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


 

















 


	
  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

  



 


i

















 


	
  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

  



 


ii

















 


	
  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

  



 


iii

















 


	
  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

  



 


iv

















 


	
  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

  



 


v

















 


	
  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

  



 


vi

















 


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

  



 


vii

















 


SCHEDULES


 


1.               Schedule of Trustee’s fees.


 


2.               Loan Schedule.


 


3.               List of Lockbox Banks.


 


viii

















 


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


 

















 


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,


 


2

















 


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.


 


3

















 


“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.


 


4

















 


“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.


 


5

















 


“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.


 


6

















 


“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


 


7

















 


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.


 


8

















 


“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.


 


9

















 


“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.


 


10

















 


“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.


 


11

















 


“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.


 


12

















 


“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


 


13

















 


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


 


14

















 


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.


 


15

















 


“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.


 


16

















 


“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.


 


17

















 


“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.


 


18

















 


“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.


 


19

















 


“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).


 


20

















 


“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.


 


21

















 


“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


 


22

















 


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


 


23

















 


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.


 


24

















 


“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.


 


25

















 


“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.


 


26

















 


“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


 


27

















 


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.


 


28

















 


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:


 


29

















 


	
  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.


 


30

















 


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.


 


31

















 


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.


 


32

















 


(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


 


33

















 


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.


 


34

















 


(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


 


35

















 


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.


 


36

















 


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


 


37

















 


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;


 


38

















 


(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


 


39

















 


(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.


 


40

















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


 


41

















 


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


 


42

















 


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


 


43

















 


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.


 


44

















 


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”

  	
   

  
				



 


45

















 


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.


 


46

















 


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);


 


47

















 


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;


 


48

















 


(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


 


49

















 


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.


 


50

















 


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 


 


51

















 


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).


 


52

















 


(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.


 


53

















 


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


 


54

















 


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


 


55

















 


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


 


56

















 


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


 


57

















 


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.


 


58

















 


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;


 


59

















 


(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;


 


60

















 


(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


 


61

















 


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


 


62

















 


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.


 


63

















 


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


 


64

















 


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).


 


65

















 


(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).


 


66

















 


(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,


 


67

















 


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


 


68

















 


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.


 


69

















 


(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.


 


70

















 


(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.


 


71

















 


(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


 


72

















 


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.


 


73

















 


(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.


 


74

















 


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.


 


75

















 


(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


 


76

















 


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


 


77

















 


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:


 


78

















 


(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


 


79

















 


(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


 


80

















 


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;


 


81

















 


(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


 


82

















 


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.


 


83

















 


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


 


84

















 


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


 


85

















 


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.


 


86

















 


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


 


87

















 


“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.


 


88

















 


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.


 


89

















 


(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;


 


90

















 


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;


 


91

















 


(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.


 


92

















 


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;


 


93

















 


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


 


94

















 


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


 


95

















 


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


 


96

















 


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.


 


97

















 


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


 


98

















 


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,


 


99

















 


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


 


100

















 


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.


 


101

















 


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.


 


102

















 


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


 


103

















 


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;


 


104

















 


(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


 


105

















 


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.


 


106

















 


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


 


107

















 


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 


 


108

















 


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


 


109

















 


(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.


 


110

















 


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.


 


111

















 


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).


 


112

















 


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).


 


113

















 


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.


 


114

















 


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,


 


115

















 


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.


 


116

















 


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]


 


117