless
requested in writing so to do by the Majority Holders; provided, however, that
if the payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not assured to the Trustee by the security
afforded to it by the terms of this Agreement, the Trustee may require

 

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indemnity satisfactory to the Trustee against such cost, expense or liability as
a condition to taking any such action.

 

(f)            the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent, attorney or custodian
appointed with due care by it hereunder;

 

(g)           except as may be required by Section 13.1(b), the Trustee shall
not be required to make any initial or periodic examination of any documents or
records related to the Pledged Loans for the purpose of establishing the
presence or absence of defects, the compliance by the Servicer or the Issuer
with their respective representations and warranties or for any other purpose;

 

(h)           the right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the Trustee
shall not be answerable for the performance of such act; and

 

(i)            the Trustee shall not be required to give any bond or surety in
respect of the powers granted hereunder.

 

Section 13.3           Trustee Not Liable for Recitals in Notes or Use of
Proceeds of Notes.  The Trustee assumes no responsibility for the correctness of
the recitals contained herein and in the Notes (other than the certificate of
authentication on the Notes) or for any statements, representations or
warranties made herein by any Person other than the Trustee (except as expressly
set forth herein).  Except as set forth in Section 13.14, the Trustee makes no
representations as to the validity, enforceability or sufficiency of this
Agreement or of the Notes (other than the certificate of authentication on the
Notes) or of any Pledged Loan or related document.  The Trustee shall not be
accountable for the use or application of funds properly withdrawn from any
Account on the instructions of the Servicer or for the use or application by the
Issuer of the proceeds of any of the Notes, or for the use or application of any
funds paid to the Issuer in respect of the Pledged Loans.  The Trustee shall not
be responsible for the legality or validity of this Agreement or the validity,
priority, perfection or sufficiency of the security for the Notes issued or
intended to be issued hereunder.  The Trustee shall have no responsibility for
filing any financing or continuation statement in any public office at any time
or to otherwise perfect or maintain the perfection of any security interest or
lien granted to it hereunder or to record this Agreement.

 

Section 13.4           Trustee May Own Notes; Trustee in its Individual
Capacity.  Wachovia Bank, National Association, in its individual or any other
capacity, may become the owner or pledgee of Notes with the same rights as it
would have if it were not the Trustee.  Wachovia Bank, National Association and
its Affiliates may generally engage in any kind of business with the Issuer or
the Servicer as though Wachovia Bank, National Association were not acting in
such capacity hereunder and without any duty to account therefor.  Nothing
contained in this Agreement shall limit in any way the ability of Wachovia Bank,
National Association and its Affiliates to act as a trustee or in a similar
capacity for other interval ownership and lot contract and installment note
financings pursuant to agreements similar to this Agreement.

 

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Section 13.5           Trustee’s Fees and Expenses; Indemnification.  The
Trustee shall be entitled to receive from time to time pursuant to this
Agreement and the Trustee Fee Letter, (a) such compensation as shall be agreed
to between the Issuer and the Trustee (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
for all services rendered by it in the execution of the trust hereby created and
in the exercise and performance of any of the powers and duties hereunder as the
Trustee and to be reimbursed for its out-of-pocket expenses (including
reasonable attorneys’ fees), incurred or paid in establishing, administering and
carrying out its duties under this Agreement or the Collateral Agency Agreement
and (b) subject to Section 10.3, the Issuer and the Servicer agree, jointly and
severally, to pay, reimburse, indemnify and hold harmless the Trustee (without
reimbursement from any Account or otherwise) upon its request for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever (including without
limitation fees, expenses and disbursements of counsel) which may at any time
(including without limitation at any time following the termination of this
Agreement and payment on account of the Notes) be imposed on, incurred by or
asserted against the Trustee in any way relating to or arising out of this
Agreement, the Collateral Agency Agreement or any other Transaction Document to
which the Trustee is a party or the transactions contemplated hereby or any
action taken or omitted by the Trustee under or in connection with any of the
foregoing except for those liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from the gross negligence, reckless disregard of its duties, bad faith or
willful misconduct of the Trustee and except that if the Trustee is appointed
Successor Servicer pursuant to Section 10.2, the provisions of this Section 13.5
shall not apply to expenses, disbursements and advances made or incurred by the
Trustee in its capacity as Successor Servicer.  The agreements in this Section
13.5 shall survive the termination of this Agreement, the resignation or removal
of the Trustee and all amounts payable on account of the Notes.

 

Anything in this Agreement to the contrary notwithstanding, in no event shall
the Trustee be liable for special, indirect or consequential loss or damage of
any kind whatsoever (including but not limited to lost profits), even if the
Trustee has been advised of the likelihood of such loss or damage and regardless
of the form of action.

 

Section 13.6           Eligibility Requirements for Trustee.  The Trustee
hereunder (if other than Wachovia Bank, National Association) shall at all times
be an Eligible Institution and a corporation or banking association organized
and doing business under the laws of the United States of America or any state
thereof authorized under such laws to exercise corporate trust powers, and such
Trustee (including Wachovia Bank, National Association) shall have a combined
capital and surplus of at least $25,000,000 (or, in the case of a successor to
the initial Trustee, $100,000,000) and subject to supervision or examination by
federal or state authority.  If such corporation or banking association
publishes reports of condition at least annually, pursuant to law or to the
requirements of federal or state supervising or examining authority, then for
the purpose of this Section 13.6, the combined capital and surplus of such
corporation or banking association shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published. 
In case at any time the Trustee shall cease to be eligible in accordance with
the provisions of this Section 13.6, the Trustee shall resign immediately in the
manner and with the effect specified in Section 13.7.

 

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Section 13.7           Resignation or Removal of Trustee

 

(a)           The Trustee may at any time resign and be discharged from the
trust hereby created by giving 60 days prior written notice thereof to the
Issuer, the Swap Counterparty, the Servicer, the Noteholders and each Rating
Agency.  Upon receiving such notice of resignation, the Issuer shall promptly
arrange to appoint a successor trustee meeting the requirements of Section 13.6
and the Servicer shall notify the Trustee, the Swap Counterparty and each Rating
Agency of such appointment by written instrument, one copy of which instrument
shall be delivered to the resigning Trustee and one copy to the successor
Trustee.  If no successor Trustee shall have been so appointed and have accepted
within 30 days after the giving of such notice of resignation, a successor
Trustee shall be appointed by Majority Holders (with notice to the Swap
Counterparty).  The successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the Trustee.  If no successor Trustee
shall have been so appointed by the Issuer or the Noteholders and shall have
accepted appointment in the manner hereinafter provided, any Noteholder, on
behalf of itself and all others similarly situated, or the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.

 

(b)           If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 13.6 and shall fail to resign after
written request therefor by the Issuer or the Servicer, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged a bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Issuer or the Majority Holders may remove the Trustee and
promptly appoint a successor Trustee by written instrument, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor Trustee.

 

(c)           At any time the Majority Holders may remove the Trustee and
promptly appoint a successor Trustee by written instrument, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor Trustee.

 

(d)           Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 13.7 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 13.8.

 

Section 13.8           Successor Trustee.

 

(a)           Any successor Trustee, appointed as provided in Section 13.7,
shall execute, acknowledge and deliver to the Issuer, the Servicer and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee herein.  The predecessor Trustee shall deliver to the successor
Trustee all money, documents and other property held by it hereunder; and Issuer
and the predecessor Trustee shall execute and deliver

 

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such instruments and do such other things as may reasonably be required for
fully and certainly vesting and confirming in the successor Trustee all such
rights, power, duties and obligations.

 

(b)           No successor Trustee shall accept appointment as provided in this
Section 13.8 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 13.6.

 

(c)           Upon acceptance of appointment by a successor Trustee as provided
in this Section 13.8, such successor Trustee shall mail notice of such
succession hereunder to the Trustee, the Issuer, the Swap Counterparty, the
Servicer and all Noteholders at their addresses as shown in the Note Register.

 

Section 13.9           Merger or Consolidation of Trustee.  Any Person into
which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided, such corporation shall be eligible under the
provisions of Section 13.6, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.

 

Section 13.10         Appointment of Co-Trustee or Separate Trustee

 

(a)           Notwithstanding any other provisions of this Agreement, at any
time, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Collateral may at the time be located, the Trustee shall
have the power and may execute and deliver all instruments to appoint one or
more Persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Collateral and to vest in such
Person or Persons, in such capacity and for the benefit of the Noteholders and
the Swap Counterparty, such title to the Collateral, or any part thereof, and
subject to the other provisions of this Section 13.10, such powers, duties,
obligations, rights and trusts as the Trustee may consider necessary or
desirable.  No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 13.6 and no
notice to the Noteholders of the appointment of any co-trustee or separate
trustee shall be required under Section 13.8.

 

(b)           Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:

 

(i)            all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or performed
by the Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Trustee joining in such act), except to the extent that
under any laws of any jurisdiction in which any particular act or acts are to be
performed, the Trustee shall be incompetent or unqualified to perform such act
or acts, in which event such rights, powers, duties and obligations (including
the holding of title to the Collateral, or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate trustee
or co-trustee, but solely at the direction of the Trustee;

 

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(ii)           no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and

 

(iii)          the Trustee may at any time accept the resignation of or remove
any separate trustee or co-trustee.

 

(c)           Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them.  Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article XIII.  Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee.  Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Servicer.

 

(d)           Any separate trustee or co-trustee may at any time constitute the
Trustee its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect to this
Agreement on its behalf and in its name.  If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or a
successor trustee.

 

Section 13.11         Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Agreement or the Notes may be
prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as
trustee.  Any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the Noteholders in respect of which such judgment
has been obtained.

 

Section 13.12         Suits for Enforcement.  If an Event of Default or a
Servicer Default shall occur and be continuing, the Trustee, in its discretion,
may, subject to the provisions of Article XI and Section 12.1, proceed to
protect and enforce its rights and the rights of the Noteholders under this
Agreement by a suit, action or proceeding in equity or at law or otherwise,
whether for the specific performance of any covenant or agreement contained in
this Agreement or in aid of the execution of any power granted in this Agreement
or for the enforcement of any other legal, equitable or other remedy as the
Trustee, being advised by counsel, shall deem most effectual to protect and
enforce any of the rights of the Trustee or the Noteholders.

 

Section 13.13         Rights of Noteholders to Direct the Trustee.  The Majority
Holders shall have the right to direct the time, method, and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee; provided, however, that, subject to Section
13.1, the Trustee shall have the right to decline to follow any such direction
if the Trustee being advised by counsel determines that the action so directed
may not lawfully be taken, or if the Trustee in good faith shall, by a
Responsible Officer or

 

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Responsible Officers of the Trustee, determine that the proceedings so directed
would be illegal or involve it in personal liability or be unduly prejudicial to
the rights of Noteholders not parties to such direction, or if the Trustee has
not been offered reasonable security or indemnity, as contemplated by Section
13.2, by such Holders; and provided further, that nothing in this Agreement
shall impair the right of the Trustee to take any action deemed proper by the
Trustee and which is not inconsistent with such direction by the Noteholders.

 

Section 13.14         Representations and Warranties of the Trustee.  The
Trustee represents and warrants that:

 

(a)           the Trustee is a national banking association with trust powers
organized, validly existing and in good standing under the laws of the United
States;

 

(b)           the Trustee has full power, authority and right to execute,
deliver and perform this Agreement and has taken all necessary action to
authorize the execution, delivery and performance by it of this Agreement; and

 

(c)           this Agreement has been duly executed and delivered by the Trustee
and constitutes the legal, valid and binding agreement of the Trustee
enforceable against the Trustee in accordance with its terms, except as such
enforceability may be limited by Debtor Relief Laws and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).

 

Section 13.15         Maintenance of Office or Agency.  The Trustee will
maintain at its expense in The City of New York, State of New York, an office or
offices or agency or agencies where notices and demands to or upon the Trustee
in respect of the Notes and this Agreement may be served.  The Trustee will give
prompt written notice to the Issuer, the Swap Counterparty, the Servicer and the
Noteholders of any change in the location of any such office or agency.

 

Section 13.16         No Assessment.  Wachovia Bank, National Association’s
agreement to act as Trustee hereunder shall not constitute or be construed as
Wachovia Bank, National Association’s assessment of the Issuer’s or any
Obligor’s creditworthiness or a credit analysis of any Loans.

 

Section 13.17         UCC Filings and Title Certificates.  The Trustee and the
Noteholders expressly recognize and agree that the Collateral Agent may be
listed as the secured party of record on the various Financing Statements
required to be filed under this Agreement in order to perfect the security
interest in the Collateral, and such listing will not affect in any way the
respective status of the other secured parties under the Collateral Agency
Agreement as the holders of their respective interests in other collateral.  In
addition, such listing shall impose no duties on the Collateral Agent other than
those expressly and specifically undertaken in accordance with this Agreement
and the Collateral Agency Agreement.

 

Section 13.18         Replacement of the Custodian.  Each of the Issuer and the
Servicer agree not to replace the Custodian unless the Rating Agency Condition
has been satisfied with respect to such replacement.

 

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ARTICLE XIV

 

TERMINATION

 

Section 14.1           Termination of Agreement.  The respective obligations and
responsibilities of the Issuer, the Servicer and the Trustee created hereby
(other than the obligation of the Trustee to make payments to Noteholders as
hereafter set forth) shall terminate (the “Termination Date”) on the day after
the Payment Date following the date on which funds shall have been deposited in
the Collection Account sufficient to pay the Aggregate Principal Amount of all
Notes plus all interest accrued on the Notes through the day preceding such
Payment Date; provided that, all amounts required to be paid on such Payment
Date pursuant to this Agreement shall have been paid.

 

Section 14.2           Final Payment.

 

(a)           Written notice of any termination shall be given (subject to at
least two Business Days’ prior notice from the Servicer to the Trustee) by the
Trustee to the Noteholders, the Swap Counterparty and each Rating Agency then
rating any Notes mailed not later than the fifth day of the month of such final
payment specifying (a) the Payment Date and (b) the amount of any such final
payment.  The Trustee shall give such notice to the Note Registrar at the time
such notice is given to the Noteholders.

 

(b)           On or after the final Payment Date, upon written request of the
Trustee, the Noteholders shall surrender their Notes to the office specified in
such request.

 

Section 14.3           [Reserved]

 

Section 14.4           Release of Collateral.  Upon the termination of this
Agreement pursuant to Section 14.1, the Trustee shall release all liens and
assign to the Issuer (without recourse, representation or warranty) all right,
title and interest of the Trustee in and to the Collateral and all proceeds
thereof.  The Trustee shall execute and deliver such instruments of assignment,
in each case without recourse, representation or warranty, as shall be
reasonably requested by the Issuer to release the security interest of the
Trustee in the Collateral.

 

Section 14.5           Release of Defaulted Loans.  If any Pledged Loan becomes
a Defaulted Loan during any Due Period, the Issuer shall, subject to the
limitation set forth in the last paragraph of this Section, if so directed by a
Seller and the Seller provides funds to the Issuer for such purpose, obtain a
release of such Pledged Loan from the Lien of this Agreement on any Payment Date
thereafter.  To obtain such release the Issuer shall be required to pay the
Release Price of such Defaulted Loan to the Trustee for deposit into the
Collection Account.  The Issuer shall provide written notice to the Trustee and
the Collateral Agent of any release pursuant to this Section 14.6 not less than
two Business Days prior to the Payment Date on which such release is to be
effected, specifying the Defaulted Loan and the Release Price therefor.  The
Issuer shall pay the Release Price to the Trustee for deposit into the
Collection Account not later than 12:00 noon, New York City time, on the Payment
Date on which such release is made.

 

Upon each release of a Pledged Loan under this Section 14.6, the Collateral
Agent and the Trustee shall automatically and without further action release,
sell, transfer, assign, set over

 

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and otherwise convey to the Issuer, without recourse, representation or
warranty, all of the Collateral Agent’s and Trustee’s right, title and interest
in and to such Defaulted Loan and the Pledged Assets related thereto, all monies
due or to become due with respect thereto and all Collections with respect
thereto free and clear of the Lien of this Agreement.  The Collateral Agent and
the Trustee shall execute such documents, releases and instruments of transfer
or assignment and take such other actions as shall reasonably be requested by
the Issuer to effect the release of such Defaulted Loans and the related Pledged
Assets pursuant to this Section 14.6.  Promptly after the occurrence of a
Release Date and after the payment for and release of a Defaulted Loan, in
respect to which the Release Price has been paid the Issuer shall direct the
Servicer to delete such Defaulted Loans from the Loan Schedule.

 

The amount of Defaulted Loans for which the Issuer is permitted to obtain a
release and transfer to a Seller is limited as follows:

 

(a)           The Loan Balance of Pledged Loans which become Defaulted Loans and
which are released and transferred to FAC, as Seller, shall not exceed in the
aggregate 10.5% of the Loan Balance of the Pledged Loans as of the Cut-Off Date
which were Fairfield Loans; for such purposes, the Loan Balance of a Pledged
Loan shall be calculated on the day prior to the day the Pledged Loan became a
Defaulted Loan; and

 

(b)           The Loan Balance of Pledged Loans which become Defaulted Loans and
which are released and transferred to Trendwest, as Seller, shall not exceed in
the aggregate 16.0% of the Loan Balance of the Pledged Loans as of the Cut-Off
Date which were Trendwest Loans; for such purposes, the Loan Balance of a
Pledged Loan shall be calculated on the day prior to the day the Pledged Loan
became a Defaulted Loan.

 

Section 14.6           Release of Trendwest Timeshare Upgrades.  If a Trendwest
Loan becomes a Trendwest Timeshare Upgrade, the Issuer, upon the written request
of the Depositor and the receipt by the Issuer or the Trustee of the Release
Price from or on behalf of the Depositor, shall obtain a release of such Pledged
Loan from the Lien of this Agreement on the Payment Date thereafter and upon
such Release, shall transfer the Trendwest Loan to the Depositor.  To obtain
such release the Issuer shall be required to pay or cause to be paid to the
Trustee the Release Price of such Trendwest Loan.  Upon receipt of such Release
Price, the Trustee shall deposit the Release Price into the Collection Account. 
The Issuer shall provide written notice to the Trustee and the Collateral Agent
of any release pursuant to this Section 14.7 not less than two Business Days
prior to the Payment Date on which such release is to be effected, specifying
the Trendwest Loan which has become a Trendwest Timeshare Upgrade and the
Release Price therefor.  The Issuer shall pay the Release Price to the Trustee
for deposit into the Collection Account not later than 12:00 noon, New York City
time, on the day on which such release is made.

 

Upon each release of a Pledged Loan under this Section 14.7, the Collateral
Agent and the Trustee shall automatically and without further action release,
sell, transfer, assign, set over and otherwise convey to the Depositor, without
recourse, representation or warranty, all of the Collateral Agent’s and
Trustee’s right, title and interest in and to such Trendwest Loan and the
Pledged Assets related thereto, all monies due or to become due with respect
thereto and all Collections with respect thereto free and clear of the Lien of
this Agreement.  The Collateral Agent and the Trustee shall execute such
documents, releases and instruments of transfer or

 

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assignment and take such other actions as shall reasonably be requested by the
Issuer to effect the release of such Trendwest Loans and the related Pledged
Assets pursuant to this Section 14.7.  Promptly after the occurrence of a
Release Date and after the payment for and release of a Trendwest Loan, in
respect to which the Release Price has been paid the Issuer shall direct the
Servicer to delete such Trendwest Loan from the Loan Schedule.

 

Section 14.7           Release Upon Payment in Full.  At such time as the Notes
have been paid in full, all fees and expenses of the Trustee and the Collateral
Agent with respect to the Notes have been paid in full and all obligations
relating to this Agreement have been paid in full, then, the Collateral Agent
shall, upon the written request of the Issuer, release all liens and assign to
Issuer (without recourse, representation or warranty) all right, title and
interest of the Collateral Agent in and to the Collateral, and all proceeds
thereof.  The Collateral Agent and the Trustee shall execute and deliver such
instruments of assignment, in each case without recourse, representation or
warranty, as shall be reasonably requested by the Issuer to release the security
interest of the Collateral Agent in the Collateral.

 

ARTICLE XV

 

MISCELLANEOUS PROVISIONS

 

Section 15.1           Amendment.

 

(a)           Supplemental Indentures and Amendments Without Consent of the
Noteholders.  The Issuer, the Trustee, the Collateral Agent and the Servicer, at
any time and from time to time, without the consent of any of the Noteholders,
may enter into one or more amendments or indentures supplemental to this
Agreement in form satisfactory to the Trustee for any of the following purposes:

 

(i)            to add to the covenants of the Issuer for the benefit of the
Noteholders and the Swap Counterparty or to surrender any right or power
conferred upon the Issuer;

 

(ii)           to Grant any additional property to the Trustee or the Collateral
Agent or to be held by the Custodian, in each case, for the benefit of the
Trustee and the Holders of the Notes and the Swap Counterparty;

 

(iii)          to correct or amplify the description of any property at any time
subject to the Lien of this Agreement, or to better assure, convey and confirm
unto the Trustee or the Collateral Agent or deliver to the Custodian, in each
case for the benefit of the Trustee and the Noteholders and the Swap
Counterparty, any property subject to the Lien of this Agreement;

 

(iv)          to cure any ambiguity, correct, modify or supplement any provision
which is defective or inconsistent with any other provision herein; provided
that, such correction, modification or supplement shall not alter in any
material respect, the amount or timing of payments to or other rights of the
Noteholders;

 

(v)           to modify transfer restrictions on the Notes, so long as any such
modifications comply with the Securities Act and the Investment Company Act; or

 

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(vi)          make any other changes which do not, in the aggregate, materially
and adversely affect the rights of any Noteholders.

 

provided that, (x) in each case, the Issuer shall have satisfied the Rating
Agency Condition with respect to such corrections, amendments, modifications or
clarifications and (y), with respect to any changes described in subsection
(vi), the Issuer shall have delivered to the Trustee an Officer’s Certificate of
the Issuer and an Officer’s Certificate of the Servicer both to the effect that
such change will not adversely affect the rights of any Noteholders.

 

Subject to Section 15.1(c), the Trustee is hereby authorized to join in the
execution of any such amendment or supplemental indenture and to make any
further appropriate agreements and stipulations that may be therein contained. 
So long as any of the Notes are outstanding, at the cost of the Issuer, the
Trustee shall provide to each Rating Agency then rating any Notes a copy of any
proposed amendment or supplemental indenture prior to the execution thereof by
the Trustee and, as soon as practicable after the execution by the Issuer, the
Trustee and the Collateral Agent of any such amendment or supplemental
indenture, provide to each Rating Agency a copy of the executed amendment or
supplemental indenture, as the case may be.

 

(b)           Amendments and Supplemental Indentures With Consent of the
Noteholders.  With the consent of the Majority Holders and upon satisfaction of
the Rating Agency Condition, the Issuer and the Trustee may enter into an
amendment or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Agreement, or modifying in any manner the rights of the Holders of the
Notes under this Agreement; provided that, so long as the Interest Rate Swap is
in effect, no such amendment or supplemental indenture shall be entered into
without the prior written consent of the Swap Counterparty if the effect of such
amendment or supplement would be to adversely affect the Swap Counterparty’s
ability or right to receive payment under the terms of the Interest Rate Swap,
or if the amendment or supplemental indenture would modify the obligations of or
impair the ability of the Issuer to fully perform any of its payment obligations
under the Interest Rate Swap.

 

No such amendment or supplemental indenture shall, without the consent of all
affected Noteholders:

 

(i)            reduce in any manner the amount of, or change the timing of,
principal, interest and other payments required to be made on any Note;

 

(ii)           change the application of proceeds of any Collateral to the
payment of Notes of such Series;

 

(iii)          reduce the percentage of Noteholders required to take or approve
any action under this Agreement; or

 

(iv)          permit the creation of any lien ranking prior to or on a parity
with the lien of this Agreement with respect to any part of the Collateral or
terminate the lien of this Agreement on any property at any time subject thereto
or deprive the Noteholders of the security afforded by the lien of this
Agreement.

 

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It shall not be necessary in connection with any consent of the Noteholders
under this Section 15.1(b) for the Noteholders to approve the specific form of
any proposed amendment or supplemental indenture, but it shall be sufficient if
such consent shall approve the substance thereof.  The Trustee will not be
permitted to enter into any such supplemental indenture or amendment if, as a
result of such supplemental indenture or amendment, the ratings of any
outstanding Notes (if then rated) would be reduced without the consent of each
affected Noteholder.

 

Promptly after the execution by the Issuer, the Trustee, the Collateral Agent
and the Servicer of any amendment or supplemental indenture pursuant to this
Section 15.1(b), the Trustee, at the expense of the Issuer shall mail to the
Noteholders, the Luxembourg Stock Exchange (if and for so long as any Class of
Notes is listed thereon) and each Rating Agency rating any of the Notes, a copy
thereof.

 

(c)           Execution of Amendments and Supplemental Indentures.  In executing
or accepting the additional trusts created by any amendment or supplemental
indenture permitted by this Section 15.1 or the modifications thereby of the
trusts created by this Agreement, the Trustee shall be entitled to receive, and
(subject to Sections 13.1 and 13.2) shall be fully protected in relying in good
faith upon, an Opinion of Counsel stating that the execution of such amendment
or supplemental indenture is authorized or permitted by this Agreement and that
all conditions precedent applicable thereto under this Agreement have been
satisfied.  The Trustee may, but shall not be obligated to, enter into any such
amendment or supplemental indenture which affects the Trustee’s own rights,
duties or immunities under this Agreement or otherwise.

 

(d)           Effect of Amendments and Supplemental Indentures.  Upon the
execution of any amendment or supplemental indenture under this Section 15.1,
this Agreement shall be modified in accordance therewith, and such amendment or
supplemental indenture shall form a part of this Agreement for all purposes; and
every Holder of a Note theretofore and thereafter authenticated and delivered
hereunder shall be bound thereby.

 

(e)           Reference in Notes to Amendments and Supplemental Indentures. 
Notes executed, authenticated and delivered after the execution of any amendment
or supplemental indenture pursuant to this Section 15.1 may, and if required by
the Trustee shall, bear a notation in form approved by the Trustee as to any
matter provided for in such amendment or supplemental indenture.  If the Issuer
shall so determine, new Notes, so modified as to conform in the opinion of the
Trustee and the Issuer to any such amendment or supplemental indenture, may be
prepared and executed by the Issuer and authenticated and delivered by the
Trustee or the Authentication Agent in exchange for outstanding Notes.

 

(f)            In determining whether the requisite percentage of Noteholders
have concurred in any direction, waiver or consent, Notes owned by the Issuer or
an Affiliate of the Issuer shall be considered as though they are not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in making such determination or relying on any such
direction, waiver or consent, only Notes which a Responsible Officer of the
Trustee knows pursuant to written notice (or in the case of the Issuer, by
reference to the Note Register if the Trustee is also the Note Registrar) are so
owned shall be so disregarded.

 

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Section 15.2           Reserved

 

Section 15.3           Limitation on Rights of the Noteholders.

 

(a)           The death or incapacity of any Noteholder shall not operate to
terminate this Agreement, nor shall such death or incapacity entitle such
Noteholder’s legal representatives or heirs to claim an accounting or to take
any action or commence any proceeding in any court for a partition or winding up
of the Collateral, nor otherwise affect the rights, obligations and liabilities
of the parties hereto or any of them.

 

(b)           Nothing herein set forth, or contained in the terms of the Notes,
shall be construed so as to constitute the Noteholders from time to time as
partners or members of an association; nor shall any Noteholder be under any
liability to any third person by reason of any action taken by the parties to
this Agreement pursuant to any provision hereof.

 

Section 15.4           Governing Law.  This Agreement is governed by and shall
be construed in accordance with the laws of the State of New York and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.

 

Section 15.5           Notices.  All communications and notices hereunder shall
be in writing and shall be deemed to have been duly given if personally
delivered to, or transmitted by overnight courier, or transmitted by telex or
telecopy and confirmed by a mailed writing:

 

If to the Issuer:

 

SIERRA 2003-1 RECEIVABLES FUNDING COMPANY, LLC
10750 West Charleston Boulevard
Suite 130, Mail Stop 2045
Las Vegas, Nevada 89135
Attention:  President

(or such other address as may hereafter be furnished to the Trustee, the
Servicer and the Collateral Agent in writing by the Issuer).

 

If to the Servicer:

 

FAIRFIELD ACCEPTANCE CORPORATION-NEVADA
10750 West Charleston Boulevard
Suite 130
Las Vegas, Nevada 89135
Fax number:  702-227-3114
Attention:  Ralph E. Turner

(or such other address as may hereafter be furnished to the Trustee, the Issuer
and the Collateral Agent in writing by the Servicer).

 

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If to the Trustee:

 

WACHOVIA BANK, NATIONAL ASSOCIATION
401 South Tryon Street

NC – 1179

12th Floor

Charlotte, North Carolina 28288-1179

Fax number:  704-383-6039

Attention:  Structured Finance Trust Services

Re:  Sierra 2003-1 Receivables Funding Company, LLC

 

(or such other address as may be furnished to the Servicer, the Issuer or the
Collateral Agent in writing by the Trustee).

 

If to the Collateral Agent:

 

WACHOVIA BANK, NATIONAL ASSOCIATION
269 Technology Way

Building B, Unit 3

Rocklin, CA 95765

Fax number:  916-626-3152

Attention:  Structured Finance Trust Services

Re:  Sierra 2003-1 Receivables Funding Company, LLC

 

(or such other address as may be furnished in writing to the Trustee, the Issuer
and the Servicer by the Collateral Agent).

 

If to each Rating Agency:

 

Fitch, Inc.
Attn:  Asset-Backed Securities - Timeshare
55 East Monroe
Suite 3500

Chicago, IL 60610

Fax number:  312-368-2069

 

(or such other address as may be furnished in writing to the Trustee, the Issuer
and the Servicer).

 

Moody’s Investors Service, Inc.
99 Church Street
New York, New York 10007
Fax number:  212-553-4392

 

(or such other address as may be furnished in writing to the Trustee, the Issuer
and the Servicer).

 

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Standard & Poor’s Ratings Group
55 Water Street
New York, New York 10041
Fax number:  212-438-2655

 

(or such other address as may be furnished in writing to the Trustee, the Issuer
and the Servicer).

 

If to the Swap Counterparty:

 

Bank of America, N.A.

Sears Tower

233 South Wacker Drive, Suite 2800

Chicago, IL 60606

Attention:  Swap Operations

Telex N.:  49663210 Answerback:  NATIONSBANK CHA

 

(or such other address as may be furnished in writing to the Trustee, the Issuer
and the Servicer),

 

with a copy to:

 

Bank of America, N.A.

100 N. Tryon St., NC1-007-13-01

Charlotte, North Carolina 28255

Attention: Capital markets Documentation

(Telex No.:  9663210; Answerback:  NATIONSBK CHA)

Facsimile No.:  704-386-4113

 

All communications and notices pursuant hereto to a Noteholder will be given by
first-class mail, postage prepaid, to the registered holders of such Notes at
their respective address as shown in the Note Register.  Any notice so given
within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Noteholder receives such notice.

 

Section 15.6           Severability of Provisions.  If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Notes or
rights of the Noteholders thereof.

 

Section 15.7           Assignment.  Notwithstanding anything to the contrary
contained herein, except as provided in Section 12.2, this Agreement may not be
assigned by the Issuer or the Servicer without the prior consent of the Majority
Holders and the Swap Counterparty.

 

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Section 15.8           Notes Non-assessable and Fully Paid.  It is the intention
of the Issuer that the Noteholders shall not be personally liable for
obligations of the Issuer and that the indebtedness represented by the Notes
shall be non-assessable for any losses or expenses of the Issuer or for any
reason whatsoever.

 

Section 15.9           Further Assurances.  Each of the Issuer, the Servicer and
the Collateral Agent 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 Trustee more fully to effect the purposes of this Agreement,
including without limitation the authorization of any financing statements,
amendments thereto, or continuation statements relating to the Pledged Loans for
filing under the provisions of the UCC of any applicable jurisdiction.

 

Section 15.10         No Waiver; Cumulative Remedies.  No failure to exercise
and no delay in exercising, on the part of the Trustee or the Noteholders, 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.  No waiver of any
provision hereof shall be effective unless made in writing.  The rights,
remedies, powers and privileges therein provided are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.

 

Section 15.11         Counterparts.  This Agreement may be executed in two or
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which together shall constitute one and
the same instrument.

 

Section 15.12         Third-Party Beneficiaries.  This Agreement will inure to
the benefit of and be binding upon the parties hereto, the Swap Counterparty,
the Noteholders and their respective successors and permitted assigns.  Except
as otherwise provided in this Article XV, no other person will have any right or
obligation hereunder.

 

Section 15.13         Actions by the Noteholders

 

(a)           Wherever in this Agreement a provision is made that an action may
be taken or a notice, demand or instruction given by the Noteholders, such
action, notice or instruction may be taken or given by any Noteholder, unless
such provision requires a specific percentage of the Noteholders.  If, at any
time, the request, demand, authorization, direction, consent, waiver or other
act of a specific percentage of the Noteholders is required pursuant to this
Agreement, written notification of the substance thereof shall be furnished to
all Noteholders.

 

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

 

Section 15.14         Merger and Integration.  Except as set forth in the
Trustee Fee Letter, and except as specifically stated otherwise herein, this
Agreement and the other Transaction Documents set forth the entire understanding
of the parties relating to the subject matter hereof,

 

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and, except as set forth in such Trustee Fee Letter, all prior understandings,
written or oral, are superseded by this Agreement and the other Transaction
Documents.  This Agreement may not be modified, amended, waived or supplemented
except as provided herein.

 

Section 15.15         No Bankruptcy Petition.  The Trustee, the Servicer, the
Collateral Agent and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Issuer or the
Depositor, or join in instituting against the Issuer or the Depositor, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any Debtor Relief Law.

 

Section 15.16         Headings.  The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.

 

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

 

 

 

SIERRA 2003-1 RECEIVABLES FUNDING COMPANY, LLC,

 

as Issuer

 

 

 

 

 

 

 

By:

/s/ Ralph E. Turner

 

 

 

Name:  Ralph E. Turner

 

 

Title:  President and Treasurer

 

 

 

 

 

 

 

FAIRFIELD ACCEPTANCE CORPORATION-NEVADA,

 

as Servicer

 

 

 

 

 

 

 

By:

/s/ Ralph E. Turner

 

 

 

Name:  Ralph E. Turner

 

 

Title:  President and Treasurer

 

 

 

 

 

 

 

WACHOVIA BANK, NATIONAL
ASSOCIATION,

 

as Trustee

 

 

 

 

 

 

 

By:

/s/ Robert Ashbaugh

 

 

 

Name:  Robert Ashbaugh

 

 

Title:  Vice President

 

 

 

 

 

 

 

WACHOVIA BANK, NATIONAL
ASSOCIATION,

 

as Collateral Agent

 

 

 

 

 

 

 

By:

/s/ Cheryl Whitehead

 

 

 

Name:  Cheryl Whitehead

 

 

Title:  Asst. Vice President

 

[Signature page for Indenture and Servicing Agreement]

 

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