Document:

Amended Rights Agreement

    
      

    

     

    

      

      

      U.S.
        ENERGY CORP.

      Issuer
        and Company

      

      and

      

      

      COMPUTERSHARE
        TRUST COMPANY, INC

      Rights
        Agent

      

      

      

      RIGHTS
        AGREEMENT

      

      Rights
        Record Date: September 19, 2001

      

      

      Amended
        as of September 30, 2005 and

      Effective
        for All Purposes as of the

      Rights
        Record Date (September 19, 2001)

      

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      

      
        	
                TABLE
                  OF CONTENTS

              
	 	 	 
	 	 	
                Page

              
	
                Section
                  1.

              	
                Definitions

              	
                4

              
	 	 	 
	
                Section
                  2.

              	
                Appointment
                  of Rights Agent

              	
                7

              
	 	 	 
	
                Section
                  3.

              	
                Definition
                  of Distribution Date and Offer Date; When Right Certificates Will
                  Issue

              	
                7

              
	 	 	 
	
                Section
                  4.

              	
                Form
                  of Right Certificates

              	
                8

              
	 	 	 
	
                Section
                  5.

              	
                Countersignature
                  and Registration

              	
                9

              
	 	 	 
	
                Section
                  6.

              	
                Transfer,
                  Split Up, Combination and Exchange of Right Certificates;

              	 
	 	
                Mutilated,
                  Destroyed, Lost or Stolen Right Certificates

              	
                9

              
	 	 	 
	
                Section
                  7.

              	
                Exercise
                  of Rights; Purchase Price; Expiration Date of Rights

              	
                10

              
	 	 	 
	
                Section
                  8.

              	
                Cancellation
                  and Destruction of Right Certificates

              	
                11

              
	 	 	 
	
                Section
                  9.

              	
                Reservation
                  and Availability of Shares; Registration

              	
                11

              
	 	 	 
	
                Section
                  10.

              	
                Record
                  Date

              	
                12

              
	 	 	 
	
                Section
                  11.

              	
                Adjustment
                  of Purchase Price, Number and Kind of Shares or Number of Rights
                  

              	 
	 	
                (Including
                  Flip-In Provision)

              	
                12

              
	 	 	 
	
                Section
                  12.

              	
                Certification
                  of Adjusted Purchase Price or Number of Shares

              	
                17

              
	 	 	 
	
                Section
                  13.

              	
                Consolidation,
                  Merger or Sale or Transfer of Assets or Earning Power 

              	 
	 	
                (Including
                  Flip-Over Provision?)

              	
                18

              
	 	 	 
	
                Section
                  14.

              	
                Fractional
                  Rights and Fractional Shares

              	
                20

              
	 	 	 
	
                Section
                  15.

              	
                Rights
                  of Action..

              	
                21

              
	 	 	 
	
                Section
                  16.

              	
                Agreement
                  of Right Holders

              	
                21

              
	 	 	 
	
                Section
                  17.

              	
                Right
                  Certificate Holder Not Deemed a Stockholder

              	
                21

              
	 	 	 
	
                Section
                  18.

              	
                Concerning
                  the Rights Agent

              	
                21

              
	 	 	 
	
                Section
                  19.

              	
                Merger
                  or Consolidation or Change of Name of Rights Agent

              	
                22

              
	 	 	 
	
                Section
                  20.

              	
                Duties
                  of Rights Agent

              	
                22

              
	 	 	 
	
                Section
                  21.

              	
                Change
                  of Rights Agent

              	
                24

              
	 	 	 

      

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      

      
        	
                Section
                  22.

              	
                Issuance
                  of New Right Certificates

              	
                24

              
	 	 	 
	
                Section
                  23.

              	
                Redemption
                  Right and Termination of Redemption Right

              	
                24

              
	 	 	 
	
                Section
                  24.

              	
                Notice
                  of Proposed Actions

              	
                25

              
	 	 	 
	
                Section
                  25.

              	
                Notices
                  in General 

              	
                25

              
	 	 	 
	
                Section
                  26.

              	
                Supplements
                  and Amendments

              	
                26

              
	 	 	 
	
                Section
                  27.

              	
                Exchange
                  of Rights for Shares of Common Stock Without Cash Payment

              	
                27

              
	 	 	 
	
                Section
                  28.

              	
                Successors

              	
                27

              
	 	 	 
	
                Section
                  29.

              	
                Determinations
                  and Actions Taken by the Board of Directors

              	
                27

              
	 	 	 
	
                Section
                  30.

              	
                Benefits
                  of this Agreement

              	
                27

              
	 	 	 
	
                Section
                  31.

              	
                Governing
                  Law; Choice of Venue

              	
                27

              
	 	 	 
	
                Section
                  32.

              	
                Counterparts

              	
                28

              
	 	 	 
	
                Section
                  33.

              	
                Section
                  Headings

              	
                28

              
	 	 	 
	
                Section
                  34.

              	
                Severability

              	
                28

              
	 	 	 
	
                Signature
                  Page

              	 	
                28

              
	 	 	 
	
                Exhibit
                  A

              	
                Form
                  of Right Certificate

              	
                29

              
	 	 	 
	
                Exhibit
                  B

              	
                Summary
                  of Rights

              	
                34

              
	 	 	 
	
                Exhibit
                  C

              	
                Certificate
                  of Designation for Series P Preferred Stock

              	
                37

              

      

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      

      RIGHTS
        AGREEMENT

      

      This
        RIGHTS AGREEMENT, dated as of September 19, 2001, and amended on September
        30,
        2005, is entered into by U.S. Energy Corp., a Wyoming corporation (the
        "Company"),
        and
        Computershare Trust Company, Inc. as the Rights Agent. As amended pursuant
        to
        Section 26, (i) the Company has delivered to the Rights Agent a certificate
        signed by the president of the company and the Rights Agent has executed
        this
        Rights Agreement, as amended; and (ii) this Rights Agreement, as amended,
        remains effective as of September 19, 2001. 

      

      RECITALS

      

      The
        board
        of directors of the Company has determined that provision should be made
        to
        supplement Wyoming law, in a manner consistent with that law, to protect
        the
        shareholders by facilitating obtaining a higher value for the Company through
        negotiated transactions, in the event of an attempted unfair takeover of
        the
        Company without the consent of the board of directors. Subject to the express
        provisions of this Rights Agreement, Exhibit C to this Agreement, and
        proceedings of the board of directors of the Company, the general purpose
        of
        this Rights Agreement is to encourage a person or company to discuss a potential
        acquisition of the Company through a Qualified Offer, before acquiring more
        than
        15% of the total voting power of the stock of the Company. Under Section
        31, if
        there is conflict between this Agreement and the Wyoming Management Stability
        Act, that law will control. 

      

      Therefore,
        the board of directors has authorized and declared the distribution of one
        Right
        for every share of Common Stock of the Company outstanding at the Close of
        Business on September 19, 2001 (the "Rights
        Record Date"),
        each
        Right representing the right to purchase one Unit, being (initially and before
        any adjustments as provided for herein) one one-thousandth (1/1,000) of a
        share
        of Series P Preferred Stock. Further, the board of directors has authorized
        and
        declared this dividend to cover every additional share of Common Stock which
        may
        become outstanding between the Rights Record Date and the first to occur
        of the
        Distribution Date, or the Expiration Date, or the date, if any, when the
        Rights
        may be redeemed, all upon the terms and subject to the conditions stated
        below.

      

      NOW,
        THEREFORE, the parties agree as follows:

      

      AGREEMENT

      

      Section
        1. DEFINITIONS.

      

      (a) For
        purposes of this Agreement, the following terms have the meanings
        indicated:

      

      "ACQUIRING
        PERSON"
        means
        any Person who or which, alone or together with all of the Affiliates and
        Associates of such Person, is the Beneficial Owner of a Substantial Block
        of
        Voting Stock, but does not include
        (i)
        an
        Exempt Person or
        (ii)
        any
        Person who or which acquires a Substantial Block of Voting Stock in connection
        with a transaction or series of transactions approved prior to such transaction
        or transactions by the board of directors of the Company. However, no person
        shall become an Acquiring Person solely as a result of a reduction in the
        number
        of shares of Voting Stock outstanding, unless and until such Person thereafter
        becomes the Beneficial Owner of additional shares constituting 1% or more
        of the
        general voting power of the Company.

      

      
        
          
          

        

        
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      "AFFILIATE"
        and
        "ASSOCIATE"
        have
        the respective meanings ascribed in rule 12b-2 of the General Rules and
        Regulations under the Exchange Act.

      

      "BENEFICIAL OWNER."
        A
        Person is deemed to be the Beneficial Owner of any securities:

      

      (i) which
        such Person or any of his or its Affiliates or Associates beneficially owns,
        directly or indirectly;

      

      (ii) which
        such Person or any of his or its Affiliates or Associates has
        (A) the
        right
        to acquire (whether such right is exercisable immediately or only after the
        passage of time) pursuant to any agreement, arrangement or understanding
        (whether or not in writing), or upon the exercise of any conversion, exchange
        or
        purchase rights (other than the Rights), warrants or options, or otherwise;
        provided, however, that a Person shall not be deemed the "Beneficial Owner"
        of
        securities tendered pursuant to a tender or exchange offer made by or on
        behalf
        of such Person or any of such Person's Affiliates or Associates until such
        tendered securities are accepted for payment or exchange; or
        (B)
        the
        right to vote or to direct the voting of, pursuant to any agreement, arrangement
        or understanding (whether or not in writing);
        or (C)
        the
        right to dispose or to direct the disposition of, pursuant to any agreement,
        arrangement or understanding (whether or not in writing); or

      

      (iii) which
        are
        beneficially owned, directly or indirectly, by any other Person with which
        such
        Person or any of such Person's Affiliates or Associates has any agreement,
        arrangement or understanding (whether or not in writing) for the purpose
        of
        acquiring, holding, voting or disposing of any securities of the Company;
        provided, however, that a Person shall not be deemed the Beneficial Owner
        of, or
        to Beneficially Own, any security if the agreement, arrangement or understanding
        to vote such security (1)
        arises
        solely from the grant of a revocable proxy or consent given to such Person
        in
        connection with a public proxy or consent solicitation made pursuant to,
        and in
        accordance with, the applicable rules and regulations under the Exchange
        Act,
and
        (2) is
        not
        also then reportable on Schedule 13(d) or successor report under the Exchange
        Act; provided, further, that a Person engaged in business as an underwriter
        of
        securities shall not be deemed the "Beneficial Owner" of securities acquired
        through such person's participation in good faith in a firm commitment
        underwriting until the expiration of the 40-day period immediately following
        the
        date of such acquisition.

      

      "BUSINESS
        DAY"
        means
        any day other than a Saturday, Sunday or day on which banking institutions
        in
        the State Wyoming are authorized or obligated by law or executive order to
        close.

      

      "CLOSE
        OF BUSINESS"
        means
        5:00 p.m., Wyoming time, on a Business Day; provided, however, that if such
        is
        not a Business Day it shall mean 5:00 p.m., Wyoming time, on the next succeeding
        Business Day.

      

      "COMMON
        STOCK"
        means
        the Company?s
        Common
        Stock; and "common stock" when used with reference to Persons other than
        the
        Company means: (i)
        for
        Persons organized in corporate form, the capital stock or equity security
        with
        the greatest voting power of such Person or, if such Person is a Subsidiary
        of
        another Person, of the Person or Persons which ultimately control such Person;
        and
        (ii)
        in the
        case of Persons not organized in corporate form, the units of beneficial
        interest which
        (A)
        represent the right to participate generally in the profits and losses of
        such
        Person (including without limitation any flow-through tax benefits resulting
        from an ownership interest in such Person)
        and (B)
        are
        entitled to exercise the greatest voting power of such Person or, in the
        case of
        a limited partnership, shall have the power to remove the general partner
        or
        partners.

      

      
        
          
          

        

        
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      "DISTRIBUTION
        DATE"
        has the
        meaning assigned in Section 3(a).

      

      "EQUIVALENT
        STOCK"
        has the
        meaning assigned in Section 7(a).

      

      "EXCHANGE
        ACT"
        means
        the Securities Exchange Act of 1934 and its future amendments. 

      

      "EXEMPT
        PERSON"
        means
        the Company, any Subsidiary of the Company and any employee benefit plan
        or
        employee stock plan of the Company or of any Subsidiary of the Company, or
        any
        trust or other entity organized, established or holding shares of Common
        Stock
        by, for or pursuant to, the terms of any such plan.

      

      "EXPIRATION
        DATE"
        has the
        meaning assigned in Section 7(a).

      

      "OFFER
        DATE"
        has the
        meaning assigned in Section 3(a).

      

      "PERSON"
        means
        any individual, firm, corporation, partnership, trust or other entity and
        shall
        include any of their successors.

      

      "PRINCIPAL
        PARTY"
        has the
        meaning assigned in Section 13(b).

      

      "PURCHASE
        PRICE"
        means
        the price (initially $200.00) payable for one Unit (1/1,000 share of Series
        P
        Preferred Stock) upon exercise of a Right.

      

      "QUALIFIED
        OFFER"
        means a
        tender or exchange offer for all outstanding Common Stock at a price and
        on
        terms determined to be adequate and otherwise in the best interests of the
        Company and its stockholders (other than the Person or an Affiliate or Associate
        thereof on whose behalf the offer is made) by at least a majority of the
        Directors who are not representatives of or affiliated with the Person making
        such offer or any Affiliate or Associate of such Person.

      

      "REDEMPTION
        PRICE"
        has the
        meaning assigned in Section 23(a), initially $0.01 per Right.

      

      "RIGHT"
        has the
        meaning assigned in the Recitals to this Agreement.

      

      "RIGHTS
        RECORD DATE"
        is
        defined in the Recitals to this Agreement.

      

      "SUBJECT
        SHARES"
        means
        the class or series of shares then issuable on exercise of the
        Rights.

      

      "STOCK
        ACQUISITION DATE"
        means
        the date of the first public announcement by the Company or an Acquiring
        Person
        (which for purposes of this definition shall include, without limitation,
        a
        report filed pursuant to Section 13(d) under the Exchange Act) that an Acquiring
        Person has become such.

      

      "SUBSIDIARY"
        means,
        with respect to any Person, a corporation or other entity the securities
        or
        other ownership interests of which having ordinary voting power sufficient
        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 and
        any
        Affiliate of such Person.

      

      
        
          
          

        

        
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      "SUBSTANTIAL
        BLOCK"
        means a
        number of shares of Voting Stock having in the aggregate 15 percent or more
        of
        the general voting power.

      

      "TRADING
        DAY"
        has the
        meaning assigned to it in Section 11(d).

      

      "UNIT"
        means
        the shares or other securities issuable upon exercise of one Right, initially
        one one-thousandth of a share of Series P Preferred Stock of the Company
        having
        the rights and preferences stated in Exhibit C, before any adjustment pursuant
        to Section 11(a)(ii) or Section 13.

      

      "VOTING
        STOCK"
        means
        shares of the Company's capital stock the holders of which have general voting
        power.

      

      Section
        2. APPOINTMENT
        OF RIGHTS AGENT.
        The
        Company hereby appoints the Rights Agent to act as agent for the Company
        in
        accordance with the terms and conditions hereof, and the Rights Agent hereby
        accepts such appointment. The Company may from time to time appoint such
        Co-Rights Agent or Agents as it may deem necessary or desirable and determine
        the respective duties of the Rights Agent and the Co-Rights Agent or
        Agents.

      

      Section
        3. DEFINITION
        OF DISTRIBUTION DATE AND OFFER DATE; WHEN RIGHT CERTIFICATES WILL
        ISSUE.

      

      (a) Until
        the
        Close of Business on the earlier of
        (i) the
        tenth
        Business Day after a Stock Acquisition Date
        or (ii) the
        tenth
        Business Day (or such later date as the Company's board of directors shall
        determine) after the date of the commencement by any Person (other than an
        Exempt Person) of, or the date of the first public announcement (such
        commencement date or announcement is the "Offer
        Date")
        of the
        intent of any Person (other than an Exempt Person) to commence a tender or
        exchange offer upon the successful consummation of which such Person, together
        with its Affiliates and Associates, would be the Beneficial Owner of 15 percent
        or more of the then outstanding Voting Stock (regardless of whether any shares
        are actually purchased pursuant to such offer) (the tenth Business Day after
        the
        first to occur of a Stock Acquisition Date or an Offer Date is the "Distribution
        Date"),

      

      (i) the
        Rights will automatically attach to, and be evidenced by, the certificates
        for
        Common Stock registered in the names of the holders of Common Stock (which
        certificates for Common Stock shall be deemed also to be Right Certificates)
        and
        not by separate Right Certificates, and

      

      (ii) each
        Right will be transferable only in connection with the transfer of the
        underlying shares of Common Stock.

      

      (b) As
        soon
        as practicable after the Rights Record Date, the Company will send by
        first-class mail to each record holder of Common Stock as of the Close of
        Business on the Rights Record Date a copy of the Summary of Rights (see Exhibit
        B).

      

      For
        certificates for Common Stock issued after the Rights Record Date (including
        replacement certificates for shares of Common Stock outstanding on or prior
        to
        the Rights Record Date), but prior to the earliest of the Distribution Date,
        the
        Expiration Date and the date, if any, on which the Rights may be redeemed,
        the
        Company will have printed on or otherwise affixed to them the following
        legend:

      

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      This
        certificate also entitles the holder hereof to certain Rights as set forth
        in
        the Rights Agreement between the Company and Corporate Stock Transfer, Inc.
        as
        Rights Agent as the same shall be amended from time to time (the "Rights
        Agreement"), the terms of which are hereby incorporated herein by reference
        and
        a copy of which is on file at the principal executive offices of the Company.
        Under certain circumstances, as set forth in the Rights Agreement, such Rights
        will be evidenced by separate certificates and will no longer be evidenced
        by
        this Common Stock certificate. The Company will mail to the holder of this
        certificate a copy of the Rights Agreement without charge after receipt of
        a
        written request therefor. Under certain circumstances set forth in the Rights
        Agreement, Rights issued to, or held by, any Person who is, was or becomes
        an
        Acquiring Person or any Affiliate or Associate thereof (as such terms are
        defined in the Rights Agreement) or certain transferees of any thereof, whether
        currently held by or on behalf of such Person or by any subsequent holder,
        may
        be limited as provided in Section 7(f) of the Rights Agreement.

      

      For
        certificates containing the legend, until the Distribution Date, the Rights
        associated with Common Stock represented by such certificates shall be evidenced
        only by such certificates; transfer of any such certificates also shall
        constitute transfer of the Rights associated with the Common Stock.

      

      (c) After
        the
        Distribution Date, the Rights will be evidenced solely by the Right
        Certificates.

      

      (d) As
        soon
        as practicable after the Distribution Date, the Rights Agent will mail by
        first-class insured mail to each record holder of Common Stock as of the
        Close
        of Business on the Distribution Date, as shown by the records of the Company
        at
        the Close of Business on the Distribution Date, at the address of such holder
        shown on such records, a Right Certificate, in substantially the form attached
        hereto as Exhibit A, evidencing one Right for each share of Common Stock
        so
        held.

      

      Section
        4. FORM
        OF RIGHT CERTIFICATES.

      

      (a) The
        Right
        Certificates (and the forms of assignment and certification and of election
        to
        purchase shares to be printed on the reverse thereof) shall be in substantially
        the form of Exhibit A hereto and may have such marks of identification or
        designation and such legends, summaries or endorsements as are not inconsistent
        with this Agreement, or as may be required to comply with any law or to conform
        to usage.

      

      (b) Any
        Right
        Certificate issued pursuant to Section 3(a) or Section 22 that represents
        Rights
        Beneficially Owned by: (i)
        an
        Acquiring Person or any Associate or Affiliate of any Acquiring Person;
(ii)
        a
        transferee of an Acquiring Person (or of any such Associate or Affiliate)
        who
        becomes a transferee after the Acquiring Person becomes such; or
        (iii)
        a
        transferee of an Acquiring Person (or of any such Associate or Affiliate)
        who
        becomes a transferee prior to or concurrently with the Acquiring Person becoming
        such and receives such Rights pursuant to either (A)
        a
        transfer (whether or not for consideration) from the Acquiring Person to
        holders
        of equity interests in such Acquiring Person or to any Person with whom such
        Acquiring Person has any continuing agreement, arrangement or understanding
        regarding the transferred Rights, or
        (B)
        a
        transfer which the board of directors of the Company has determined is part
        of a
        plan, arrangement or understanding which has as a primary purpose or effect
        avoidance of Section 7(f), and any Right Certificate issued pursuant to Section
        6 or Section 11 upon transfer, exchange, replacement or adjustment of any
        other
        Right Certificate referred to in this sentence, shall contain (to the extent
        feasible and reasonably identifiable as such) the following legend:

      

      The
        Rights represented by this Right Certificate are or were beneficially owned
        by a
        Person who was or became an Acquiring Person or an Affiliate or Associate
        of an
        Acquiring Person (as such terms are 

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      defined
        in the Rights Agreement) or certain transferees thereof. Accordingly, under
        certain circumstances as provided in the Rights Agreement, this Right
        Certificate and the Rights represented hereby may be limited as provided
        in
        Section 7(f) of such Agreement.

      

      Section
        5. COUNTERSIGNATURE
        AND REGISTRATION.

      

      (a) The
        Right
        Certificates shall be executed on behalf of the Company by its Chairman of
        the
        Board, its President or any of its Vice Presidents, manually or by facsimile
        signature, and have affixed thereto the Company's seal or a facsimile thereof
        attested by the Secretary or an Assistant Secretary, either manually or by
        facsimile. The Right Certificates shall be manually countersigned by the
        Rights
        Agent and shall not be valid for any purpose unless so countersigned. In
        case
        any officer who shall have signed any of the Right Certificates shall cease
        to
        be such officer before countersignature by the Rights Agent and issuance
        and
        delivery by the Company, such Right Certificates, nevertheless, may be
        countersigned by the Rights Agent, issued and delivered with the same force
        and
        effect as though the person who signed such Right Certificates had not ceased
        to
        be such officer of the Company; and any Right Certificate may be signed on
        behalf of the Company by any person who, at the actual date of the execution
        of
        such Right Certificate, shall be a proper officer (as specified above) of
        the
        Company to sign such Right Certificate, although at the date of the execution
        of
        this Rights Agreement any such person was not such an officer.

      

      (b) Following
        the Distribution Date, the Rights Agent will keep or cause to be kept books
        for
        registration and transfer of the Right Certificates issued hereunder. Such
        books
        shall show the names and addresses of the respective holders of the Right
        Certificates, the number of Rights evidenced on its face by each Right
        Certificate, the date of each Right Certificate and the number of each Right
        Certificate. 

      

      Section
        6. TRANSFER,
        SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED, DESTROYED,
        LOST OR STOLEN RIGHT CERTI-FICATES.

      

      (a) Subject
        to Sections 4(b), 7(f) and 14, at any time after the Close of Business on
        the
        Distribution Date, and prior to the Close of Business on the Expiration Date
        or
        the day prior to the day, if any, when the Rights are to be redeemed under
        Section 23, any Right Certificate or Certificates may be transferred, split
        up,
        combined or exchanged for another Right Certificate or Right Certificates,
        entitling the registered holder to purchase such number of Units as the Right
        Certificate(s) surrendered then entitled such holder to purchase. Any registered
        holder desiring to transfer, split up, combine or exchange any Right Certificate
        shall make such request in writing delivered to the Rights Agent, and shall
        surrender the Right Certificate(s) to be transferred, split up, combined
        or
        exchanged, with the form of assignment on the reverse side(s) thereof duly
        completed and executed, at the stock transfer office of the Rights Agent.
        The
        Rights Agent shall countersign and deliver to the persons entitled thereto
        the
        Right Certificate(s) requested. The Company may require payment of a sum
        sufficient to cover any tax or government charge that may be imposed in
        connection therewith. However, neither the Rights Agent nor the Company shall
        be
        obligated to take any action with respect to the transfer of any such
        surrendered Right Certificate unless and until the registered holder shall
        have
        completed and signed the certificate contained in the form of assignment
        on the
        reverse side of such Right Certificate and shall have provided such additional
        evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
        or
        Affiliates or Associates thereof as the Company shall reasonably
        request.

      

      (b) Upon
        receipt by the Company and the Rights Agent of evidence reasonably satisfactory
        to them of the loss, theft, destruction or mutilation of a Right Certificate,
        and, in case of loss, theft or destruction, of indemnity or security reasonably
        satisfactory to them, and reimbursement to the Company 

      
        
          
          

        

        
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      and
        the
        Rights Agent of all reasonable expenses incident thereto, and upon surrender
        to
        the Rights Agent and cancellation of the Right Certificate, if mutilated,
        the
        Company will execute and deliver a new Right Certificate of like tenor to
        the
        Rights Agent for delivery to the registered owner in lieu of the Right
        Certificate so lost, stolen, destroyed or mutilated.

      

      Section
        7. EXERCISE
        OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.

      

      (a) Subject
        to Section 7(f), and unless earlier redeemed as provided in Section 23, the
        registered holder of any Right Certificate may exercise the Rights evidenced
        thereby in whole or in part at any time after the Distribution Date upon
        surrender of the Right Certificate, with the form of election to purchase
        on the
        reverse side thereof duly completed and executed, to the Rights Agent at
        the
        stock transfer office of the Rights Agent, together with payment of the Purchase
        Price for each Unit as to which the Rights are exercised, at or prior to
        the
        Close of Business on the tenth anniversary of the Rights Record Date or such
        other date to which the Rights may be extended as provided in this Agreement
        (the latest of such dates is the "Expiration
        Date").
        If at
        any time after the Distribution Date but prior to the Expiration Date the
        Company is unable, under its articles of incorporation, to issue the number
        and
        class of shares required to be issued upon the exercise of all of the
        outstanding Rights, the Company may issue upon exercise of any of the Rights
        shares of capital stock or other securities of the Company of value equivalent
        to the shares so required to be issued ("Equivalent Stock"), as determined
        by
        the board of directors.

      

      (b) The
        Purchase Price for each Unit pursuant to the exercise of a Right initially
        shall
        be US$200.00, subject to adjustment from time to time as provided in Sections
        11
        and 13. 

      

      (c) Upon
        receipt of a Right Certificate, with the form of election to purchase duly
        executed, accompanied by payment of the Purchase Price for the Units to be
        purchased and an amount equal to any applicable transfer tax in cash, or
        by
        certified check, bank draft or money order payable to the order of the Company,
        the Rights Agent shall thereupon promptly
        (i)
        requisition from the Company or any transfer agent of the Company (if different
        from the Rights Agent) a certificate for the number of shares to be purchased
        and the Company will comply, and hereby irrevocably authorizes its transfer
        agent to comply, with all such requests; (ii)
        requisition from the Company the amount of cash to be paid in lieu of issuance
        of a fractional share, when appropriate, in accordance with Section 14;
and
        (iii)
        promptly
        after receipt of such certificate from any such transfer agent, cause the
        same
        to be delivered to or upon the order of the registered holder of such Right
        Certificate, registered in the name(s) designated by such holder and cash
        for
        any fractional share. These same procedures shall be followed if Rights are
        exercised for Equivalent Stock. 

      

      (d) The
        Company shall not be required to pay any transfer tax which may be payable
        in
        respect of any transfer involved in the transfer or delivery of Right
        Certificates, or the issuance or delivery of certificates in a name other
        than
        the registered holder, or to issue or deliver any certificates upon the exercise
        of any Rights, until any such tax shall have been paid (any such tax being
        payable by the holder of such Right Certificate at the time of surrender)
        or
        until it has been established to the Company's satisfaction that no such
        tax is
        due.

      

      (e) If
        the
        registered holder exercises less than all the Rights, a new Right Certificate
        for the remaining unexercised Rights shall be issued by the Rights Agent
        to the
        registered holder of such Right Certificate or to his duly authorized assigns,
        subject to Section 14.

      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      (f) Notwithstanding
        any provision of this Agreement to the contrary, upon the occurrence of any
        of
        the events described in any of clauses (A), (B), (C) or (D) of Section
        11(a)(ii), or the occurrence of any of the events described in any of Section
        13(a)(i), 13(a)(ii) or 13(a)(iii), the adjustment and provision under Section
        11(a)(ii), and also the exchange provision under Section 27 and the redemption
        provision under Section 23, shall
        not apply
        with
        respect to any Rights that are at the time Beneficially Owned by
        (i)
        an
        Acquiring Person or by any Associate or Affiliate of such Acquiring Person
        (which Acquiring Person or Affiliate or Associate engages in, or realizes
        the
        benefit of, one or more of the transactions described in clause (A) or (B)
        of
        Section 11(a)(ii), realizes the benefits set forth in clause (C) of Section
        11(a)(ii) or, alone or together, become the Beneficial Owner(s) of a number
        of
        shares of Voting Stock which equals or exceeds the percentage of the general
        voting power as provided in clause (D) of Section 11(a)(ii), as the case
        may
        be), or
        (ii) a
        transferee of an Acquiring Person or of any Associate or Affiliate of such
        Acquiring Person (which engages in, or realizes the benefit of, one or more
        of
        the transactions described in clause (A) or (B) of Section 11(a)(ii), or
        realizes the benefits in clause (C) of Section 11(a)(ii), or, alone or together
        with such Acquiring Person or Associate or Affiliate, become the Beneficial
        Owner(s) of a number of shares of Voting Stock which equals or exceeds the
        percentage of the general voting power as provided in clause (D) of Section
        11(a)(ii), as the case may be) (A)
        who
        becomes a transferee after the Acquiring Person becomes such, or
        (B)
        who
        becomes a transferee prior to or concurrently with the Acquiring Person becoming
        such and receives such Rights either
        by (1)
        a
        transfer (whether or not for consideration) from the Acquiring Person to
        holders
        of equity interests in such Acquiring Person or to any Person with whom such
        Acquiring Person has any continuing agreement, arrangement or understanding
        regarding the transferred Rights, or
        (2)
        a
        transfer which the board of directors of the Company has determined is part
        of a
        plan, arrangement or understanding which has as a primary purpose or effect
        the
        avoidance of this Section 7(f). Upon the exercise of such Rights covered
        by this
        Section 7(f), the holders shall be entitled to receive, upon payment of the
        Purchase Price, the number of Units issuable upon exercise of such Rights
        without
        giving effect
        to the
        adjustment provided for under Section 11(a)(ii). The Company shall use all
        reasonable efforts to insure that the provisions of this Section 7(f) and
        Section 4(b) are complied with, but shall have no liability to any holder
        of
        Right Certificates or other Person as a result of its making or failing to
        make
        any determinations with respect to an Acquiring Person or its Affiliates,
        Associates or transferees hereunder.

      

      (g) Notwithstanding
        anything in this Agreement to the contrary, neither the Rights Agent nor
        the
        Company shall be obligated to undertake any action with respect to a registered
        holder upon the occurrence of any purported exercise as set forth in this
        Section 7 unless such registered holder shall have
        (i)
        completed and signed the certificate contained in the form of election to
        purchase set forth on the reverse side of the Right Certificate surrendered
        for
        such exercise,
        and (ii)
        provided
        such additional evidence of the identity of the Beneficial Owner (or former
        Beneficial Owner) or Affiliates or Associates thereof as the Company shall
        reasonably request.

      

      Section
        8. CANCELLATION
        AND DESTRUCTION OF RIGHT CERTIFICATES.
        All
        Right Certificates surrendered for the purpose of exercise, transfer, split
        up,
        combi-nation or exchange shall, if surrendered to the Company or to any of
        its
        agents, be delivered to the Rights Agent for cancellation or in canceled
        form,
        or, if surrendered to the Rights Agent, shall be cancelled by it, and no
        Right
        Certificates shall be issued in lieu thereof except as expressly permitted
        by
        this Agreement. The Company shall deliver to the Rights Agent for cancellation
        and retirement, and the Rights Agent shall so cancel and retire, any other
        Right
        Certificate purchased or acquired by the Company otherwise than upon the
        exercise thereof. The Rights Agent shall deliver all cancelled Right
        Certificates to the Company, or shall, at the written request of the Company,
        destroy such cancelled Right Certificates, and in such case shall deliver
        a
        certificate of destruction thereof to the Company.

      

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      Section
        9. RESERVATION
        AND AVAILABILITY OF SHARES; REGISTRATION.

      

      (a) The
        Company covenants and agrees that it shall (i)
        on
        or
        prior to the Rights Record Date, take all such action as shall be necessary
        to
        cause to be reserved and kept available out of its authorized and unissued
        capital stock, enough shares of Preferred Stock to permit the exercise in
        full
        of all Rights to be outstanding as of the Rights Record Date, (ii)
        no later
        than promptly following the Distribution Date, take all such action as shall
        be
        necessary to cause to be reserved and kept available out of its authorized
        and
        unissued capital stock, or its authorized and issued shares held in its
        treasury, the number of shares of Common Stock that will, from time to time,
        be
        sufficient to permit the exercise in full of all Rights from time to time
        outstanding; (iii)
        take all
        such action as may be necessary to insure that all shares delivered upon
        exercise of Rights shall be duly and validly authorized and issued and be
        fully
        paid and nonassessable; and
        (iv)
        pay when
        due any transfer taxes and charges in respect of the issuance or delivery
        of the
        Right Certificates or of any shares upon the exercise of Rights (except as
        otherwise provided in Section 7(d)).

      

      (b) The
        Company agrees to use its best efforts as soon as practicable following the
        Distribution Date, to file with the Securities and Exchange Commission a
        registration statement to permit the issuance of shares on exercise of the
        Rights under the Securities Act of 1933, and to take the steps necessary
        to
        permit such issuance under the securities "blue sky" laws of the states where
        registered holders reside. The Company may temporarily suspend for up to
        90 days
        the exercise of the Rights to file a registration statement and other documents
        as needed to allow exercise of the Rights. At the start and end of a suspension,
        the Company shall issue a public announcement and notify the Rights Agent
        that
        exercise has been suspended and the end of the suspension.

      

      (c) The
        Rights shall not be exercisable in any jurisdiction if not there legal.

      

      (d) 
        The
        Company shall use its reasonable efforts to cause all shares reserved for
        issuance upon exercise of Rights to be listed on the Company’s exchange or
        quotation market.

      

      Section
        10. RECORD DATE.
        Each
        Person in whose name any stock certificate is issued upon exercise of Rights
        shall be deemed to have become the holder of record of the shares represented
        thereby on, and such certificate shall be dated, the date when the Right
        Certificate was surrendered and the Purchase Price paid. Prior to exercise
        of
        the Rights, the holder of a Right Certificate shall not be entitled to any
        rights of a stockholder of the Company with respect to shares for which the
        Rights shall be exercisable, including without limitation the right to vote
        or
        to receive dividends or other distributions, and such holder shall not be
        entitled to receive any notice of any proceedings of the Company, except
        as
        provided herein.

      

      Section
        11. ADJUSTMENT
        OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS (INCLUDING
        FLIP-IN PROVISION).
        The
        Purchase Price, number and kind of shares or other securities covered by
        each
        Right and the number of Rights outstanding are subject to adjustment from
        time
        to time as provided in this Section 11.

      

      (a)  (i)
        If
        the
        Company shall at any time after the date of this Agreement (A)
        declare
        and pay a dividend on the shares which are subject to the Rights ("Subject
        Shares") payable in shares of stock of the Company,
        (B) subdivide
        or split the Subject Shares,
        (C) combine
        or consolidate the Subject Shares into a smaller number of shares or effect
        a
        reverse stock split of the Subject Shares, or
        (D)
        issue
        any shares of its capital stock in a reclassification of the Subject Shares
        (including any such reclassification in connection with a consolidation or
        merger in which the Company is the continuing or surviving
        corporation),
        then, and in each 

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      such
        event,
        except
        as otherwise provided in this Section 11(a), the Purchase Price in effect
        at the
        time of the record date for dividend or subdivision, split, reverse split,
        combination, consolidation or reclassification, and the number and kind of
        shares of capital stock issuable on such date, shall be proportionately adjusted
        so that the holder of any Right exercised after such time shall be entitled
        to
        receive the aggregate number and kind of shares of capital stock which, if
        such
        Right had been exercised immediately prior to such date and at a time when
        the
        transfer books of the Company were open, he would have received upon such
        exercise and been entitled to receive. If an event occurs which would require
        an
        adjustment under both this Section 11(a)(i) and Section 11(a)(ii), the
        adjustment provided for in this Section 11(a)(i) shall be in addition to,
        and
        shall be made prior to, any adjustment required pursuant to Section 11(a)(ii).
        

      

      (ii) If
        at any
        time after the date of this Agreement

      

      (A)
        any
        Acquiring Person, or any Associate or Affiliate of any Acquiring Person,
        directly or indirectly (1)
        shall
        merge into the Company or any of its Subsidiaries or otherwise combine with
        the
        Company or any of its Subsidiaries and the Company or such Subsidiary shall
        be
        the continuing or surviving corporation of such merger or combination and
        the
        Common Stock shall remain outstanding and the outstanding shares thereof
        shall
        not be changed into or exchanged for stock or other securities of the Company
        or
        of any other Person or cash or any other property,
        or (2)
        shall
        sell or otherwise transfer in one or more transactions, assets to the Company
        or
        any of its Subsidiaries in exchange for 15 percent or more of the shares
        of any
        class of capital stock of the Company or any of its Subsidiaries, and the
        Common
        Stock shall remain outstanding and unchanged, or

      

      (B)
        directly
        or indirectly, any Acquiring Person, or any Associate or Affiliate of any
        Acquiring Person, shall
        (1)
        in one
        or more transactions, transfer assets to the Company or any of its Subsidiaries
        in exchange (in whole or in part) for shares of any class of capital stock
        of
        the Company or any of its Subsidiaries or for securities exercisable for
        or
        convertible into shares of any class of capital stock of the Company or any
        of
        its Subsidiaries or otherwise obtain from the Company or any of its
        Subsidiaries, with or without consideration, any additional shares of any
        class
        of capital stock of the Company or any of its Subsidiaries or other securities
        exercisable for or convertible into shares of any class of capital stock
        of the
        Company or any of its Subsidiaries (other than as part of a pro rata
        distribution by the Company or such Subsidiary to all holders of Common Stock),
        or
        (2)
        sell,
        purchase, lease, exchange, mortgage, pledge, transfer or otherwise dispose
        (in
        one or more transactions), to, from or with, as the case may be, the Company
        or
        any of its Subsidiaries, assets on terms and conditions less favorable to
        the
        Company or such Subsidiary than the Company or such Subsidiary would be able
        to
        obtain in arm's-length negotiation with an unaffiliated third party,
or
        (3)
        receive
        any compensation from the Company or any of the Company's Subsidiaries other
        than compensation for full-time employment as a regular employee, or fees
        for
        serving as director, at rates in accordance with the Company's (or its
        Subsidiaries') past practices, or
        (4)
        receive
        the benefit, directly or indirectly (except proportionately as a stockholder),
        of any loans, advances, guarantees, pledges or other financial assistance
        provided by the Company or any of its Subsidiaries, on terms and conditions
        less
        favorable to the Company or such Subsidiary than the Company or such Subsidiary
        would be able to obtain in arm's-length negotiation with an unaffiliated
        third
        party, or

       

      (C) during
        any such time as there is an Acquiring Person, there shall be any
        reclassification of securities (including any reverse stock split), or
        recapitalization of the Company, or any merger or consolidation of the Company
        with any of its Subsidiaries or any other similar transaction or series of
        transactions involving the Company or any of its Subsidiaries (whether or
        not
        with or into or otherwise involving an Acquiring Person or any Affiliate
        or
        Associate of such Acquiring Person) which has the effect, directly or
        indirectly, of increasing by more than one percent the proportionate share
        of
        the outstanding shares 

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      of
        any
        class of equity securities, or of securities exercisable for or convertible
        into
        equity securities, of the Company or any of its Subsidiaries which is directly
        or indirectly owned by any Acquiring Person or any Associate or Affiliate
        of any
        Acquiring Person, or
        

      

      (D) any
        Person shall become an Acquiring Person otherwise than pursuant to a Qualified
        Offer, 

      then,
        and in each such case,
        but
        subject to Section 27 (covering exchange of Rights for shares of Common Stock,
        without requiring exercise of Rights) and to Section 23 (covering redemption
        of
        Rights), proper adjustment and provision shall be made so that each holder
        of a
        Right (except as provided below and in Section 7(f)) shall, on and after
        the
        later of (I)
        the date
        of the occurrence of an event described in clause (A), (B), (C) or (D) of
        this
        Section 11(a)(ii),
        or (II) the
        expiration of the period within which the Rights may be redeemed under Section
        23 (as the same may have been amended under Section 26), have the right to
        receive, upon exercise thereof at the then current Purchase Price, the number
        of
        shares of Common Stock equal to the result obtained by (x)
        multiplying the then current Purchase Price by the then number of Units for
        which a Right is then exercisable and dividing that product by (y)
        50
        percent of the current market price per share of Common Stock (determined
        in
        accordance with Section 11(d)) on the date of the occurrence of the relevant
        event listed above in clause (A), (B), (C) or (D) of this subparagraph (ii);
        PROVIDED,
        HOWEVER,
        that if
        the transaction that would otherwise give rise to the foregoing adjustment
        is
        also subject to the provisions of Section 13, then only the provisions of
        Section 13 (flip-over provisions) shall apply and no adjustment shall be
        made
        pursuant to this Section 11(a)(ii). The Company shall not consummate any
        such
        merger, combination, transfer or transaction referred to in any of such clauses
        (A), (B) and (C) unless prior thereto there shall be sufficient authorized
        but
        unissued Common Stock to permit the exercise in full of the Rights in accordance
        with the foregoing sentence, unless the Board of Directors has determined
        to
        issue Equivalent Stock in accordance with Section 7(a); PROVIDED,
        HOWEVER,
        that in
        no case may the Company consummate any such merger, combination, transfer
        or
        transaction if at the time of or immediately after such transaction there
        are
        any rights, warrants or other instruments or securities outstanding or
        agreements in effect which would substantially diminish or otherwise eliminate
        the benefits intended to be afforded by the Rights.

      

      If
        the
        Company issues Equivalent Stock upon the exercise of any Rights pursuant
        to the
        immediately preceding paragraph, then, upon any such exercise, proper provision
        shall be made so that the holder of a Right (except as provided in Section
        7(f))
        shall have the right to receive, upon such exercise at the then current Purchase
        Price, such number of shares or other units of Equivalent Stock of the Company
        as shall equal the result obtained by
        (x)
        multiplying the then current Purchase Price by the number of Units for which
        a
        Right is then exercisable and dividing that product by (y)
        50
        percent of the current market price per share or other unit of the Equivalent
        Stock of the Company (determined on substantially the same basis as is
        prescribed by Section 11(d) with respect to the valuation of Common Stock)
        on
        the date of occurrence of the relevant event listed above in clause (A),
        (B),
        (C) or (D) of this subparagraph (ii). If at any time the Company should be
        prohibited by law, by any provision of its articles of incorporation, or
        by any
        instrument or agreement to which the Company is a party or by which it is
        bound,
        from issuing, or should be unable under its articles of incorporation to
        issue,
        sufficient Equivalent Stock to permit the exercise of all outstanding Rights
        in
        accordance with the foregoing sentence, then, in lieu of issuing such Equivalent
        Stock upon such exercise, the Company shall pay to each holder of a Right
        (except as provided in Section 7(f)) upon surrender of the Right as provided
        herein but without payment of the Purchase Price, an amount in cash for each
        Right equal to the Purchase Price.

      

      (b) If
        after
        the Rights Record Date the Company sets a record date for the issuance of
        rights
        or warrants to all holders of Common Stock or Subject Shares entitling them
        (for
        a period expiring 

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      within
        45
        calendar days after such record date) to subscribe for or purchase Common
        Stock
        or Subject Shares or securities convertible into Common Stock or Subject
        Shares
        at a price per share (or having a conversion price per share, if a security
        convertible into Common Stock) less than the current market price per share
        (determined with Section 11(d)) on such record date, the Purchase Price to
        be in
        effect after such record date shall be determined by multiplying the Purchase
        Price in effect immediately prior to such record date by a fraction; the
        numerator shall be the total number of shares of Common Stock and Subject
        Shares
        outstanding on such record date plus the number of shares of Common Stock
        which
        the aggregate offering price of the total number of shares so to be offered
        (and/or the aggregate initial conversion price of the convertible securities
        so
        to be offered) would purchase at such current market price, and the denominator
        shall be the total number of shares of Common Stock and Subject Shares
        outstanding on such record date plus the number of additional shares to be
        offered for subscription or purchase (or into which the convertible securities
        to be offered are initially convertible). In case such subscription or purchase
        price may be paid, in whole or in part, in a form other than cash, the value
        of
        such consideration shall be as determined in good faith by the board of
        directors of the Company, whose determination shall be described in a statement
        filed with the Rights Agent. Shares owned by or held for the account of the
        Company shall not be deemed outstanding for the purpose of any such computation.
        Such adjustment shall be made successively whenever such a record date is
        fixed,
        and if such rights or warrants are not so issued, the Purchase Price shall
        be
        adjusted to be the Purchase Price which would then be in effect if such record
        date had not been set.

      

      (c) If
        the
        Company at any time after the Rights Record Date sets a record date for making
        a
        distribution on shares of Common Stock or the Subject Shares, whether by
        way of
        a dividend, distribution, reclassification of stock, recapitalization,
        reorganization or partial liquidation of the Company or otherwise (and including
        any such distribution made in connection with a consolidation or merger in
        which
        the Company is the continuing corporation), of subscription rights or warrants
        (excluding those referred to in Section 11(b)), evidences of indebtedness
        or
        other assets (other than
        (i)
        regular
        periodic cash dividends, (ii)
        a
        dividend payable in Common Stock
        or (iii)
        a
        distribution which is part of or is made in connection with a transaction
        to
        which Section 11(a)(ii) or Section 13 applies), then the Purchase Price to
        be in
        effect after such record date shall be determined by multiplying the Purchase
        Price in effect immediately prior to such record date by a fraction, of which
        the numerator shall be the current market price per share of Common Stock
        (determined with Section 11(d)) on such record date, less the fair market
        value
        applicable to one share of Common Stock (as determined in good faith by the
        board of directors of the Company, whose determination shall be described
        in a
        statement filed with the Rights Agent) of such assets or evidences of
        indebtedness or of such subscription rights or warrants so to be distributed,
        and of which the denominator shall be such current market price per share
        of
        Common Stock. Such adjustments shall be made successively whenever such a
        record
        date is fixed; and if such distribution is not so made, the Purchase Price
        shall
        again be adjusted to be the Purchase Price which would then be in effect
        if such
        record date had not been fixed.

      

      (d) The
        "current
        market price"
        per
        share of Common Stock on any date shall be deemed to be the average of the
        daily
        closing prices per share of such Common Stock for the 30 consecutive Trading
        Days (defined below) immediately prior to such date; provided, however, that
        if
        the current market price per share of Common Stock is determined during a
        period
        following the announcement by the issuer of such Common Stock of a dividend
        or
        distribution on such Common Stock payable in shares of such Common Stock
        or
        securities convertible into shares of Common Stock (other than the Rights),
        and
        prior to the expiration of 30 Trading Days after the ex-dividend date for
        such
        dividend or distribution, then, and in each such case, the current market
        price
        shall be appropriately adjusted to reflect the current market price per share
        of
        Common Stock in connection with ex-dividend trading. The closing price for
        each
        day shall be the last sale price, or, in case no such sale takes place on
        such
        day, the average of the closing bid and asked prices, in either case as reported
        in the principal consolidated transaction reporting system of the principal
        market where the shares of 

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      
        Common
          Stock are listed or admitted to trading. If the shares of Common Stock
          are not
          listed or admitted to trading on any national securities exchange, then
          closing
          price will be determined with reference to the average of the high bid
          and low
          asked prices in the over-the-counter market, as reported by the National
          Association of Securities Dealers, Inc., Automated Quotation System ("NASDAQ").
          If on any such date the shares of Common Stock are not quoted by any such
          organization, the fair market value of such shares on such date as determined
          in
          good faith by the board of directors shall be used. Any such determination
          of
          current market price shall be described in a statement filed with the Rights
          Agent.

        

        For
          the
          purpose of any computation hereunder, the "current
          market price"
          of a
          Unit shall be deemed to be equal to the current market price per share
          of Common
          Stock, and the "current market price" of a Subject Share shall be deemed
          to be
          equal to the current market price per share of Common Stock divided by
          the
          number of Subject Shares which comprise a Unit.

        

        For
          purposes of this Agreement, the term "Trading
          Day"
          shall
          mean a day on which the principal national securities exchange on which
          the
          shares of Common Stock are listed or admitted to trading is open for the
          transaction of business or, if the shares of Common Stock are not listed
          or
          admitted to trading on any national securities exchange, a Business
          Day.

        

        (e) No
          adjustment in the Purchase Price shall be required unless the adjustment
          would
          require an increase or decrease of at least one percent in Price; provided,
          however, that any adjustments which by reason of this Section 11(e) are
          not
          required to be made shall be carried forward and taken into account in
          any
          subsequent adjustment. All calculations under this Section 11 shall be
          made to
          the nearest cent or to the nearest one-thousandth of a share, as the case
          may
          be. Notwithstanding the proviso to the first sentence of this Section 11(e),
          any
          adjustment required by this Section 11 shall be made no later than the
          earlier
          of three years from the date of the transaction which gives rise to such
          adjustment or the date of the expiration of the Rights.

        

        (f) If
          at any
          time, as a result of an adjustment made pursuant to Section 11(a), the
          holder of
          any Right thereafter exercised shall become entitled to receive any shares
          of
          capital stock of the Company other than shares of Common Stock, thereafter
          the
          number of such other shares so receivable upon exercise of any Right shall
          be
          subject to adjustment from time to time in a manner and on terms as nearly
          equivalent as practicable to the provisions, with respect to such shares,
          contained in Sections 11(a) through (c), inclusive. The provisions of Sections
          7, 9, 10, 13 and 14 with respect to the shares of Common Stock shall apply
          on
          like terms to any such other shares.

        

        (g) All
          Rights originally issued by the Company subsequent to any adjustment made
          to the
          Purchase Price hereunder shall represent the right to purchase, at the
          adjusted
          Purchase Price, the number of shares purchasable from time to time hereunder
          upon exercise of the Rights, all subject to further adjustment as provided
          herein. 

        

        (h) Unless
          the Company shall have exercised its election under Section 11(i), when
          there is
          an adjustment of the Purchase Price as a result of the calculations made
          in
          Sections 11(b) and (c), each Right outstanding immediately prior to the
          making
          of such adjustment shall thereafter evidence the right to purchase, at
          the
          adjusted Purchase Price, that number of shares (calculated to the nearest
          one-thousandth) obtained by (i)
          multiplying
          (x)
          the
          number of shares covered by a Right immediately prior to such adjustment
          by
(y)
          the
          Purchase Price in effect immediately prior to such adjustment of the Purchase
          Price, and (ii)
          dividing
          the result by the Purchase Price in effect immediately after such adjustment.
          

        

        
          
            
            

          

          
            16

            
              

            

          

          
            
            

          

        

        (i) The
          Company may elect, on or after the date of adjustment of the Purchase Price,
          to
          adjust the number of Rights, in substitution for any adjustment in the
          number of
          shares purchasable upon the exercise of each Right. Each of the Rights
          outstanding after such adjustment of the number of Rights shall be exercisable
          for the number of Units for which a Right was exercisable immediately prior
          to
          such adjustment. Each Right held of record prior to such adjustment of
          the
          number of Rights shall become that number of Rights (calculated to the
          nearest
          one-thousandth) obtained by dividing the Purchase Price in effect immediately
          prior to adjustment of the Purchase Price by the Purchase Price in effect
          immediately after adjustment of the Purchase Price. The Company shall make
          a
          public announcement of its election to adjust the number of Rights, indicating
          the record date for the adjustment, and, if known at the time, the amount
          of the
          adjustment to be made. This record date may be the date on which the Purchase
          Price is adjusted or any day thereafter, but, if the Right Certificates
          have
          been issued, shall be at least 10 days later than the date of the public
          announcement. If Right Certificates have been issued, upon each adjustment
          of
          the number of Rights the Company shall cause to be distributed to holders
          of
          record of Right Certificates on such record date, Right Certificates to
          show
          (subject to Section 14) the additional Rights to which the holders shall
          be
          entitled as a result of such adjustment. However, at its option, the Company
          may
          shall cause to be distributed in substitution and replacement for the Right
          Certificates held by the holders prior to the date of adjustment, and upon
          surrender thereof, if required by the Company, new Right Certificates to
          evidence all the Rights to which the holders are entitled after the adjustment.
          

        

        (j) Irrespective
          of any adjustment or change in the Purchase Price or the number of shares
          issuable upon the exercise of the Rights, the Right Certificates theretofore
          and
          thereafter issued may continue to express the Purchase Price per share
          and the
          number of shares which were expressed in the initial Right Certificates
          issued
          hereunder.

        

        (k) If
          this
          Section 11 requires that an adjustment in the Purchase Price be made effective
          as of the record date for a specified event, the Company may elect to defer
          until the occurrence of such event the issuance to the holder of any Right
          exercised after such record date the additional shares or securities of
          the
          Company, if any, issuable as a consequence of such adjustment; provided,
          however, that the Company shall deliver to such holder a due bill or other
          appropriate instrument evidencing such holder's right to receive such additional
          shares or securities upon the occurrence of such event.

        

        (l) Notwithstanding
          the other provisions of this Section 11, the Company shall be entitled
          to make
          such adjustments in the number of shares which may be acquired upon exercise
          of
          the Rights, and such adjustments in the Purchase Price, in addition to
          those
          adjustments expressly required by the other subsections of this Section
          11, as
          and to the extent that the Company, in its sole discretion, shall determine
          to
          be advisable, in order that (x)
          the
          holders of the Rights shall be treated equitably and in accordance with
          the
          purpose and intent of this Agreement, and
          (y)
          to the
          extent reasonably possible, such event shall not, in the opinion of counsel
          for
          the Company, result in the stockholders of the Company being subject to
          any
          United States federal income tax liability by such adjustments. The events
          which
          would enable the Company to make such further adjustments include (i)
          any
          reclassification, consolidation or subdivision of the Common Stock;
          (ii)
          any
          reorganization or partial liquidation of the Company or similar transaction;
          (iii)
          any
          issuance wholly for cash of any Common Stock at less than the current market
          price; (iv)
          any
          issuance wholly for cash of Common Stock or securities which by their terms
          are
          convertible into or exchangeable for Common Stock; (v)
          any
          stock
          dividends;
          or (vi)
          any
          issuance of rights, options or warrants to holders of Common Stock.

        

        Section
          12. CERTIFICATION
          OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
          If an
          adjustment is made under Section 11 or 13, the Company shall (i)
          promptly
          prepare a certificate setting forth such adjustment, and a brief statement
          of
          the facts accounting for such adjustment; (ii) 

        
          
            
            

          

          
            17

            
              

            

          

          
            
            

          

        

        promptly
          file with the Rights Agent and any different transfer agent for the Common
          Stock
          a copy of such certificate;
          and (iii)
          mail a
          brief summary to each holder of a Right Certificate in accordance with
          Section
          25. Notwithstanding the foregoing sentence, the failure of the Company
          to give
          such notice shall not affect the validity of, or the force or effect of,
          the
          requirement for such adjustment.

        

        Section
          13. CONSOLIDATION,
          MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER (INCLUDING FLIP-OVER
          PROVISION).

        

        (a) If,
          at
          any time after an Acquiring Person has become such,

        

        (i) the
          Company shall consolidate with, or merge with and into, any other Person
          and the
          Company shall not be the continuing or surviving corporation of such
          consolidation or merger, or

        

        (ii) any
          other
          Person(s) shall consolidate or merge with and into the Company, the Company
          shall be the continuing or surviving corporation of such merger, and in
          connection with such consolidation or merger, all or part of the Common
          Stock
          shall be changed into or exchanged for stock or other securities of the
          Company
          or of any other Person or cash or any other property, or

        

        (iii) the
          Company shall sell or otherwise transfer (or one or more of its Subsidiaries
          shall sell or otherwise transfer), in one or more transactions, assets
          or
          earning power aggregating more than 50 percent of the assets or earning
          power of
          the Company and its Subsidiaries (taken as a whole) to any other Person,
          (other
          than a pro rata distribution by the Company of assets (including securities)
          of
          the Company or any of its Subsidiaries to all holders of the Company's
          Common
          Stock),
          then,
          on and
          after the later of
          (I) the
          date
          of the occurrence of an event described in clause (i), (ii) or (iii) of
          this
          Section 13(a), or
          (II)
          the date
          of the expiration of the period within which the Rights may be redeemed
          pursuant
          to Section 23 (as the same may have been amended as provided in Section
          26):

        

        (A) proper
          provision shall be made so that each holder of a Right shall thereafter
          have the
          right to receive, upon the exercise thereof at the then current Purchase
          Price,
          such number of shares of common stock of the Principal Party as shall be
          equal
          to the result obtained by (x)
          multiplying
          the then current Purchase Price by the number of Units for which a Right
          is then
          exercisable and dividing that product by
          (y)
          50
          percent of the current market price per share of the common stock of the
          Principal Party (determined in the same manner as the current market price
          of
          Common Stock is determined under Section 11(d)) on the date of consummation
          of
          such consolidation, merger, sale or transfer;

        

        (B) the
          Principal Party shall thereafter be liable for, and shall assume, by virtue
          of
          such consolidation, merger, sale or transfer, all the obligations and duties
          of
          the Company pursuant to this Agreement, provided that the Principal Party
          shall,
          prior to the first occurrence of an event described in clause (i), (ii)
          or (iii)
          of this Section 13(a), have caused to be reserved out of its authorized
          and
          unissued shares of common stock (or its authorized and issued shares of
          common
          stock held in its treasury), for issuance pursuant to this Agreement, the
          number
          of shares of common stock that will be sufficient to permit the exercise
          in full
          of the Rights after the occurrence of such event;

        

        (C) the
          term
          "Company" wherever used in this Agreement shall thereafter be deemed to
          refer to
          such Principal Party; and
          

        

        (D) the
          Principal Party shall, in addition to the reservation of shares of its
          common
          stock as provided in the proviso to clause (B) above, take such steps (including
          without limitation 

        
          
            
            

          

          
            18

            
              

            

          

          
            
            

          

        

        compliance
          with the Company's other obligations as set forth in Section 9) in connection
          with such consummation as may be necessary to assure that the provisions
          hereof
          shall thereafter be applicable, as nearly as reasonably may be, in relation
          to
          the shares of its common stock thereafter deliverable upon the exercise
          of the
          Rights; provided, however, that, upon the subsequent occurrence of any
          merger,
          consolidation, sale of all or substantially all assets, recapitalization,
          reclassification of shares, reorganization or other extraordinary transaction
          in
          respect of such Principal Party, each holder of a Right shall thereupon
          be
          entitled to receive, upon exercise of a Right and payment of the Purchase
          Price,
          such cash, shares, rights, warrants and other property which such holder
          would
          have been entitled to receive had such holder, at the time of such transaction,
          owned the shares of common stock of the Principal Party purchasable upon
          the
          exercise of a Right, and such Principal Party shall take such steps (including,
          but not limited to, reservation of shares of stock) as may be necessary
          to
          permit the subsequent exercise of the Rights in accordance with the terms
          hereof
          for such cash, shares, rights, warrants and other property.

        

        (b) For
          purposes of this Agreement, "Principal Party" shall mean

        

        (i) in
          the
          case of any transaction described in clause (i) or (ii) of Section 13(a),
          (A)
          the
          Person that is the issuer of the securities into which shares of Common
          Stock
          are converted in such merger or consolidation, or, if there is more than
          one
          such issuer, the issuer the common stock of which has the greatest market
          value,
or
          (B)
          if no
          securities are so issued,
          (x)
          the
          Person that is the other party to the merger or consolidation and that
          survives
          said merger or consolidation, or, if there is more than one such Person,
          the
          Person the common stock of which has the greatest market value or
          (y)
          if the
          Person that is the other party to the merger or consolidation does not
          survive
          the merger or consolidation, the Person that does so survive (including
          the
          Company if it survives); and

        

        (ii) in
          the
          case of any transaction described in clause (iii) of Section 13(a), the
          Person
          that is the party receiving the greatest portion of the assets or earning
          power
          transferred pursuant to such transaction or transactions, or, if each Person
          that is a party to such transaction or transactions receives the same portion
          of
          the assets or earning power so transferred or if the Person receiving the
          greatest portion of the assets or earning power cannot be determined, whichever
          of such Persons is the issuer of common stock having the greatest market
          value
          of shares outstanding; PROVIDED,
          HOWEVER,
          that in
          any such case,
          (1)
          if the
          common stock of such Person is not at such time and has not been continuously
          over the preceding 12-month period registered under Section 12 of the Exchange
          Act, and such Person is a direct or indirect Subsidiary of another corporation
          the common stock of which is and has been so registered, "Principal Party"
          shall
          refer to such other corporation; (2)
          if the
          common stock of such Person is not and has not been so registered and such
          Person is not a direct or indirect Subsidiary of another corporation the
          common
          stock of which is and has been so registered, "Principal Party" shall refer
          to
          the corporation which ultimately controls such Person;
          (3)
          in case
          such Person is a Subsidiary, directly or indirectly, of more than one
          corporation, the common stocks of all of which are and have been so registered,
          "Principal Party" shall refer to whichever of such corporations is the
          issuer of
          common stock having the greatest market value of shares held by the public;
          and
(4)
          if
          the
          common stock of such Person is not and has not been so registered and such
          Person is owned, directly or indirectly, by a joint venture formed by two
          or
          more Persons that are not owned, directly or indirectly, by the same Person,
          the
          rules set forth in clauses (1), (2) and (3) above shall apply to each of
          the
          chains of ownership having an interest in such joint venture as if such
          Person
          were a "Subsidiary" of both or all of such joint venturers and the Principal
          Party in each such chain shall bear the obligations set forth in this Section
          13
          in the same ratio as its direct or indirect interests in such Person bear
          to the
          total of such interests.

        

        (c) The
          Company shall not consummate any such consolidation, merger, sale or transfer
          unless prior thereto the Company and the Principal Party shall have executed
          and
          delivered to the Rights Agent 

        
          
            
            

          

          
            19

            
              

            

          

          
            
            

          

        

        a
          supplemental agreement making valid provision for the results described
          in
          clause (A) of Section 13(a) and confirming that the Principal Party will
          perform
          its obligations under this Section 13(a); provided, however, that in no
          case may
          the Company consummate any such consolidation, merger, sale or transfer
          if
(i)
          at the
          time of or immediately after such transaction there are any rights, warrants
          or
          other instruments or securities outstanding or agreements in effect which
          would
          substantially diminish or otherwise eliminate the benefits intended to
          be
          afforded by the Rights
          or (ii)
          prior
          to, simultaneously with or immediately after such transaction, the stockholders
          of the Person which constitutes, or would constitute, the Principal Party
          for
          purposes of this Section 13 shall have received a distribution of Rights
          previously owned by such Person or any of its Affiliates and
          Associates.

        

        (d) The
          provisions of this Section 13 shall similarly apply to successive mergers
          or
          consolidations or sales or other transfers. This Section 13 shall not be
          applicable to a transaction described in Subparagraphs (i), (ii) or (iii)
          of
          Subsection (a) of this Section if
          (i)
          such
          transaction is consummated with a Person or Persons who acquired Common
          Stock
          pursuant to a Qualified Offer (or a wholly owned subsidiary of any such
          Person
          or Persons);
          (ii)
          the
          price per share of Common Stock offered in such transaction or distributable
          to
          stockholders upon conclusion of such transaction is not less than the price
          per
          share of Common Stock paid to all holders of Common Stock whose shares
          were
          purchased pursuant to such Qualified Offer;
          and (iii)
          the form
          of consideration being offered to the remaining holders of Common Stock
          pursuant
          to such transaction or distributable to stockholders upon conclusion of
          such
          transaction is the same as the form of consideration paid pursuant to such
          Qualified Offer. Upon conclusion of any transaction described in the foregoing
          sentence, all Rights shall expire.

        

        Section
          14. FRACTIONAL
          RIGHTS AND FRACTIONAL SHARES.

        

        (a) The
          Company shall not be required to issue fractions of Rights or distribute
          Right
          Certificates which evidence fractional Rights. If the Company shall elect
          not to
          issue such fractional Rights, in lieu of such fractional Rights, there
          shall be
          paid to the registered holders of the Right Certificates with regard to
          which
          such Fractional Rights would otherwise be issuable, cash equal to the same
          fraction of the current market value of a whole Right. For the purposes
          of this
          Section 14(a), the current market value of a whole Right shall be the closing
          price of the Rights for the Trading Day immediately prior to the date on
          which
          such fractional Rights would have been otherwise issuable. The closing
          price for
          any day shall be the last sale price, regular way, or, in case no such
          sale
          takes place on such day, the average of the closing bid and asked prices,
          regular way, in either case as reported in the principal consolidated
          transaction reporting system with respect to securities listed or admitted
          to
          trading on the New York Stock Exchange or, if the Rights are not listed
          or
          admitted to trading on the New York Stock Exchange, as reported in the
          principal
          consolidated transaction reporting system with respect to securities listed
          on
          the principal national securities exchange on which the Rights are listed
          or
          admitted to trading or, if the Rights are not listed or admitted to trading
          on
          any national securities exchange, the average of the high bid and low asked
          prices in the over-the-counter market, as reported by NASDAQ. If on any
          such
          date the Rights are not quoted by any such organization, the fair value
          of the
          Rights on such date as determined in good faith by the board of directors
          of the
          Company shall be used. Any such determination of current market value shall
          be
          described in a statement filed with the Rights Agent.

        

        (b) The
          Company shall not be required to issue fractions of shares upon exercise
          of a
          Right or to distribute certificates which evidence fractional shares. In
          lieu of
          fractional shares, the Company shall pay to the registered holders of Right
          Certificates at the time such Right Certificates are exercised, cash equal
          to
          the same fraction of the current market value of a share of Common Stock.
          For
          purposes of this Section 14, the current market value of a share of Common
          Stock
          shall be the closing price of a share of Common Stock for the Trading Day
          immediately prior to the date of such exercise.

        

        
          
            
            

          

          
            20

            
              

            

          

          
            
            

          

        

        (c) The
          holder of a Right by the acceptance thereof expressly waives his right
          to
          receive any fractional Rights or any fractional shares upon exercise of
          a
          Right.

        

        Section
          15. RIGHTS
          OF ACTION.
          All
          rights of action in respect of this Agreement are vested in the registered
          holders of the Right Certificates (and prior to the Distribution Date,
          the
          registered holders of the Common Stock). Any registered holder of any Right
          Certificate (or, prior to the Distribution Date, any registered holder
          of the
          Common Stock), without the consent of the Rights Agent or the holder of
          any
          other Right Certificate (or, prior to the Distribution Date, any other
          registered holder of the Common Stock), may, on his own behalf and for
          his own
          benefit, enforce, and may institute and maintain, any suit, action or proceeding
          against the Company to enforce, or otherwise act in respect of, his right
          to
          exercise the Rights evidenced by such Right Certificate in the manner provided
          in such Right Certificate and in this Agreement. Without limiting the foregoing
          or any remedies available to the holders of Rights, it is specifically
          acknowledged that the holders of Rights would not have an adequate remedy
          at law
          for any breach of this Agreement and will be entitled to specific performance
          of
          the obligations under, and injunctive relief against actual or threatened
          violations of the obligations of any Person subject to, this Agreement.
          

        

        Section
          16. AGREEMENT
          OF RIGHT HOLDERS.
          Every
          holder of a Right by accepting the same, consents and agrees with the Company
          and the Rights Agent and with every other holder of a Right that:

        

        (a) prior
          to
          the Distribution Date, the Rights will be transferable only in connection
          with
          the transfer of Common Stock; 

        

        (b) on
          and
          after the Distribution Date, the Right Certificates will be transferable
          only on
          the registry books of the Rights Agent and then if surrendered at the stock
          transfer office of the Rights Agent, duly endorsed or accompanied by a
          proper
          instrument of transfer; and

        

        (c) the
          Company and the Rights Agent may deem and treat the person in whose name
          the
          Right Certificate (or, prior to the Distribution Date, the associated Common
          Stock certificate) is registered as the absolute owner thereof and of the
          Rights
          evidenced thereby (notwithstanding any notations of ownership or writing
          on the
          Right Certificates or the associated Common Stock certificate made by anyone
          other than the Company or the Rights Agent) for all purposes whatsoever.
          Neither
          the Company nor the Rights Agent shall be affected by any notice to the
          contrary.

        

        Section
          17. RIGHT
          CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER.
          No
          holder, as such, of any Right Certificate shall be entitled to vote, receive
          dividends or be deemed for any purpose the holder of Common Stock or any
          other
          securities of the Company which may at any time be issuable on the exercise
          of
          the Rights represented thereby. No provision of this Agreement or of any
          Right
          Certificate shall be construed to confer upon the holder of any Right
          Certificate, as such, any of the rights of a stockholder of the Company
          or any
          right to vote for the election of directors or upon any matter submitted
          to
          stockholders at any meeting thereof, or to give or withhold consent to
          any
          corporate action, or to receive notice of meetings or other actions affecting
          stockholders (except as provided in Section 24), or to receive dividends
          or
          subscription rights, or otherwise, until the Rights evidenced by such Right
          Certificate have been exercised.

        
          
            
            

          

          
            21

            
              

            

          

          
            
            

          

        

        

        Section
          18. CONCERNING
          THE RIGHTS AGENT.

        

        (a) The
          Company agrees to pay to the Rights Agent reasonable compensation for all
          services rendered by it hereunder and, from time to time, on demand of
          the
          Rights Agent, its reasonable expenses and counsel fees and other disbursements
          incurred in the administration and execution of this Agreement and the
          exercise
          and performance of its duties hereunder. The Company also agrees to indemnify
          the Rights Agent for, and hold it harmless against any loss, liability,
          or
          expense incurred, without negligence, bad faith or willful misconduct on
          the
          part of the Rights Agent, for anything done or omitted by the Rights Agent
          in
          connection with the acceptance and administration of this Agreement, including
          the costs and expenses of defending against any claim of liability.

        

        (b) The
          Rights Agent shall be protected and shall incur no liability for or in
          respect
          of any action taken, suffered or omitted by it in connection with its
          administration of this Agreement in reliance upon any Right Certificate
          or
          certificate for Common Stock or for other securities of the Company, instrument
          of assignment or transfer, power of attorney, endorsement, affidavit, letter,
          notice, direction, consent, certificate, statement, or other paper or document
          believed by it, acting with reasonable care, to be genuine and to be signed,
          executed and, where necessary, verified or acknowledged, by the proper
          person or
          persons.

        

           Section
          19. MERGER
          OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.

        

        (a) Any
          corporation into which the Rights Agent or any successor Rights Agent may
          be
          merged or with which it may be consolidated, or any corporation resulting
          from
          any merger or consolidation to which the Rights Agent or any successor
          Rights
          Agent shall be a party, or any corporation succeeding to the stock transfer
          business of the Rights Agent or any successor Rights Agent, shall be the
          successor to the Rights Agent under this Agreement without the execution
          or
          filing of any paper or any further act on the part of any of the parties
          hereto,
          provided that such corporation would be eligible for appointment as a successor
          Rights Agent under the provisions of Section 21. In case at the time such
          successor Rights Agent shall succeed to the agency created by this Agreement
          any
          of the Right Certificates shall have been countersigned but not delivered,
          any
          such successor Rights Agent may adopt the countersignature of the predecessor
          Rights Agent and deliver such Right Certificates so countersigned. In case
          at
          that time any of the Right Certificates shall not have been countersigned,
          any
          successor Rights Agent may countersign such Right Certificates either in
          the
          name of the predecessor Rights Agent or in the name of the successor Rights
          Agent and in all such cases such Right Certificates shall have the full
          force
          provided in the Right Certificates and in this Agreement.

        

        (b) In
          case
          at any time the name of the Rights Agent shall be changed and at such time
          any
          of the Right Certificates shall have been countersigned but not delivered,
          the
          Rights Agent may adopt the countersignature under its prior name and deliver
          Right Certificates so countersigned, and in case at that time any of the
          Right
          Certificates shall not have been countersigned, the Rights Agent may countersign
          such Right Certificates either in its prior name or in its changed name,
          and in
          all such cases such Right Certificates shall have the full force provided
          in the
          Right Certificates and in this Agreement.

        

        Section
          20. DUTIES
          OF RIGHTS AGENT.
          The
          Rights Agent undertakes the duties and obligations imposed by this Agreement
          upon the following terms and conditions, by all of which the Company and
          the
          holders of Right Certificates, by their acceptance thereof, shall be
          bound:

        

        
          
            
            

          

          
            22

            
              

            

          

          
            
            

          

        

        (a) The
          Rights Agent may consult with legal counsel (who may be legal counsel for
          the
          Company), and the opinion of such counsel shall be full and complete
          authorization and protection to the Rights Agent as to any action taken
          or
          omitted by it in good faith and in accordance with such opinion. 

        

        (b) Whenever
          in the performance of its duties under this Agreement the Rights Agent
          shall
          deem it necessary or desirable that any fact or matter be proved or established
          by the Company prior to taking or suffering any action hereunder, such
          fact or
          matter (unless other evidence in respect thereof be herein specifically
          prescribed) may be deemed to be conclusively proved and established by
          a
          certificate signed by the Chairman of the Board, the President, any Vice
          President, or the Secretary of the Company and delivered to the Rights
          Agent,
          and such certificate shall be full authorization to the Rights Agent for
          any
          action taken or suffered in good faith by it under the provisions of this
          Agreement in reliance upon such certificate.

        

        (c) The
          Rights Agent shall be liable hereunder only for its own negligence, bad
          faith or
          willful misconduct. 

        

        (d) The
          Rights Agent shall not be liable for or by reason of any of the statements
          of
          fact or recitals contained in this Agreement or in the Right Certificates
          (except its countersignature thereof) or be required to verify the same,
          but all
          such statements and recitals are and shall be deemed to have been made
          by the
          Company only.

        

        (e) The
          Rights Agent shall not be under any responsibility in respect of the validity
          of
          this Agreement or the execution and delivery hereof (except the due execution
          hereof by the Rights Agent) or in respect of the validity or execution
          of any
          Right Certificate (except its countersignature thereof), nor shall it be
          responsible for any breach by the Company of any covenant or condition
          contained
          in this Agreement or in any Right Certificate, nor shall it be responsible
          for
          any adjustment required under the provisions of Section 11 or 13 or responsible
          for the manner, method or amount of any such adjustment or the ascertaining
          of
          the existence of facts that would require any such adjustment (except with
          respect to the exercise of Rights evidenced by Right Certificates after
          actual
          notice of any such adjustment), nor shall it by any act hereunder be deemed
          to
          make any representation or warranty as to the authorization or reservation
          of
          any shares of stock to be issued pursuant to this Agreement or any Right
          Certificate or as to whether any shares of stock will, when issued, be
          validly
          authorized and issued, fully paid and nonassessable.

        

        (f) The
          Company agrees that it will perform, execute, acknowledge and deliver or
          cause
          to be performed, executed, acknowledged and delivered all such further
          and other
          acts, instruments and assurances as may reasonably be required by the Rights
          Agent for the carrying out or performance by the Rights Agent of the provisions
          of this Agreement.

        

        (g) The
          Rights Agent is hereby authorized and directed to accept instructions with
          respect to the performance of its duties hereunder from the Chairman of
          the
          Board, the President or the Secretary of the Company, and to apply to such
          officers for advice or instructions in connection with its duties, and
          it shall
          not be liable for any action taken or suffered to be taken by it in good
          faith
          in accordance with instructions of any such officer.

        

        (h) Nothing
          herein shall preclude the Rights Agent from acting in any other capacity
          for the
          Company or for any other legal entity.

        

        (i) The
          Rights Agent may execute and exercise any of the rights or powers hereby
          vested
          in it or perform any duty hereunder either itself or by or through its
          attorneys
          or agents, and the Rights Agent 

        
          
            
            

          

          
            23

            
              

            

          

          
            
            

          

        

        shall
          not
          be answerable or accountable for any act, default, neglect or misconduct
          of any
          such attorneys or agents or for any loss to the Company resulting from
          any such
          act, default, neglect or misconduct, provided reasonable care was exercised
          in
          the selection and continued employment thereof.

        

        (j) If,
          with
          respect to any Right Certificate surrendered to the Rights Agent for exercise
          or
          transfer, the certificate attached to the form of assignment or form of
          election
          to purchase, as the case may be, has either not been completed or indicates
          an
          affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall
          not
          take any further action with respect to such requested exercise or transfer
          without first obtaining the Company's approval.

        

        Section
          21. CHANGE
          OF RIGHTS AGENT.
          Unless
          the Company and the Rights Agent agree to a shorter time period, the Rights
          Agent or any successor Rights Agent may resign and be discharged from its
          duties
          under this Agreement upon 15 days' notice in writing mailed to the Company
          (and,
          if different, to each transfer agent of Common Stock) by registered or
          certified
          mail, and to the holders of the Right Certificates by first-class mail.
          Unless
          the Company and the Rights Agent agree to a shorter time period, the Company
          may
          remove the Rights Agent or any successor Rights Agent upon 15 days' notice
          in
          writing, mailed to the Rights Agent or successor Rights Agent, as the case
          may
          be, and to each transfer agent of Common Stock by registered or certified
          mail,
          and to the holders of the Right Certificates by first-class mail. If the
          Rights
          Agent shall resign or be removed or shall otherwise become incapable of
          acting,
          the Company shall appoint a successor to the Rights Agent. If the Company
          shall
          fail to make such appointment within a period of 15 days after such removal
          or
          after it has been notified in writing of such resignation or incapacity
          by the
          resigning or incapacitated Rights Agent or by the holder of a Right Certificate
          (who shall, with such notice, submit his Right Certificate for inspection
          by the
          Company), then the registered holder of any Right Certificate may apply
          to any
          court of competent jurisdiction for the appointment of a new Rights Agent.
          Any
          successor Rights Agent, whether appointed by the Company or by such a court,
          shall be a corporation organized and doing business under the laws of the
          United
          States having a stock transfer office in the State of Colorado which is
          subject
          to supervision or examination by federal authority. After appointment,
          the
          successor Rights Agent shall be vested with the same powers, rights, duties
          and
          responsibilities as if it had been originally named as Rights Agent without
          further act or deed, but the predecessor Rights Agent shall deliver and
          transfer
          to the successor Rights Agent any property at the time held by it hereunder,
          and
          execute and deliver any further assurance, conveyance, act or deed necessary
          for
          the purpose. Not later than the effective date of any such appointment,
          the
          Company shall file notice thereof in writing with the predecessor Rights
          Agent
          (and if different, each transfer agent of Common Stock) and mail a notice
          thereof in writing to the registered holders of the Right Certificates.
          Failure
          to give any notice provided for in this Section 21, however, or any defect
          therein, shall not affect the legality or validity of the resignation or
          removal
          of the Rights Agent or the appointment of the successor Rights Agent, as
          the
          case may be.

        

        Section
          22. ISSUANCE
          OF NEW RIGHT CERTIFICATES.
          Notwithstanding any of the provisions of this Agreement or of the Rights
          to the
          contrary, the Company may, at its option, issue new Right Certificates
          evidencing Rights in such form as may be approved by its board of directors
          to
          reflect any adjustment or change in the Expiration Date, the Purchase Price
          per
          share or the number or kind or class of shares of stock or other securities
          or
          property purchasable under the Right Certificates made in accordance with
          the
          provisions of this Agreement.

        

        Section
          23. Redemption
          Right and Termination of Redemption Right.
          The
          Board of Directors of the Company has the right (the “Redemption Right”), but
          not the obligation, at any time prior to the earlier of (i) the Close of
          Business on the tenth day following the Stock Acquisition Date, or (ii)
          the
          final Expiration Date, redeem all but not less than all of the then outstanding
          Rights (which shall not include Rights 

        
          
            
            

          

          
            24

            
              

            

          

          
            
            

          

        

        that
          have
          become subject to Section 7(f))at a redemption price of $0.01 per Right,
          as such
          amount may be appropriately adjusted to reflect any stock split, stock
          dividend
          or similar transaction occurring after the date hereof (such redemption
          price
          being hereinafter referred to as the “Redemption Price”). Notwithstanding
          anything contained in this Agreement to the contrary, the Rights shall
          not be
          exercisable after the first occurrence of a Section 11(a)(ii) Event until
          such
          time as the Company’s Redemption Right has expired. The Company may, at its
          option, pay the Redemption Price in cash, shares of Common Stock (based
          on the
“current market price,” as defined in Section 11(d), of the Common Stock at the
          time of redemption) or any other form of consideration deemed appropriate
          by the
          Board of Directors. The redemption of the Rights by the Board of Directors
          may
          be made effective at such time, on such basis and with such conditions
          as the
          Board of Directors in its sole discretion may establish.

        

        Immediately
          upon the action of the Board of Directors of the Company ordering the redemption
          of the Rights, evidence of which shall have been filed with the Rights
          Agent and
          without any further action and without any notice, the right to exercise
          the
          Rights will terminate and the only right thereafter of the holders of Rights
          shall be to receive the Redemption Price for each Right so held. Promptly
          after
          the action of the Board of Directors ordering the redemption of the Rights,
          the
          Company shall give notice of such redemption to the Rights Agent and the
          holders
          of the then outstanding Rights by mailing such notice to the Rights Agent
          and to
          all such holders at each holder’s last address as it appears upon the registry
          books of the Rights Agent or, prior to the Distribution Date, on the registry
          books of the transfer agent for the Common Stock. Any notice which is mailed
          in
          the manner herein provided shall be deemed given, whether or not the holder
          receives the notice. Each such notice of redemption will state the method
          by
          which the payment of the Redemption Price will be made.

         

        Section
          24. NOTICE
          OF PROPOSED ACTIONS.
          In case
          the Company, after the Rights become exercisable, shall propose
          (i)
          to pay
          any dividend payable in stock of any class to the holders of its Common
          Stock or
          the Subject Shares or to make any other distribution to the holders of
          its
          Common Stock or Subject Shares (other than a regular periodic cash dividend),
          or
          (ii)
          to offer
          to the holders of its Common Stock or Subject Shares rights or warrants
          to
          subscribe for or to purchase any additional shares of Common Stock or shares
          of
          stock of any class or any other securities, rights or options, or
          (iii)
          to
          effect any reclassification of its Common Stock or Subject Shares (other
          than a
          reclassification involving only the subdivision of outstanding shares of
          Common
          Stock) or any recapitalization or reorganization of the Company, or
          (iv) to
          effect
          any consolidation or merger into or with, or to effect any sale or other
          transfer (or to permit one or more of its Subsidiaries to effect any sale
          or
          other transfer), in one or more transactions, of more than 50 percent of
          the
          assets or earning power of the Company and its Subsidiaries (taken as a
          whole)
          to, any other Person, or
          (v)
          to
          effect the liquidation, dissolution or winding up of the Company, then,
          in each
          such case, the Company shall give to each holder of a Right, in accordance
          with
          Section 25, a notice. The notice of such proposed action shall specify
          the
          record date or the date on which such reclassification, recapitalization,
          reorganization, consolidation, merger, sale, transfer, liquidation, dissolution
          or winding up is to take place and the date of participation therein by
          the
          holders of Common Stock and/or Subject Shares, if any such date is to be
          fixed.
          The notice shall be given in case of any action covered by clause (i) or
          (ii)
          above at least 20 days prior to the record date for determining holders
          of the
          Common Stock and/or Subject Shares for purposes of such action; in the
          case of
          any other action, at least 20 days prior to the date of the taking of such
          proposed action or the date of participation therein by the holders of
          Common
          Stock and/or Subject Shares, whichever shall be the earlier. The failure
          to give
          notice required by this Section 24 or any defect thereon shall not affect
          the
          legality or validity of the action taken by the Company or the vote upon
          any
          such action.

        

        
          
            
            

          

          
            25

            
              

            

          

          
            
            

          

        

        

          Section
            25. NOTICES
            IN GENERAL.
            Notices
            or demands authorized by this Agreement to be given or made by the Rights
            Agent
            or by the holder of any Right Certificate to or on the Company shall
            be given if
            sent by courier, facsimile, or first-class mail, postage prepaid, addressed
            to:

          

          U.S.
            Energy Corp. 

          877
            N.
            8th
            W.

          Riverton,
            Wyoming 82501

          Fax
            307.857.3050

          

          Any
            notice or demand authorized by this Agreement to be given or made by
            the Company
            or by the holder of any Right Certificate to or on the Rights Agent shall
            be
            sufficiently given or made if sent by courier, facsimile or first-class
            mail,
            postage prepaid, addressed (until another address is filed in writing
            with the
            Company) as follows:

          

          Computershare
            Trust Company, Inc. 

          12039
            West Alameda Parkway, Suite Z 2

          Lakewood,
            Colorado [Fax 303.986.2444]

            

          Notices
            or demands authorized by this Agreement to be given or made by the Company
            or
            the Rights Agent to or on the holder of any Right Certificate shall be
            sufficiently given or made if sent by first-class mail, postage prepaid,
            addressed to such holder at the address of such holder on the
            Company.

          

          Section
            26. SUPPLEMENTS
            AND AMENDMENTS.
            Prior
            to the Distribution Date and subject to the penultimate sentence of this
            Section, the Company and the Rights Agent shall, if the Company so directs,
            supplement or amend any provision of this Agreement without the approval
            of any
            holders of certificates representing shares of Common Stock. From and
            after the
            Distribution Date and subject to the penultimate sentence of this Section,
            the
            Company and the Rights Agent shall, if the Company so directs, supplement
            or
            amend this Agreement without the approval of any holders of Right Certificates
            in order (i)
            to
            cure
            any ambiguity,
            (ii)
            to
            correct or supplement any provision contained herein which may be defective
            or
            inconsistent with any other provisions herein, (iii)
            to
            shorten or lengthen any time period, or
            (iv)
            to
            change or supplement the provisions hereof in any manner which the Company
            may
            deem necessary or desirable and which shall not adversely affect the
            interests
            of the holders of Right Certificates; provided,
            however,
            this
            Agreement may not be supplemented or amended to lengthen
            (A)
            a time
            period relating to when the Rights may be redeemed at such time as the
            Rights
            are not then redeemable, or
            (B)
            any
            other time period, unless such lengthening is for the purpose of protecting,
            enhancing or clarifying the rights of, and/or the benefits to, the holders
            of
            Rights. Upon the delivery of a certificate from an appropriate officer
            of the
            Company which states that the proposed supplement or amendment is in
            compliance
            with the terms of this Section, the Rights Agent shall execute such supplement
            or amendment. Notwithstanding anything contained in this Agreement to
            the
            contrary: (1)
            no
            supplement or amendment shall be made which changes the Redemption Price,
            the
            Purchase Price or the number of shares or Units for which a Right is
            exercisable; and
            (2)
            the
            duration of the Rights may not be shortened without the written consent
            of the
            registered holders thereof (other than by a redemption of the Rights).
            Prior to
            the Distribution Date, the interests of the holders of Rights shall be
            deemed
            coincident with the interests of the holders of Common Stock.

          
            
              
              

            

            
              26

              
                

              

            

            
              
              

            

          

          

          Section
            27.  EXCHANGE OF
            RIGHTS FOR SHARES OF COMMON STOCK WITHOUT
            CASH PAYMENT.

          

          (a) The
            board
            of directors of the Company may, at its option, at any time after any
            Person
            becomes an Acquiring Person, exchange all or part of the then outstanding
            and
            exercisable Rights (which shall not include Rights that have become subject
            to
            Section 7(f)) for Common Stock at an exchange ratio of one share of Common
            Stock
            per Right, appropriately adjusted to reflect any stock split, stock dividend
            or
            similar transaction occurring after the date hereof (such exchange ratio
            being
            hereinafter referred to as the "Exchange Ratio").

          

          (b) Immediately
            upon the action of the board of directors of the Company ordering the
            exchange
            of any Rights pursuant to subsection (a) of this Section and without
            any further
            action and without any notice, the right to exercise such Rights shall
            terminate
            and the only right thereafter of a holder of such Rights shall be to
            receive
            that number of shares of Common Stock equal to the number of such Rights
            held by
            such holder multiplied by the Exchange Ratio. The Company shall promptly
            give
            public notice of any such exchange; provided, however, that the failure
            to give,
            or any defect in, such notice shall not affect the validity of such exchange.
            The Company promptly shall mail a notice of any such exchange to all
            of the
            holders of such Rights at their last addresses as they appear upon the
            registry
            books of the Rights Agent. Any notice which is mailed in the manner herein
            provided shall be deemed given, whether or not the holder receives the
            notice.
            Each notice of exchange will state the method by which the exchange of
            the
            Common Stock for Rights will be effected and, in the event of any partial
            exchange, the number of Rights which will be exchanged. Any partial exchange
            shall be effected pro rata based on the number of Rights (other than
            Rights
            which have become subject to the provisions of Section 7(f)) held by
            each holder
            of Rights.

          

          (c) If
            there
            is not enough authorized Common Stock to permit an exchange of Rights
            as
            contemplated in accordance with this Section, the Company shall take
            all such
            action as may be necessary to authorize additional Common Stock or Equivalent
            Stock for issuance upon exchange of the Rights.

          

          Section
            28. SUCCESSORS.
            All the
            covenants and provisions of this Agreement by or for the benefit of the
            Company
            or the Rights Agent shall bind and inure to the benefit of their respective
            successors and assigns hereunder.

          

          Section
            29. DETERMINATION
            AND ACTIONS TAKEN BY THE BOARD OF DIRECTORS.
            For all
            purposes of this Agreement, any calculation of the number of shares of
            Common
            Stock (or other applicable securities hereunder) outstanding at any particular
            time, including for purposes of determining the particular percentage
            of such
            outstanding shares of Common Stock (or other securities) of which any
            Person is
            the Beneficial Owner, shall be made in accordance with the last sentence
            of rule
            13d-3(d)(1)(i) (as in effect on the date of this Agreement) of the General
            Rules
            and Regulations under the Exchange Act. The board of directors of the
            Company
            shall have the exclusive power and authority to administer this Agreement
            and to
            exercise all rights and powers specifically granted to such board or
            to the
            Company, or as may be necessary or advisable in the administration of
            this
            Agreement, including without limitation the right and power to
            (i)
            interpret the provisions of this Agreement,
            and (ii)
            make all
            Determinations deemed necessary or advisable for the administration of
            this
            Agreement (including a determination to redeem or not redeem the Rights
            or to
            amend the Agreement). All such actions, calculations, interpretations
            and
            Determinations (including, for purposes of clause (B) below, all omissions
            with
            respect to the foregoing) which are done or made by the Board in good
            faith,
            shall (A)
            be
            final, conclusive and binding on the Company, the Rights Agent,

          
            
              
              

            

            
              27

              
                

              

            

            
              
              

            

             

             

            the
              holders of the Rights and all other parties, and
              (B)
              not
              subject the board to any liability to the holders of the
              Rights.

          

          

          Section
            30. BENEFITS
            OF THIS AGREEMENT.
            Nothing
            in this Agreement shall be construed to give to any Person other than
            the
            Company, the Rights Agent and the registered holders of the Right Certificates
            (and, prior to the Distribution Date, the holders of Common Stock) any
            legal or
            equitable right, remedy or claim under this Agreement. This Agreement
            shall be
            for the sole and exclusive benefit of the Company, the Rights Agent and
            the
            registered holders of the Right Certificates (and, prior to the Distribution
            Date, the holders of Common Stock).

          

          Section
            31. GOVERNING
            LAW; CHOICE OF VENUE.
            This
            Agreement and each Right Certificate issued hereunder shall be deemed
            to be a
            contract made under the laws of the State of Wyoming and for all purposes
            shall
            be governed by and construed in accordance with the laws of such State
            applicable to contracts to be made and performed entirely within such
            State. The
            rights and obligations of the Rights Agent under this Agreement shall
            be
            governed by and construed in accordance with the laws in effect in the
            State of
            Colorado. The parties to this Agreement, and all of the holders of record
            of the
            Rights, irrevocably agree and acknowledge that all disputes involving
            the
            subject matter of this Agreement are to be resolved in the District Courts,
            Fremont County, Wyoming. 

          

          Notwithstanding
            any provision of this Agreement, in the event of any conflict between
            any
            provision of this Agreement, on the one hand, and the express provisions
            of the
            Wyoming Management Stability Act (the ?WMSA,?
            secs.
            17-18-101 et
            seq.,
            as now
            in effect and hereafter amended), on the other hand, then the express
            provisions
            of the WMSA shall control, and the necessary provisions of this Agreement
            shall
            be deemed modified and changed to the extent necessary so that this Agreement
            shall not conflict with the WMSA, and all the other provisions of this
            Agreement
            shall remain intact and unchanged. 

          

          Section
            32. COUNTERPARTS.
            This
            Agreement may be executed in any number of counterparts and each of such
            counterparts shall for all purposes be deemed to be an original, and
            all such
            counterparts shall together constitute but one and the same
            instrument.

          

          Section
            33. SECTION
            HEADINGS.
            Descriptive headings of the Sections of this Agreement are inserted only
            for
            convenience and shall not control or affect its meaning or
            construction.

          

          Section
            34. SEVERABILITY.
            If any
            term, provision, covenant or restriction of this Agreement is held by
            a court of
            competent jurisdiction or other authority to be invalid, illegal, or
            unenforceable, (i)
            such
            invalid, illegal or unenforceable term, provision, covenant or restriction
            shall
            nevertheless be valid, legal and enforceable to the extent, if any, provided
            by
            such court or authority, and
            (ii)
            the
            remainder of the terms, provisions, covenants and restrictions of this
            Agreement
            shall remain in full force and effect and shall in no way be affected,
            impaired
            or invalidated.

          

          

          

          (Remainder
            of the page intentionally left blank).

          
            
              
              

            

            
              28

              
                

              

            

            
              
              

            

          

          IN
            WITNESS WHEREOF,
            the
            parties hereto have caused this Agreement to be duly executed, with the
            amendments contained herein, as of September 30, 2005, but to be effective
            for
            all purposes as of the day and year first above written. 

          

          

          U.S.
            ENERGY CORP.

          

          

          /s/
            Keith G. Larsen            

          By:
            Keith
            G. Larsen, Chairman & CEO 

           

          

          COMPUTERSHARE
            TRUST COMPANY, INC.

          

          

          /s/
            Kellie Gwinn              

          By: Kellie
            Gwinn, Vice President 

          

          

          /s/
            Ian Yewer               

          By:
            Ian
            Yewer, President

          
            
              
              

            

            
              29

              
                

              

            

            
              
              

            

          

          EXHIBIT
            A

          

          [Form
            of
            Right Certificate]

          

          Certificate
            No. R-  Rights

          

          THESE
            RIGHTS ARE NOT EXERCISABLE AFTER PUBLIC ANNOUNCEMENT OF REDEMPTION IS
            MADE. THE
            RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01
            PER
            RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. IF THE RIGHTS REPRESENTED
            BY THIS CERTIFICATE ARE ISSUED TO A PERSON WHO IS AN ACQUIRING PERSON
            OR AN
            ASSOCIATE OR AFFILIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
            AGREEMENT) OR CERTAIN TRANSFEREES THEREOF, THIS RIGHT CERTIFICATE AND
            THE RIGHTS
            REPRESENTED HEREBY MAY BE SUBJECT TO CERTAIN LIMITATIONS IN THE CIRCUMSTANCES
            SPECIFIED IN SECTION 7 OF THE RIGHTS AGREEMENT.

          

          RIGHT
            CERTIFICATE

          

          This
            certifies that      or
            registered assigns, is the registered owner of the number of Rights set
            forth
            above, each of which entitles the owner thereof, subject to the terms,
            provisions and conditions of the Rights Agreement, dated as of September
            19,
            2001 (the "Rights Agreement") between U.S. Energy Corp. a Wyoming corporation
            (the "Company"), and Computershare Trust Company, Inc. (the "Rights Agent"),
            to
            purchase from the Company, unless the Rights have been previously redeemed,
            at
            any time after the Distribution Date (defined in the Rights Agreement)
            and prior
            to the Expiration Date (defined in the Rights Agreement), or the date,
            if any,
            on which the Rights evidenced by this Certificate may be redeemed, at
            the stock
            transfer office of the Rights Agent, or its successors as Rights Agent,
            one
            one-thousandth (1/1,000th) of one (1) fully paid and nonassessable share
            of
            Series P Preferred Stock, at a purchase price of $200.00 (the "Purchase
            Price"),
            upon
            presentation and surrender of this Right Certificate with the Form of
            Election
            to Purchase duly completed and executed. The number of Rights evidenced
            by this
            Right Certificate as set forth above (and the number of shares which
            may be
            purchased upon exercise thereof), and the Purchase Price set forth above,
            are
            the number and Purchase Price as of the date of the Rights Agreement
            based on
            the shares of Common Stock of the Company as constituted at such
            date.

          

          Upon
            the
            occurrence of an event described in clause (A), (B), (C) or (D) of Section
            11(a)(ii), or in Section 13(a)(i), 13(a)(ii), or 13(a)(iii), of the Rights
            Agreement, the holder of any Rights that are, or were, beneficially owned
            by an
            Acquiring Person or an Associate or Affiliate thereof (as such terms
            are defined
            in the Rights Agreement) or certain transferees thereof which engaged
            in, or
            realized the benefit of, an event or transaction or transactions described
            in
            clause (A), (B), (C) or (D) of such Section 11(a)(ii), shall not be entitled
            to
            the benefit of the adjustment described in such Section 11(a)(ii), nor
            shall
            such holder or certain transferees be entitled to participate in the
            exchange
            provisions under Section 27 or the redemption provisions of Section
            23..

          

          As
            provided in the Rights Agreement, the Purchase Price and the number and
            class of
            shares which may be purchased upon the exercise of the Rights evidenced
            by this
            Right Certificate are subject to modification and adjustment upon the
            happening
            of certain events. 

          

          This
            Right Certificate is subject to all of the terms, provisions and conditions
            of
            the Rights Agreement, and all of those terms, provisions and conditions
            are
            hereby incorporated herein by reference and made a part 

          
            
              
              

            

            
              30

              
                

              

            

            
              
              

            

          

          hereof.
            Reference is made to the Rights Agreement for a full description of the
            rights,
            limitations of rights, obligations, duties and immunities hereunder of
            the
            Rights Agent, the Company and the holders of the Right Certificates,
            which
            limitations of rights include the temporary suspension of the exercisability
            of
            such Rights under specific circumstances set forth in the Rights Agreement.
            Copies of the Rights Agreement are on file at the office of the Rights
            Agent and
            at the principal office of the Company.

          

          This
            Right Certificate, with or without other Right Certificates, upon surrender
            at
            the stock transfer office of the Rights Agent set forth above, may be
            exchanged
            for another Right Certificate or Right Certificates of like tenor and
            date
            evidencing Rights entitling the holder to purchase such number of shares
            as the
            Rights evidenced by the Right Certificate or Right Certificates surrendered
            shall have entitled such holder to purchase. If this Right Certificate
            shall be
            exercised in part, the holder shall be entitled to receive upon surrender
            hereof
            another Right Certificate or Right Certificates for the number of whole
            Rights
            not exercised.

          

          Subject
            to the Rights Agreement, the Rights evidenced by this Certificate may
            be
            redeemed by the Company at its option at a redemption price of $.01 per
            Right.

          

          No
            fractional shares will be issued upon the exercise of any Rights evidenced
            hereby, but in lieu thereof a cash payment may be made, as provided in
            the
            Rights Agreement.

          

          No
            holder
            of this Right Certificate shall be entitled to vote or receive dividends
            or be
            deemed for any purpose the holder of shares or of any other securities
            of the
            Company which may at any time be issuable on the exercise hereof. Nothing
            in
            this Right Certificate and nothing contained in the Rights Agreement
            shall be
            construed to confer upon the holder hereof, as such, any of the rights
            of a
            stockholder of the Company or any right to vote for the election of directors
            or
            upon any matter submitted to stockholders at any meeting thereof, or
            to give or
            withhold consent to any corporate action, or to receive notice of meetings
            or
            other actions affecting stockholders (except as provided in the Rights
            Agreement), or to receive dividends or subscription rights, or otherwise,
            until
            the Right or Rights evidenced by this Right Certificate shall have been
            exercised as provided in the Rights Agreement.

          

          This
            Right Certificate shall not be valid or obligatory for any purpose until
            it
            shall have been countersigned by the Rights Agent.

          

          WITNESS
            the
            facsimile signatures of the proper officers of the Company. 

          

          

          Dated
            as
            of September 30, 2005, but effective September 2001.

          

          Attest:

           

           

                                                                 
            By                                        

          Secretary                                                Keith
            G. Larsen,
            Chairman & CEO

          

          Countersigned:

          

          

          By:                                              

          Authorized
            Signature

          

          
            
              
              

            

            
              31

              
                

              

            

            
              
              

            

          

          [Form
            of
            Reverse Side of Right Certificate]

          

          FORM
            OF
            ASSIGNMENT

          

          (To
            be
            executed by the registered holder if such holder desires to transfer
            the Right
            Certificate.)

          

          FOR
            VALUE
            RECEIVED        hereby
            sells, assigns and transfers unto                                                                 

                                                                      (Please
            print name
            and address of transferee)

          this
            Right Certificate, together with all right, title and interest therein,
            and does
            hereby irrevocably constitute and appoint       
            Attorney
            to transfer the within Right Certificate on the books of the within-named
            Corporation, with full power of substitution.

          

          Dated:                                                                     

                                           Signature

          

          

          Signature
            Guaranteed:

          

          CERTIFICATE

          

          The
            undersigned hereby certifies (after due inquiry and to the best knowledge
            of the
            undersigned) by checking the appropriate boxes that: 

          

          (1) this
            Right Certificate [ ] is [ ] is not being sold, assigned and transferred
            by or
            on behalf of a Person who is or was an Acquiring Person or an Affiliate
            or
            Associate of an Acquiring Person (as such terms are defined in the Rights
            Agreement);

          

          (2) the
            undersigned [ ] did [ ] did not acquire the Rights evidenced by this
            Right
            Certificate from any Person who is, was or subsequently became an Acquiring
            Person or an Affiliate or Associate of an Acquiring Person.

          

          

          Dated:                                                 

          Signature

          

          
            Dated:                                                 

            Signature

          

           

          
            Dated:                                                 

            Signature

          

           

          Signature
            Guaranteed:

          

          NOTICE:
            The signature to the foregoing Assignment and Certificate must correspond
            to the
            name as written upon the face of this Right Certificate in every particular,
            without alteration or enlargement or any change whatsoever.

          

          
            
              
              

            

            
              32

              
                

              

            

            
              
              

            

          

          FORM
            OF
            ELECTION TO PURCHASE

          

          (To
            be
            executed if holder desires to exercise the Right Certificate.)

          

          To
            the
            Company and the Rights Agent:

          

          The
            undersigned hereby irrevocably elects to exercise     
            Rights
            represented by this Right Certificate and to purchase the shares issuable
            upon
            the exercise of such Rights and requests that certificates for such shares
            be
            issued in the name of:

          

          Please
            insert social security or other identifying number:                                                                                                       

                                                                                  (Please
            print name
            and address)

          

          

          If
            such
            number of Rights shall not be all the Rights evidenced by this Right
            Certificate, a new Right Certificate for the balance remaining of such
            Rights
            shall be registered in the name of and delivered to:

          

          Please
            insert social security or other identifying number:                                                                                             

                                                                           (Please
            print
            name and address)

          

          

          

          

          Dated:                                                                                                 

                                              Signature

          

          (Signature
            must conform in all respects to name of holder as specified on the face
            of this
            Right Certificate)

          

          Signature
            Guaranteed:

          

          

          

          

          

          

          

          

          

          
            
              
              

            

            
              33

              
                

              

            

            
              
              

            

          

          CERTIFICATE

          

          The
            undersigned hereby certifies (after due inquiry and to the best knowledge
            of the
            undersigned) by checking the appropriate boxes that:

          

          (1) the
            Rights evidenced by this Right Certificate [ ] are [ ] are not being
            exercised
            by or on behalf of a Person who is or was an Acquiring Person or an Affiliate
            or
            Associate of an Acquiring Person (as such terms are defined in the Rights
            Agreement);

          

          (2)
            the
            undersigned [ ] did [ ] did not acquire the Rights evidenced by this
            Right
            Certificate from any person who is, was or subsequently became an Acquiring
            Person or an Affiliate or Associate of an Acquiring Person.

          

          

          

          Dated:                                                                                             

                                      Signature

          

          Signature
            Guaranteed:

          

          NOTICE

          

          The
            signature to the foregoing Election to Purchase and Certificate must
            correspond
            to the name as written upon the face of this Right Certificate in every
            particular, without alteration or enlargement or any change
            whatsoever.

          

          
            
              
              

            

            
              34

              
                

              

            

            
              
              

            

          

          EXHIBIT
            B

          

          SUMMARY
            OF RIGHTS

          

          This
            summary is qualified by reference to the detailed provisions of the Rights
            Agreement, a copy of which is filed herewith. A copy of the Rights Agreement
            is
            available free of charge from the Company.

          

          As
            of
            September 19, 2001, the board of directors of U.S. Energy Corp. (the
            "Company")
            declared a distribution of one Right for each outstanding one share of
            common
            stock (the "Common
            Shares")
            of the
            Company. The distribution is to be made as of September 19, 2001 (the
            "Rights
            Record Date")
            to the
            stockholders of record on that date. All Common Shares issued after the
            Rights
            Record Date also will carry one Right for each share. The Rights are
            designed to
            discourage unfair takeovers of the Company, by encouraging a potential
            acquiror
            of the Company to negotiate with the board of directors a fair price
            for the
            Company. The Rights defined as part of the Rights Agreement between the
            Company
            and Computershare Trust Company, Inc. as the Rights Agent. Arrangements
            adopted
            by United States corporations which are similar to the Rights Agreement
            are
            often called poison pills. As summarized below, if a Qualified Offer
            is made to
            acquire all the stock of the Company, the Rights would be redeemed by
            the board
            of directors, thus causing the poison pill to disappear. 

          

          Each
            Right entitles the registered holder to purchase from the Company, initially,
            one one-thousandth (1/1,000th) of one (1) share of Series P Preferred
            Stock
            ("Preferred
            Shares")
            at a
            price of $200.00 (the "Purchase
            Price")
            for
            each 1/1,000th of 1 share, subject to adjustment. Fractional shares may
            not be
            issued, at the discretion of the Company, in which event fractions would
            be
            cashed out. The terms and conditions of the Rights are set forth in the
            Rights
            Agreement between the Company and the Rights Agent. 

          

          A
            Preferred Share purchasable upon exercise of the Rights will be entitled
            to
            dividends equal to 1,000 times the dividends, per share, declared on
            the Common
            Shares. In the event of liquidation, a Preferred Share will be entitled
            to a
            minimum preferential liquidating distribution of $1,000 per share and
            an
            aggregate liquidating distribution, per share, equal to 1,000 times the
            distribution made per Common Share. The Preferred Shares will vote together
            with
            the Common Shares and in the event of any merger, consolidation or other
            transaction in which Common Shares are exchanged, each Preferred Share
            will be
            entitled to receive 1,000 times the amount received per Common
            Share.

          

          Because
            of the Preferred Shares' dividend and liquidation rights, the value when
            issued
            of the 1/1,000th of a Preferred Share purchasable upon exercise of each
            Right
            should approximate the underlying value (but not necessarily the market
            value)
            of one Common Share.

          

          Until
            the
            earlier to occur of (i) 10 business days following a public announcement
            that a
            person or group of affiliated or associated persons (an "Acquiring
            Person")
            has
            acquired beneficial ownership of 15% or more of the Company's general
            voting
            power other than pursuant to a Qualified Offer (as defined below), the
            date of
            such public announcement being called the "Stock
            Acquisition Date,"
            or
            (ii) 10 business days (or such later date as may be determined by action
            of the
            board of directors) following the commencement of, or announcement of
            an
            intention to make, a tender offer or exchange offer the consummation
            of which
            would result in the beneficial ownership by a person or group of 15%
            or more of
            the Company's general voting power (the date of such earlier occurrence
            being
            called the "Distribution
            Date"),
            the
            Rights will be evidenced by the certificates representing the Common
            Shares and
            will be transferred with and only with the Common Shares. New Common
            Share
            certificates issued after the Rights Record Date upon transfer or new
            issuance
            of Common Shares will contain a notation incorporating the Rights Agreement
            by
            reference, and the surrender for 

          
            
              
              

            

            
              35

              
                

              

            

            
              
              

            

             

             

            transfer
              of any certificate for Common Shares, even without such notation or
              a copy of
              this Summary of Rights being attached thereto, will also constitute
              the transfer
              of the Rights associated with the Common Shares represented by such
              certificate.

          

          

          If
            there
            ever is a Distribution Date, then immediately the Company will mail to
            holders
            of record of the Common Shares (as of the close of business on the Distribution
            Date) separate certificates evidencing the Rights ("Right
            Certificates"),
            and
            such separate Right Certificates alone will evidence the Rights.

          

          The
            Rights are not exercisable until the Distribution Date. The Rights will
            expire
            on the tenth anniversary of the Rights Record Date (the "Final
            Expiration Date"),
            unless the Final Expiration Date is extended or unless the Rights are
            earlier
            redeemed or exchanged by the Company, as described below.

          

          The
            Purchase Price payable, the number of shares or other securities or property
            issuable upon exercise of the Rights, and the number of outstanding Rights,
            are
            subject to adjustment from time to time to prevent dilution.

          

          A
            Qualified
            Offer
            is a
            tender offer or exchange offer for all outstanding Common Shares which
            is
            determined by the directors not affiliated with an Acquiring Person to
            be fair
            to and otherwise in the best interests of the Company and its shareholders.
            

          

          If
            any
            person becomes an Acquiring Person other than by a purchase pursuant
            to a
            Qualified Offer, proper provision shall be made so that each holder of
            a Right,
            other than Rights beneficially owned by the Acquiring Person (which will
            not be
            entitled to the benefit of such adjustment) will thereafter have the
            right to
            receive upon exercise that number of Common Shares or Common Share equivalents
            having a market value of two times the exercise price of the Right (i.e.,
            Common
            Shares will be issued at one-half or 50% of market value at the
            time).

          

          If,
            at
            any time after an Acquiring Person has become such, the Company is acquired
            in a
            merger or other business combination transaction (other than a merger
            which
            follows a Qualified Offer at the same or a higher price) or 50% or more
            of its
            consolidated assets or earning power are sold, proper provision will
            be made so
            that each holder of a Right will thereafter have the right to receive,
            upon the
            exercise thereof at the then current exercise price of the Right, that
            number of
            shares of common stock of the acquiring company which at the time of
            such
            transaction will have a market value of two times the exercise price
            of the
            Right.

          

          At
            any
            time after an Acquiring Person has become such, the board of directors
            of the
            Company may exchange the Rights (other than Rights owned by such person
            or
            group), in whole or in part, at an exchange ratio of one Common Share
            per one
            Right (subject to adjustment), termed an Exchange.
            Unlike
            exercise of a Right with cash (see the preceding paragraph), such an
            Exchange
            would not require payment of cash or other consideration by the holder
            of the
            Right. 

          

          At
            any
            time up to close of business on a Stock Acquisition Date, the board of
            directors
            of the Company may redeem the Rights in whole, but not in part, at a
            price of
            $.01 per Right (the "Redemption
            Price").
            Immediately upon any redemption of the Rights, the right to exercise
            them will
            terminate and the only right of the holders will be to receive the Redemption
            Price. However, such redemption only can be made in conjunction with
            the board
            of directors’ determination that there is a Qualified Offer. 

          

          The
            terms
            of the Rights may be amended by the board of directors without the consent
            of
            the holders of the Rights at any time prior to the Distribution Date.
            Thereafter
            the Rights may be amended to make 

          
            
              
              

            

            
              36

              
                

              

            

            
              
              

            

          

          changes
            which do not adversely affect the interests of the holders of the Rights,
            or
            which shorten or lengthen time periods, subject to certain limitations
            set forth
            in the Rights Agreement.

          

          Holders
            of Rights will have no rights as stockholders of the Company, until Preferred
            Shares or Common Shares are acquired on exercise or exchange of the
            Rights.

          

          A
            copy of
            the Rights Agreement has been filed with the Securities and Exchange
            Commission
            as an Exhibit to a registration statement on Form 8-A. 

          
            
              
              

            

            
              37

              
                

              

            

            
              
              

            

          

          EXHIBIT
            C

          

          

          Articles
            of Amendment to the Restated

          Articles
            of Incorporation of U.S. Energy Corp.

          To
            Establish Series P Preferred Stock

          

          

          By
            authority of Article IV of the existing Restated Articles of Incorporation
            of
            U.S. Energy Corp. (the “Corporation

          ‘),
            and
            section 17-16-602(a) of the Wyoming Business Corporation Act (the “WBCA”), the
            board of directors of the Corporation has established a new series of
            shares of
            the Preferred Stock.

          

          These
            Articles of Amendment are filed with the Wyoming Secretary of State by
            the
            Corporation under section 17-16-1006 of the WBCA.

          

          A. The
            name
            of the Corporation is U.S. Energy Corp.

           

          B.
             The
            text
            of the amendment is:

          

          There
            is
            established the series P Preferred Stock. The number of shares in the
            series,
            its designation thereof, and the rights, preferences, privileges and
            restrictions of the shares of such series, all are fixed and established
            as
            follow:

          

          I. Designation
            and Amount

          

          The
            series is designated the "Series P Preferred Stock." The number of shares
            constituting the Series P Preferred Stock is fifty thousand (50,000).
            Such
            number of shares may be increased or decreased by resolution of the board
            of
            directors, but no decrease shall reduce the number of shares of Series
            P
            Preferred Stock to a number less than the number of shares then outstanding
            plus
            the number of shares reserved for issuance upon the exercise of outstanding
            options, rights or warrants or upon the conversion of any outstanding
            securities
            issued by the Corporation convertible into Series P Preferred
            Stock.

          

          II. Dividends
            and Distributions 

          

          (A) Subject
            to the rights of the holders of any shares of any series of Preferred
            Stock (or
            any similar stock) ranking prior and superior to the Series P Preferred
            Stock
            with respect to dividends, the holders of shares of Series P Preferred
            Stock, in
            preference to the holders of Common Stock of the Corporation, shall be
            entitled
            to receive, when, as and if declared by the board of directors out of
            funds
            legally available for the purpose, quarterly dividends payable in cash
            on the
            first day of March, June, September and December in each year (a "Quarterly
            Dividend Payment Date"), starting on the first Quarterly Dividend Payment
            Date
            after the first issuance of a share of Series P Preferred Stock, in an
            amount
            per share (rounded to the nearest cent) equal to the greater of (a) $1.00
            or (b)
            subject to the provision for adjustment hereinafter set forth, 1,000
            times the
            aggregate per share amount of all cash dividends, and 1,000 times the
            aggregate
            per share amount (payable in kind) of all non-cash dividends or other
            distributions, other than a dividend payable in shares of Common Stock
            or a
            subdivision of the outstanding shares of Common Stock (by reclassification
            or
            otherwise), declared on the Common Stock since the immediately preceding
            Quarterly Dividend Payment Date or, with respect to the first Quarterly
            Dividend
            Payment Date, since the first issuance of any share of Series P Preferred
            Stock.
            If the Corporation shall at any time declare or pay any dividend on the
            Common
            Stock 

          
            
              
              

            

            
              38

              
                

              

            

            
              
              

            

          

          payable
            in shares of Common Stock, or effect a subdivision or combination or
            consolidation of the outstanding shares of Common Stock (by reclassification
            or
            otherwise than by payment of a dividend in shares of Common Stock) into
            a
            greater or lesser number of shares of Common Stock, then in each such
            case the
            amount to which holders of shares of Series P Preferred Stock were entitled
            immediately prior to such event under clause (b) of the preceding sentence
            shall
            be adjusted by multiplying such amount by a fraction, the numerator of
            which is
            the number of shares of Common Stock outstanding immediately after such
            event
            and the denominator of which is the number of shares of Common Stock
            that were
            outstanding immediately prior to such event.

          

          (B) The
            Corporation shall declare a dividend or distribution on the Series P
            Preferred
            Stock as provided in paragraph (A) of this Section immediately after
            it declares
            a dividend or distribution on the Common Stock (other than a dividend
            payable in
            shares of Common Stock); PROVIDED that, if no dividend or distribution
            shall
            have been declared on the Common Stock during the period between any
            Quarterly
            Dividend Payment Date and the next subsequent Quarterly Dividend Payment
            Date, a
            dividend of $1.00 per share on the Series P Preferred Stock shall nevertheless
            be payable on such subsequent Quarterly Dividend Payment Date.

          

          (C) Dividends
            shall begin to accrue and be cumulative on outstanding shares of Series
            P
            Preferred Stock from the Quarterly Dividend Payment Date next preceding
            the date
            of issue of such shares, unless the date of issue of such shares is prior
            to the
            record date for the first Quarterly Dividend Payment Date, in which case
            dividends on such shares shall begin to accrue from the date of issue
            of such
            shares, or unless the date of issue is a Quarterly Dividend Payment Date
            or is a
            date after the record date for the determination of holders of shares
            of Series
            P Preferred Stock entitled to receive a quarterly dividend and before
            such
            Quarterly Dividend Payment Date, in either of which events such dividends
            shall
            begin to accrue and be cumulative from such Quarterly Dividend Payment
            Date.
            Accrued but unpaid dividends shall not bear interest. Dividends paid
            on the
            shares of Series P Preferred Stock in an amount less than the total amount
            of
            such dividends at the time accrued and payable on such shares shall be
            allocated
            pro rata on a share-by-share basis among all such shares at the time
            outstanding. The board of directors may fix a record date for the determination
            of holders of shares of Series P Preferred Stock entitled to receive
            payment of
            a dividend or distribution declared thereon, which record date shall
            be not more
            than 60 days prior to the date fixed for the payment thereof.

          

          III. Voting
            Rights

          

          The
            holders of shares of Series P Preferred Stock shall have the following
            voting
            rights:

          

          (A) Subject
            to the provision for adjustment hereinafter set forth, each share of
            Series P
            Preferred Stock shall entitle the holder thereof to 1,000 votes on all
            matters
            submitted to a vote of the stockholders of the Corporation.

          

          (B) Except
            as
            otherwise provided herein, or in any other resolutions of the board of
            directors
            creating a series of Preferred Stock or any similar stock, or by law,
            the
            holders of shares of Series P Preferred Stock and the holders of shares
            of
            Common Stock and any other capital stock of the Corporation having general
            voting rights shall vote together as one class on all matters submitted
            to a
            vote of stockholders of the Corporation.

          

          (C) Except
            as
            set forth herein, in the Corporation's articles of incorporation or as
            otherwise
            provided by law, holders of Series P Preferred Stock shall have no voting
            rights.

          
            
              
              

            

            
              39

              
                

              

            

            
              
              

            

          

          IV. Certain
            Restrictions

          

          (A) Whenever
            quarterly dividends or other dividends or distributions payable on the
            Series P
            Preferred Stock as provided in Section II are in arrears, thereafter
            and until
            all accrued and unpaid dividends and distributions, whether or not declared,
            on
            shares of Series P Preferred Stock outstanding shall have been paid in
            full, the
            Corporation shall not:

          

          (i) declare
            or pay dividends, or make any other distributions, on any shares of stock
            ranking junior (either as to dividends or upon liquidation, dissolution
            or
            winding up) to the Series P Preferred Stock;

          

          (ii) 
            declare
            or pay dividends, or make any other distributions, on any shares of stock
            ranking on a parity (either as to dividends or upon liquidation, dissolution
            or
            winding up) with the Series P Preferred Stock, except dividends paid
            ratably on
            the Series P Preferred Stock and all such parity stock on which dividends
            are
            payable or in arrears in proportion to the total amounts to which the
            holders of
            all such shares are then entitled;

          

          (iii) redeem
            or
            purchase or otherwise acquire for consideration shares of any stock ranking
            junior (either as to dividends or upon liquidation, dissolution or winding
            up)
            to the Series P Preferred Stock, provided that the Corporation may at
            any time
            redeem, purchase or otherwise acquire shares of any such stock in exchange
            for
            shares of any stock of the Corporation ranking junior (either as to dividends
            or
            upon dissolution, liquidation or winding up) to the Series P Preferred
            Stock;
            or

          

          (iv) redeem
            or
            purchase or otherwise acquire for consideration any shares of Series
            P Preferred
            Stock, or any shares of stock ranking on a parity with the Series P Preferred
            Stock, except in accordance with a purchase offer made in writing or
            by
            publication (as determined by the board of directors) to all holders
            of such
            shares upon such terms as the board of directors, after consideration
            of the
            respective annual dividend rates and other relative rights and preferences
            of
            the respective series and classes, shall determine in good faith will
            result in
            fair and equitable treatment among the respective series or
            classes.

          

          (B) The
            Corporation shall not permit any subsidiary of the Corporation to purchase
            or
            otherwise acquire for consideration any shares of stock of the Corporation
            unless the Corporation could, under paragraph (A) of this Section IV
            purchase or
            otherwise acquire such shares at such time and in such manner.

          

          V. Reacquired
            Shares

          

          Any
            shares of Series P Stock purchased or otherwise acquired by the Corporation
            in
            any manner whatsoever shall be retired and cancelled promptly after the
            acquisition thereof. All such shares shall upon their cancellation become
            authorized but unissued shares of Preferred Stock and may be reissued
            as part of
            a new series of Preferred Stock subject to the conditions and restrictions
            on
            issuance set forth herein, in the articles of incorporation, any other
            Certificate of Designations creating a series of Preferred Stock or any
            similar
            stock or as otherwise required by law.

          

          VI. Liquidation,
            Dissolution, or Winding Up 

          

          Upon
            any
            liquidation, dissolution or winding up of the Corporation, no distribution
            shall
            be made (1) to the holders of shares of stock ranking junior (either
            as to
            dividends or upon liquidation, dissolution or winding up) to the Series
            P
            Preferred Stock unless, prior thereto, the holders of shares of Series
            P
            Preferred 

          
            
              
              

            

            
              40

              
                

              

            

            
              
              

            

          

          Stock
            shall have received $1,000 per share, plus an amount equal to accrued
            and unpaid
            dividends and distributions thereon, whether or not declared, to the
            date of
            such payment, provided that the holders of shares of Series P Preferred
            Stock
            shall be entitled to receive an aggregate amount per share, subject to
            the
            provision for adjustment hereinafter set forth, equal to 1,000 times
            the
            aggregate amount to be distributed per share to holders of shares of
            Common
            Stock, or (2) to the holders of shares of stock ranking on a parity (either
            as
            to dividends or upon liquidation, dissolution or winding up) with the
            Series P
            Preferred Stock, except distri-butions made ratably on the Series P Preferred
            Stock and all such parity stock in proportion to the total amounts to
            which the
            holders of all such shares are entitled upon such liquidation, dissolution
            or
            winding up. If the Corporation shall at any time declare or pay any dividend
            on
            the Common Stock payable in shares of Common Stock, or effect a subdivision
            or
            combination or consolidation of the outstanding shares of Common Stock
            (by
            reclassification or otherwise than by payment of a dividend in shares
            of Common
            Stock) into a greater or lesser number of shares of Common Stock, then
            in each
            such case the aggregate amount to which holders of shares of Series P
            Preferred
            Stock were entitled immediately prior to such event under the proviso
            in clause
            (1) of the preceding sentence shall be adjusted by multiplying such amount
            by a
            fraction the numerator of which is the number of shares of Common Stock
            outstanding immediately after such event and the denominator of which
            is the
            number of shares of Common Stock that were outstanding immediately prior
            to such
            event.

          

          VII. Consolidation,
            Merger, Etc.

          

          In
            case
            the Corporation shall enter into any consolidation, merger, combination
            or other
            transaction in which the shares of Common Stock are exchanged for or
            changed
            into other stock or securities, cash and/or any other property, then
            in any such
            case each share of Series P Preferred Stock shall at the same time be
            similarly
            exchanged or changed into an amount per share, subject to the provision
            for
            adjustment hereinafter set forth, equal to 1,000 times the aggregate
            amount of
            stock, securities, cash and/or any other property (payable in kind),
            as the case
            may be, into which or for which each share of Common Stock is changed
            or
            exchanged. If the Corporation shall at any time declare or pay any dividend
            on
            the Common Stock payable in shares of Common Stock, or effect a subdivision
            or
            combination or consolidation of the outstanding shares of Common Stock
            (by
            reclassification or otherwise than by payment of a dividend in shares
            of Common
            Stock) into a greater or lesser number of shares of Common Stock, then
            in each
            such case the amount set forth in the preceding sentence with respect
            to the
            exchange or change of shares of Series P Preferred Stock shall be adjusted
            by
            multiplying such amount by a fraction, the numerator of which is the
            number of
            shares of Common Stock outstanding immediately after such event and the
            denominator of which is the number of shares of Common Stock that were
            outstanding immediately prior to such event.

          

          VIII. Redemption

          

          The
            shares of Series P Preferred Stock shall not be redeemable.

          

          IX. Rank

          

          The
            Series P Preferred Stock shall rank, with respect to the payment of dividends
            and the distribution of assets, junior to all series of any other class
            of the
            Corporation's Preferred Stock.

          

          X. Amendment
            

          

          The
            articles of incorporation of the Corporation shall not be amended in
            any manner
            which would alter or change the powers, preferences or special rights
            of the
            Series P Preferred Stock so as to affect 

          
            
              
              

            

            
              41

              
                

              

            

            
              
              

            

          

          them
            adversely without the affirmative vote of the holders of at least two-thirds
            of
            the outstanding shares of Series P Preferred Stock, voting together as
            a single
            class.

          

          C. This
            amendment was duly adopted and authorized by the board of directors of
            U.S.
            Energy Corp. on September 19, 2001 and amended again in September 30,
            2005.

          

           

          U.S.
            Energy Corp.

          

          

          /s/
            Keith G. Larsen                September
            30, 2005

          By:
            Keith
            G. Larsen, Chairman & CEO 

          

          Attest:

          

          

          /s/
            Daniel P. Svilar                September
            30, 2005

          Daniel
            P.
            Svilar, Secretary

          

          

          

          

          
            	
                    Fremont
                      

                  	
                    )

                  

          

          State
            of
            Wyoming       
            )

          

          On
            September 30, 2005 personally appeared before me, a Notary Public, Keith
            G.
            Larsen and Daniel P. Svilar, who acknowledged that they executed the
            above
            instrument.

          

          

                              _____________________________

                              Notary
            Public

          SEAL

                              My
            Commission
            Expires: _________

          

          

          

          
            
              
              

            

            
              42Master Indenture and Servicing Agreement dated Nov 14, 2005

EXHIBIT
10.1

 

EXECUTION
COPY

 

 

MASTER
INDENTURE AND SERVICING AGREEMENT

 

Dated as
of August 29, 2002

 

and

 

Amended
and Restated as of November 14, 2005

 

 

by and
among

 

CENDANT
TIMESHARE CONDUIT RECEIVABLES FUNDING, LLC,

as
Issuer

 

and

 

CENDANT
TIMESHARE RESORT GROUP - CONSUMER FINANCE, INC. ,

as Master
Servicer

 

and

 

WACHOVIA
BANK, NATIONAL ASSOCIATION,

as
Trustee

and

 

WACHOVIA
BANK, NATIONAL ASSOCIATION,

as
Collateral Agent

 

 

 

TABLE
OF CONTENTS

 

Page

 

	
      ARTICLE
      I

      DEFINITIONS

       

	
      Section
      1.1

       
	 	
      Definitions
	 	
      1

       

	
      Section
      1.2

       
	 	
      Other
      Definitional Provisions

       
	 	
      15

       

	
      Section
      1.3

       
	 	
      Intent
      and Interpretation of Documents

       
	 	
      16

       

	
      Section
      1.4

       
	 	
      References

       
	 	
      16

       

	
      ARTICLE
      II

      THE
      NOTES

       

	
      Section
      2.1

       
	 	
      Form
      Generally

       
	 	
      16

       

	
      Section
      2.2

       
	 	
      Denominations

       
	 	
      17

       

	
      Section
      2.3

       
	 	
      Execution,
      Authentication and Delivery

       
	 	
      17

       

	
      Section
      2.4

       
	 	
      Authentication
      Agent

       
	 	
      17

       

	
      Section
      2.5

       
	 	
      Registration
      of Transfer and Exchange of Notes

       
	 	
      18

       

	
      Section
      2.6

       
	 	
      Mutilated,
      Destroyed, Lost or Stolen Notes

       
	 	
      20

       

	
      Section
      2.7

       
	 	
      Persons
      Deemed Owners

       
	 	
      21

       

	
      Section
      2.8

       
	 	
      Appointment
      of Paying Agent

       
	 	
      21

       

	
      Section
      2.9

       
	 	
      Cancellation

       
	 	
      22

       

	
      Section
      2.10

       
	 	
      New
      Issuances

       
	 	
      22

       

	
      Section
      2.11

       
	 	
      Book-Entry
      Notes

       
	 	
      22

       

	
      Section
      2.12

       
	 	
      Notices
      to Clearing Agency or Foreign Clearing Agency

       
	 	
      23

       

	
      Section
      2.13

       
	 	
      Definitive
      Notes

       
	 	
      23

       

	
      Section
      2.14

       
	 	
      Global
      Note

       
	 	
      24

       

	
      Section
      2.15

       
	 	
      Meetings
      of Noteholders

       
	 	
      24

       

	
      Section
      2.16

       
	 	
      Confidentiality

       
	 	
      24

       

	
      Section
      2.17

       
	 	
      144A
      Information

       
	 	
      24

       

	
      ARTICLE
      III

      REPRESENTATIONS
      AND WARRANTIES OF THE ISSUER

       

	
      Section
      3.1

       
	 	
      Representations
      and Warranties Regarding the Issuer

       
	 	
      25

       

	
      Section
      3.2

       
	 	
      Representations
      and Warranties Regarding the Loan Files

       
	 	
      28

       

	
      Section
      3.3

       
	 	
      Rights
      of Obligors and Release of Loan Files

       
	 	
      29

       

 

i

 

TABLE
OF CONTENTS

(continued)

Page

 

	
      ARTICLE
      IV

      ADDITIONAL
      COVENANTS OF ISSUER

       

	
      Section
      4.1

       
	 	
      Affirmative
      Covenants

       
	 	
      30

       

	
      Section
      4.2

       
	 	
      Negative
      Covenants of the Issuer

       
	 	
      37

       

	
      ARTICLE
      V

      SERVICING
      OF PLEDGED LOANS

       

	
      Section
      5.1

       
	 	
      Responsibility
      for Loan Administration

       
	 	
      40

       

	
      Section
      5.2

       
	 	
      Standard
      of Care

       
	 	
      40

       

	
      Section
      5.3

       
	 	
      Records

       
	 	
      40

       

	
      Section
      5.4

       
	 	
      Loan
      Schedules

       
	 	
      40

       

	
      Section
      5.5

       
	 	
      Enforcement

       
	 	
      41

       

	
      Section
      5.6

       
	 	
      Trustee
      and Collateral Agent to Cooperate

       
	 	
      42

       

	
      Section
      5.7

       
	 	
      Other
      Matters Relating to the Master Servicer

       
	 	
      42

       

	
      Section
      5.8

       
	 	
      Servicing
      Compensation

       
	 	
      42

       

	
      Section
      5.9

       
	 	
      Costs
      and Expenses

       
	 	
      42

       

	
      Section
      5.10

       
	 	
      Representations
      and Warranties of the Master Servicer

       
	 	
      43

       

	
      Section
      5.11

       
	 	
      Additional
      Covenants of the Master Servicer

       
	 	
      44

       

	
      Section
      5.12

       
	 	
      Master
      Servicer not to Resign

       
	 	
      46

       

	
      Section
      5.13

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

       
	 	
      47

       

	
      Section
      5.14

       
	 	
      Examination
      of Records

       
	 	
      48

       

	
      Section
      5.15

       
	 	
      Subservicing
      Agreements

       
	 	
      48

       

	
      ARTICLE
      VI

      REPORTS

       

	
      Section
      6.1

       
	 	
      Noteholder
      Statements

       
	 	
      48

       

	
      Section
      6.2

       
	 	
      Monthly
      Servicing Reports

       
	 	
      49

       

	
      Section
      6.3

       
	 	
      Other
      Data

       
	 	
      49

       

	
      Section
      6.4

       
	 	
      Annual
      Master Servicer’s Certificate

       
	 	
      49

       

	
      Section
      6.5

       
	 	
      Notices
      to CTRG-CF

       
	 	
      49

       

ii

 

TABLE
OF CONTENTS

(continued)

Page

 

	
      ARTICLE
      VII

      RIGHTS
      OF NOTEHOLDERS; ACCOUNTS AND PRIORITY OF PAYMENTS

       

	
      Section
      7.1

       
	 	
      Collection
      Accounts

       
	 	
      49

       

	
      Section
      7.2

       
	 	
      Lockbox
      Accounts

       
	 	
      49

       

	
      Section
      7.3

       
	 	
      Tax
      Treatment

       
	 	
      50

       

	
      ARTICLE
      VIII

      INDEMNITIES

       

	
      Section
      8.1

       
	 	
      Liabilities
      to Obligors

       
	 	
      50

       

	
      Section
      8.2

       
	 	
      Tax
      Indemnification

       
	 	
      50

       

	
      Section
      8.3

       
	 	
      Master
      Servicer’s Indemnities

       
	 	
      50

       

	
      Section
      8.4

       
	 	
      Master
      Servicer’s Indemnities

       
	 	
      51

       

	
      ARTICLE
      IX

      EVENTS
      OF DEFAULT

       

	
      Section
      9.1

       
	 	
      Events
      of Default

       
	 	
      51

       

	
      Section
      9.2

       
	 	
      Acceleration
      of Maturity; Rescission and Annulment

       
	 	
      51

       

	
      Section
      9.3

       
	 	
      Collection
      of Indebtedness and Suits for Enforcement by Trustee

       
	 	
      51

       

	
      Section
      9.4

       
	 	
      Trustee
      May File Proofs of Claim

       
	 	
      52

       

	
      Section
      9.5

       
	 	
      Remedies

       
	 	
      53

       

	
      Section
      9.6

       
	 	
      Optional
      Preservation of Collateral

       
	 	
      54

       

	
      Section
      9.7

       
	 	
      Application
      of Monies Collected During Event of Default

       
	 	
      55

       

	
      Section
      9.8

       
	 	
      Limitation
      on Suits by Individual Noteholders

       
	 	
      55

       

	
      Section
      9.9

       
	 	
      Unconditional
      Rights of Noteholders to Receive Principal and Interest

       
	 	
      55

       

	
      Section
      9.10

       
	 	
      Restoration
      of Rights and Remedies

       
	 	
      55

       

	
      Section
      9.11

       
	 	
      Waiver
      of Event of Default

       
	 	
      56

       

	
      Section
      9.12

       
	 	
      Waiver
      of Stay or Extension Laws

       
	 	
      56

       

	
      Section
      9.13

       
	 	
      Sale
      of Series Collateral

       
	 	
      56

       

	
      Section
      9.14

       
	 	
      Action
      on Notes

       
	 	
      56

       

	
      Section
      9.15.

       
	 	
      Control
      by Series of Noteholders

       
	 	
      57

       

	
      ARTICLE
      X

      SERVICER
      DEFAULTS

       

	
      Section
      10.1

       
	 	
      Servicer
      Defaults

       
	 	
      57

       

 

iii

 

TABLE
OF CONTENTS

(continued)

Page

 

	
      Section
      10.2

       
	 	
      Appointment
      of Successor

       
	 	
      59

       

	
      Section
      10.3

       
	 	
      Notification
      to Noteholders

       
	 	
      60

       

	
      Section
      10.4

       
	 	
      Waiver
      of Past Defaults

       
	 	
      60

       

	
      Section
      10.5

       
	 	
      Termination
      of Master Servicer’s Authority.

       
	 	
      60

       

	
      Section
      10.6

       
	 	
      Matters
      Related to Successor Master Servicer

       
	 	
      61

       

	
      ARTICLE
      XI

      THE
      TRUSTEE; THE COLLATERAL AGENT; THE CUSTODIAN

       

	
      Section
      11.1

       
	 	
      Duties
      of Trustee

       
	 	
      61

       

	
      Section
      11.2

       
	 	
      Certain
      Matters Affecting the Trustee

       
	 	
      64

       

	
      Section
      11.3

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

       
	 	
      65

       

	
      Section
      11.4

       
	 	
      Trustee
      May Own Notes; Trustee in its Individual Capacity

       
	 	
      65

       

	
      Section
      11.5

       
	 	
      Trustee’s
      Fees and Expenses; Indemnification

       
	 	
      65

       

	
      Section
      11.6

       
	 	
      Eligibility
      Requirements for Trustee

       
	 	
      66

       

	
      Section
      11.7

       
	 	
      Resignation
      or Removal of Trustee

       
	 	
      67

       

	
      Section
      11.8

       
	 	
      Successor
      Trustee

       
	 	
      67

       

	
      Section
      11.9

       
	 	
      Merger
      or Consolidation of Trustee

       
	 	
      68

       

	
      Section
      11.10

       
	 	
      Appointment
      of Co-Trustee or Separate Trustee

       
	 	
      68

       

	
      Section
      11.11

       
	 	
      Trustee
      May Enforce Claims Without Possession of Notes

       
	 	
      69

       

	
      Section
      11.12

       
	 	
      Suits
      for Enforcement

       
	 	
      69

       

	
      Section
      11.13

       
	 	
      Rights
      of Noteholders to Direct the Trustee

       
	 	
      69

       

	
      Section
      11.14

       
	 	
      Representations
      and Warranties of the Trustee

       
	 	
      70

       

	
      Section
      11.15

       
	 	
      Maintenance
      of Office or Agency

       
	 	
      70

       

	
      Section
      11.16

       
	 	
      No
      Assessment

       
	 	
      70

       

	
      Section
      11.17

       
	 	
      UCC
      Filings and Title Certificates

       
	 	
      70

       

	
      Section
      11.18

       
	 	
      Replacement
      of the Custodian

       
	 	
      70

       

	
      ARTICLE
      XII

      TERMINATION

       

	
      Section
      12.1

       
	 	
      Termination
      of Agreement

       
	 	
      71

       

	
      Section
      12.2

       
	 	
      Final
      Payment

       
	 	
      71

       

	
      Section
      12.3

       
	 	
      Defeasance

       
	 	
      71

       

 

iv

 

TABLE
OF CONTENTS

(continued)

Page

 

	
      Section
      12.4

       
	 	
      Release
      of Collateral

       
	 	
      71

       

	
      ARTICLE
      XIII

      MISCELLANEOUS
      PROVISIONS

       

	
      Section
      13.1

       
	 	
      Amendment

       
	 	
      71

       

	
      Section
      13.2

       
	 	
      Reserved

       
	 	
      74

       

	
      Section
      13.3

       
	 	
      Limitation
      on Rights of the Noteholders

       
	 	
      74

       

	
      Section
      13.4

       
	 	
      Governing
      Law

       
	 	
      74

       

	
      Section
      13.5

       
	 	
      Notices

       
	 	
      74

       

	
      Section
      13.6

       
	 	
      Severability
      of Provisions

       
	 	
      76

       

	
      Section
      13.7

       
	 	
      Assignment

       
	 	
      76

       

	
      Section
      13.8

       
	 	
      Notes
      Non-assessable and Fully Paid

       
	 	
      77

       

	
      Section
      13.9

       
	 	
      Further
      Assurances

       
	 	
      77

       

	
      Section
      13.10

       
	 	
      No
      Waiver; Cumulative Remedies

       
	 	
      77

       

	
      Section
      13.11

       
	 	
      Counterparts

       
	 	
      77

       

	
      Section
      13.12

       
	 	
      Third-Party
      Beneficiaries

       
	 	
      77

       

	
      Section
      13.13

       
	 	
      Actions
      by the Noteholders

       
	 	
      77

       

	
      Section
      13.14

       
	 	
      Merger
      and Integration

       
	 	
      77

       

	
      Section
      13.15

       
	 	
      No
      Bankruptcy Petition

       
	 	
      78

       

	
      Section
      13.16

       
	 	
      Headings

       
	 	
      78

       

 

EXHIBITS

 

	
      Exhibit
      A

       
	 	
      Payment
      and Release Certificates

       
	 	
      A-1

       

	 	 

 

v

SCHEDULES

 

Schedule
of Trustee’s fees.

 

 

vi

AMENDED
AND RESTATED 

MASTER
INDENTURE AND SERVICING AGREEMENT

 

THIS
AMENDED AND RESTATED MASTER INDENTURE AND SERVICING
AGREEMENT dated as
of August 29, 2002 and amended and restated as of November 14, 2005 is by and
between CENDANT
TIMESHARE CONDUIT RECEIVABLES FUNDING, LLC, a
limited liability company organized under the laws of the State of Delaware
formerly known as Sierra Receivables Funding Company, LLC as issuer,
CENDANT
TIMESHARE RESORT GROUP - CONSUMER FINANCE, INC., a
Delaware corporation formerly known as Fairfield Acceptance Corporation-Nevada,,
as master 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
XIII. If a conflict exists between the terms and provisions of this Agreement
and any Series Supplement, the terms and provisions of the Series Supplement
shall be controlling with respect to the related Series.

 

RECITALS

 

The
Issuer has duly authorized the execution and delivery of this Agreement to
provide for issuances of its loan-backed notes to be issued in one series as
provided in this Agreement and the Series Supplement.

 

All
covenants and agreements made by the Issuer herein are for the benefit and
security of the Noteholders of the Series and, to the extent and as provided for
in the Series Supplement, the Series Enhancers.

 

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 and under the Series Supplement and duly issued by the Issuer,
the valid obligations of the Issuer, and to make this Agreement a valid
agreement of the Issuer, enforceable in accordance with their and its terms. All
covenants and agreements made by the Issuer herein are for the benefit and
security of the Noteholders and, to the extent and as provided for in the Series
Supplement, the Series Enhancers. 

 

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, to the extent and as provided for in the Series
Supplement, the Series Enhancers.

 

ARTICLE
I

DEFINITIONS

 

Section
1.1  Definitions

 

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

 

1

 

“Account” shall
mean any Collection Account and any other Series Account.

 

“Addition
Date” shall
mean, with respect to any Series, each date subsequent to the Closing Date for
that Series on which a security interest is granted in Loans to secure the Notes
of that Series.

 

“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 August 29, 2002 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, CTRG-CF, as
administrator with respect to the Depositor and the Issuer, respectively, or any
other entity which becomes the Administrator under the terms of the respective
Administrative Services Agreements.

 

“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.

 

“Agent
Members” shall
mean members of, or participants in Euroclear or Clearstream.

 

“Aggregate
Principal Amount” shall
mean, as of any day of calculation, an amount equal to the sum of the principal
amount outstanding for all Series of Notes or, if used with respect to a Series,
an amount equal to the sum of the principal amount outstanding for that Series
of Notes.

 

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

 

“Amortization
Event” shall
have, with respect to any Series, the meaning assigned to that term in the
applicable Series Supplement.

 

“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. 

 

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

 

2

 

“Bearer
Notes” shall
have the meaning set forth in Section 2.1.

 

“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.

 

“Book-Entry
Notes” shall
mean security entitlements to the Notes, ownership and transfers of which shall
be made through book entries by a Clearing Agency or a Foreign Clearing Agency,
as described in Section 2.11.

 

“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.

 

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

 

“Class” shall
mean, with respect to any Series, any one of the classes of Notes of that
Series.

 

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

 

“Clearing
Agency Participant” shall
mean 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, with respect to any Series, the closing date specified in the related
Series Supplement. 

 

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

 

“Collateral” shall
mean the Series Collateral for any one or more Series.

 

“Collateral
Agency Agreement” shall
mean the Ninth Amendment to the Collateral Agency Agreement dated as of August
11, 2005 by and among the Collateral Agent, the Trustee and the trustees for
other series of notes as described therein, as such Collateral Agency Agreement
may be amended, supplemented, restated or otherwise modified from time to time
in accordance with its terms.

 

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

 

3

 

“Collection
Account” shall
mean with respect to any Series the account described in Section 7.1 hereof and
established in the respective Series Supplement for the deposit of Collections
related to that Series.

 

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

 

“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, Cendant
Timeshare Conduit Receivables Funding, LLC Series 2002-1.

 

“Coupons” shall
have the meaning set forth in Section 2.1.

 

“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 CTRG-CF and FRI, Trendwest
or any other Seller, 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 Section 4.2(c).

 

“CTRG-CF” shall
mean Cendant Timeshare Resort Group - Consumer Finance, Inc., a Delaware
corporation--formerly known as Fairfield Acceptance Corporation -
Nevada--domiciled in Nevada and a wholly-owned subsidiary of FRI.

 

“Custodial
Agreement” shall
mean the Fifth Amended and Restated Custodial Agreement dated as of August 11,
2005 by and among the Issuer, other subsidiaries of the Depositor which have
issued notes, CTRG-CF, Trendwest, Wachovia Bank, National Association, as
Custodian, the Trustee and the Collateral Agent as well as the trustees for
other issues of notes, as the same may be further amended, supplemented or
otherwise modified from time to time hereafter in accordance with its
terms.

 

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

 

“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 for any Series, the date stated as the
Cut-Off Date in the related Series Supplement.

 

“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 

 

4

 

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 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. 

 

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

 

“Depositor” shall
mean Sierra Deposit Company, LLC, a Delaware limited liability company, as
depositor under the Pool Purchase Agreement.

 

“Depository
Agreement” shall
mean, if applicable with respect to any Series or Class of Book-Entry Notes, the
agreement among the Issuer, the Trustee and a Clearing Agency or, if applicable,
the Foreign Clearing Agency.

 

“Determination
Date” shall
mean, with respect to any Payment Date, the second Business Day preceding such
Payment Date or any other date designated as the Determination Date for a Series
under the applicable Series Supplement.

 

“Due
Period” shall
mean, for any Payment Date, the immediately preceding calendar month or any
other period designated as the Due Period for a Series under the applicable
Series Supplement.

 

“Eligible
Institution” shall
mean any depository institution the short term unsecured senior indebtedness of
which is rated at least “F-l” 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.

 

“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 4.2(g).

 

5

 

“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, with respect to any Series, each event which is stated to constitute an
Event of Default under the applicable Series Supplement.

 

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

 

“Facility
Documents” shall
mean, collectively, this Agreement, the Series Supplements, the Purchase
Agreements, the Series Purchase Supplements, the Pool Purchase Agreement, the
Custodial Agreements, the Lockbox Agreements, the Title Clearing Agreements, the
Loan Conveyance Documents, 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 “Facility
Document” shall
mean any of them.

 

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

 

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

 

“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
Note” shall
have the meaning specified in Section 2.14.

 

“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 Series 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 Series 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.

 

“Initial
Closing Date” shall
mean August 29, 2002.

 

6

 

“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 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.

 

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

 

“Issuer” shall
mean Cendant Timeshare Conduit Receivables Funding, 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.

 

“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 Agreement of Cendant Timeshare Conduit Receivables
Funding, LLC dated as of August 29, 2002 as amended, supplemented, restated or
otherwise modified from time to time.

 

7

 

“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.

 

“Loan
Conveyance Documents” shall
mean, with respect to any Pledged Loan, (a) the Purchase Agreement, Series
Purchase Supplement or assignment of additional loans under which such Pledged
Loan was transferred from the Seller to the Depositor, (b) the Pool Purchase
Agreement or assignment of additional loans under which such Pledged Loan was
transferred from the Depositor to the Issuer, (c) the applicable Series
Supplement or Supplemental Grant pursuant to which the Pledged Loan is Granted
to the Collateral Agent for the benefit of the Trustee and (d) any such other
releases, documents, instruments or agreements as may be required by the
Depositor, the Issuer, the Collateral Agent or the Trustee in order to more
fully effect the transfer or Grant (including any prior assignments) of such
Pledged Loan and any related Pledged Assets from the Originator to the
Depositor, from the Depositor to the Issuer and from the Issuer to the
Collateral Agent or the Trustee.

 

“Loan
Documents” shall
mean, 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,
with respect to any Series, mean the Loan Schedule described in the Series
Purchase Supplement for that Series or if Pledged Loans for such Series are sold
under more than one Purchase Agreement, the Loan Schedules described in all of
the applicable Series Purchase Supplements and all revisions
thereto.

 

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

 

“Lockbox
Agreement” shall
have the meaning assigned to such term in the applicable Purchase
Agreement.

 

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

 

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

 

8

 

“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 and, with respect
to any Series, the Holders of fifty-one percent or more of the Aggregate
Principal Amount of that Series.

 

“Master
Servicer” shall
mean Cendant Timeshare Resort Group - Consumer Finance , Inc. or, if the
conditions set forth in Section 5.12 are satisfied, Trendwest, in either case in
its capacity as master servicer pursuant to this Agreement and, after any
Service Transfer, the Successor Master Servicer.

 

“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 Facility Documents to which it is a party;

 

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

 

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

 

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

 

“Monthly
Master Servicer Fee” shall
mean, in respect of any Payment Date, with respect to each Series, the Monthly
Master Servicer Fee for the preceding Due Period, calculated as provided in the
related Series Supplement. 

 

“Monthly
Servicing Report” shall
mean each monthly report prepared by the Master Servicer as provided in Section
6.2 and in the Series Supplements.

 

“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. 

 

9

 

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

 

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

 

“Notes” shall
mean all Series of Notes issued by the Issuer pursuant to this Agreement and the
respective Series Supplements.

 

“Note
Register” shall
have the meaning specified in Section 2.5.

 

“Note
Registrar” shall
have the meaning specified in Section 2.5.

 

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

 

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

 

“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 Master Servicer, as the case may be, or, in the case of a Successor Master
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 Master Servicer, and delivered
to the Trustee.

 

“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.

 

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

 

“Paying
Agent” shall
mean, with respect to any Series of Notes, the Trustee or any successor thereto,
in its capacity as paying agent.

 

“Payment
Date” shall
mean the 13th day of each calendar month, or, if such 13th day is not a Business
Day, the next succeeding Business Day or, with respect to any Series such other
date as is specified in the related Series Supplement.

 

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

 

“Permitted
Encumbrances” 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.

 

10

 

“Permitted
Investments”
 shall
mean (i) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof 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 “F-l” by Fitch,
“A-1” by S&P or “P-l” by Moody’s; (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 “F-l” by Fitch, “A-l” by S&P, or “P-l” by Moody’s; (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
“F-l” by Fitch, “A-l” by S&P or “P-l” by Moody’s; (v) money market funds
rated “Aaa” by Moody’s 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; and (vi) with
respect to any Series Accounts any other investments permitted by the applicable
Series Supplement; provided,
however, that no
obligation of any Seller shall constitute a Permitted Investment.

 

“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 Internal Revenue 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
Loan” shall
mean a Loan listed on a Loan Schedule.

 

“Pledged
Assets” shall
mean with respect to any Series the assets designated in the related Series
Supplement as the “Series ____ Pledged Assets.”

 

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

 

“Pool
Assets” shall
have the meaning set forth in the Pool Purchase Agreement.

 

“Pool
Purchase Agreement” shall
mean the purchase agreement dated August 29, 2002 by and between the Depositor
and the Issuer as amended and restated on November 14, 2005 and as thereafter
amended from time to time.

 

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

 

“Primary
Custodial Documents” shall
have the meaning specified in Section 4.1(k).

 

11

 

“Principal
Amount” shall
mean the initial principal amount of a Series, plus additional principal amounts
issued as part of that Series less principal payments previously paid as of such
date.

 

“Proceeding” shall
have the meaning specified in Section 9.3. 

 

“Purchase” shall
mean a purchase (whether by means of cash payment, delivery of a note or capital
contribution) of Pledged Loans and any related Pool Assets by the Issuer from
the Depositor pursuant to the Pool Purchase Agreement. 

 

“Purchase
Agreement” shall
have the meaning assigned thereto in the Pool Purchase Agreement.

 

“Rating
Agency” shall
mean, with respect to any outstanding Series or Class of a Series, each
statistical rating agency, as specified in the applicable Series Supplement,
selected by the Issuer to rate the Notes of such Series or Class.

 

“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 Series or
Class with respect to which it is a Rating Agency; provided, however, that if
such Series or Class has not been rated, the Rating Agency Condition with
respect to any such action shall be defined in the related Series Supplement or,
if not defined therein, shall not apply.

 

“Record
Date” shall
mean the date on which Noteholders entitled to receive a payment of interest or
principal on the succeeding Payment Date are determined, such date as to any
Payment Date being the day preceding such Payment Date (or if such day is not a
Business Day, the next preceding Business Day) except as otherwise provided with
respect to any Series or Class of a Series in the related Series
Supplement.

 

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

 

“Registered
Notes” shall
have the meaning set forth in Section 2.1.

 

“Release
Price” shall
mean, with respect to a Pledged Loan of a Series, the Release Price for that
Loan as specified in the applicable Series Supplement.

 

“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. 

 

“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 

 

12

functions
similar to those performed by any of the above designated officers, in each case
having direct responsibility for the administration of this Agreement.

 

“S&P” shall
mean Standard & Poor’s Ratings Services or any successor thereto.

 

“Sale” shall
have the meaning specified in Section 9.13(a). 

 

“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,
with respect to each Purchase Agreement, have the meaning assigned to that term
in such Purchase Agreement.

 

“Series” shall
mean any series of Notes issued pursuant to this Agreement and a related Series
Supplement.

 

“Series
Account” shall
mean any deposit, trust, escrow or similar account maintained for the benefit of
the Noteholders of any Series or Class, as specified in any Series
Supplement.

 

“Series
Collateral” shall
mean the collateral Granted to the Collateral Agent for the benefit of the
Trustee to secure the Notes of any Series and to secure any other obligations
described in the related Series Supplement.

 

“Series
Enhancement” shall
mean the rights and benefits provided to the Noteholders of any Series or Class
pursuant to any letter of credit, surety bond, cash collateral guaranty, cash
collateral account, insurance policy, spread account, reserve account,
guaranteed rate agreement, maturity liquidity facility, tax protection
agreement, interest rate swap agreement, interest rate cap agreement, currency
exchange agreement, other derivative securities agreement or other similar
arrangement. The subordination of any Class or Series to another Class or Series
shall be a Series Enhancement.

 

“Series
Enhancer” shall
mean the Person or Persons providing any Series Enhancement, other than (except
to the extent otherwise provided with respect to any Series in the Series
Supplement for such Series) the Noteholders of any Class or Series which is
subordinated to another Class or Series.

 

“Series
Issuance Date” shall
mean, with respect to any Series, the date on which the Notes of such Series are
to be originally issued in accordance with Section 2.10 and the related Series
Supplement.

 

“Series
Purchase Supplement” shall
mean with respect to any Series, each of the supplements to the respective
Purchase Agreements which supplements provide for the sale of Loans to the
Depositor which Loans will provide the collateral for such Series.

 

“Series
Supplement” shall
mean with respect to any Series, the Supplement to this Agreement which sets
forth the terms of such Series.

 

13

 

“Series
2002-1 Notes” shall
mean the Series 2002-1 Loan Backed Variable Funding Notes issued pursuant to the
Agreement and the Series 2002-1 Supplement.

 

“Series
2002-1 Supplement” shall
mean the Series 2002-1 Supplement to the Master Indenture and Servicing
Agreement dated as of August 29, 2002 and amended and restated as of November
14, 2005 by and between the Issuer, the Master Servicer, the Trustee and the
Collateral Agent, as amended from time to time.

 

“Servicer
Default” shall
mean the defaults specified in Section 10.1.

 

“Service
Transfer” shall
have the meaning set forth in Section 10.1.

 

“Servicing
Officer” shall
mean any officer of the Master 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 Master Servicer, as such list
may be amended from time to time.

 

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

 

“Subservicing
Agreement” shall
mean the agreement between the Master Servicer and Trendwest relating to the
servicing of Pledged Loans originated by Trendwest or, with respect to Acquired
Portfolio Loans, an agreement between the Master Servicer and the originator of
such Acquired Portfolio Loans or another third party to service such loans on
behalf of the Master Servicer, or if CTRG-CF is no longer the Master Servicer,
the agreement between the Master Servicer and CTRG-CF relating to the servicing
of the Pledged Loans originated by CTRG-CF or, with respect to any other Seller,
the agreement between the Master Servicer and such Seller relating to the
servicing of the Pledged Loans originated by such Seller.

 

“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.

 

“Successor
Master Servicer” shall
have the meaning set forth in Section 10.2.

 

“Supplement” shall
mean any Series Supplement and any other documents executed under the terms of
Section 13.1 in connection with this Agreement which amend or supplement the
terms hereof.

 

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

 

“Termination
Notice” shall
have the meaning specified in Section 10.1. 

 

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

 

14

 

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

 

“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.

 

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

 

“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,
supplements thereto or replacements 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.

 

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 Pool 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 Series or Class of a
Series.

 

(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

 

15

 

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.

 

Section
1.3  Intent
and Interpretation of Documents

 

The
arrangement by this Agreement, the Series Supplements, the Purchase Agreements
and the Series Purchase Supplements, the Pool Purchase Agreement, the Custodial
Agreements, the Collateral Agency Agreement and the other Facility 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 Facility
Documents shall be interpreted to further these intentions.

 

Section
1.4  References.

 

References
to “Series” or “Series of Notes” in this Agreement, shall, for all purposes,
refer only to the Series 2002-1 Notes. References to “Series Supplement” or
“Series Supplements” in this Agreement, shall, for all purposes, refer only to
the Series 2002-1 Supplement.

 

ARTICLE
II

THE
NOTES

 

Section
2.1  Form
Generally.

 

The Notes
of any Series or Class shall be issued in fully registered form without interest
coupons (the “Registered
Notes”) unless
the applicable Series Supplement provides, in accordance with then applicable
laws, that such Notes be issued in bearer form (“Bearer
Notes”) with
attached interest coupons and a special coupon (collectively the “Coupons”). Such
Registered Notes or Bearer Notes, as the case may be, shall be substantially in
the form provided in the applicable Series Supplement with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Agreement or the applicable Series Supplement, 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
officers 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. If
specified in any Series Supplement, the Notes of any Series or Class shall be
issued upon initial issuance as one or more notes evidencing the aggregate
original principal amount of such Series or Class as described in Section
2.10.

 

16

 

All Notes
shall be dated as provided in the applicable Series Supplement.

 

Section
2.2  Denominations.

 

Except as
otherwise specified in the related Series Supplement and the Notes, each Class
of Notes of each Series shall be issued in fully registered form in minimum
amounts of U.S. $1,000 and in integral multiples of U.S. $1,000 in excess
thereof (except that one Note of each Class may be issued in a different amount,
so long as such amount exceeds the applicable minimum denomination for such
Class).

 

Section
2.3  Execution,
Authentication and Delivery.

 

Each Note
shall be executed by manual or facsimile signature on behalf of the Issuer by an
Authorized Officer of the Issuer.

 

Notes
bearing the manual or facsimile signature of an individual who was, at the time
when such signature was affixed, authorized to sign on behalf of the Issuer
shall not be rendered invalid, notwithstanding the fact that such individual
ceased to be so authorized prior to the authentication and delivery of such
Notes or does not hold such office at the date of issuance such
Notes.

 

At any
time and from time to time after the execution and delivery of this Agreement,
the Issuer may deliver Notes executed by the Issuer to the Trustee for
authentication and delivery, and the Trustee shall authenticate and deliver such
Notes as provided in this Agreement or the related Series Supplement and not
otherwise.

 

No Note
shall be entitled to any benefit under this Agreement or the applicable Series
Supplement 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 or in the related Series Supplement executed by or on behalf of the
Trustee by the manual signature of a duly authorized signatory, 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
2.4  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 Master
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 power or any further act on the part of the Trustee or such
Authentication Agent.

 

17

 

(c)  An
Authentication Agent may at any time resign by giving notice of resignation to
the Trustee 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 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
Master Servicer.

 

(d)  The
Issuer agrees to pay to each Authentication Agent from time to time reasonable
compensation for its services under this Section 2.4.

 

(e)  The
provisions of Sections 11.1 and 11.3 shall be applicable to any Authentication
Agent.

 

(f)  Pursuant
to an appointment made under this Section 2.4, 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”

Section
2.5  Registration
of Transfer and Exchange of Notes.

 

(a)  The
Issuer shall cause to be kept at the Corporate Trust Office, a register (the
“Note
Register”) in
which, subject to such reasonable regulations as it may prescribe, the
registration of Notes and the registration of transfers of Notes shall be
provided. A note registrar (which may be the Trustee) (in such capacity, the
“Note
Registrar”) shall
provide for the registration of Registered Notes and transfers and exchanges of
Registered Notes as herein provided. The Note Registrar shall initially be the
Trustee. Any reference in this Agreement to the Note Registrar shall include any
co-note registrar unless the context requires otherwise.

 

The
Trustee may revoke such appointment and remove any Note Registrar if the Trustee
determines in its sole discretion that such Note Registrar failed to perform its
obligations under this Agreement in any material respect. Any Note Registrar
shall be permitted to resign as Note 

 

18

 

Registrar
upon thirty (30) days’ notice to the Issuer and the Trustee; provided, however,
that such resignation shall not be effective and such Note Registrar shall
continue to perform its duties as Note Registrar until the Trustee has appointed
a successor Note Registrar (which may be the Trustee) reasonably acceptable to
the Issuer.

 

Upon
surrender for registration of transfer or exchange of any Registered Note at any
office or agency of the Note Registrar maintained for such purpose, subject to
any transfer restrictions contained in the applicable Series Supplement, one or
more new Registered Notes (of the same Series and Class) in authorized
denominations of like tenor and aggregate principal amount shall be executed,
authenticated and delivered, in the name of the designated transferee or
transferees.

 

At the
option of a Registered Noteholder, subject to the provisions of this Section 2.5
and any restrictions contained in the applicable Series Supplement, Registered
Notes (of the same Series and Class) may be exchanged for other Registered Notes
of authorized denominations of like tenor and aggregate principal amount, upon
surrender of the Registered Notes to be exchanged at any such office or agency;
Registered Notes, including Registered Notes received in exchange for Bearer
Notes, may not be exchanged for Bearer Notes. At the option of the Holder of a
Bearer Note, subject to applicable laws and regulations, Bearer Notes may be
exchanged for other Bearer Notes or Registered Notes (of the same Series and
Class) of authorized denominations of like tenor and aggregate principal amount,
upon surrender of the Bearer Notes to be exchanged at an office or agency of the
Note Registrar located outside the United States. Each Bearer Note surrendered
pursuant to this Section shall have attached thereto all unmatured
Coupons.

 

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, and the applicable Series Supplement, as the
Notes surrendered upon such registration of transfer or exchange.

 

The
preceding provisions of this Section 2.5(a) notwithstanding, the Trustee or the
Note Registrar, as the case may be, shall not be required to register the
transfer of or exchange any Note for a period of fifteen (15) days preceding the
due date for any payment with respect to the Note.

 

Whenever
any Notes are so surrendered for exchange, subject to any restrictions contained
in the applicable Series Supplement, the Issuer shall execute and the Trustee
shall authenticate and deliver (in the case of Bearer Notes, outside the United
States) the Notes which the Noteholder making the exchange is entitled to
receive. Every Note presented or surrendered for registration of transfer or
exchange shall be accompanied by a written instrument of transfer in a form
satisfactory to the Trustee or the Note Registrar duly executed by the
Noteholder or the attorney-in-fact thereof duly authorized in
writing.

 

No
service charge shall be made for any registration of transfer or exchange of
Notes, but the Note Registrar may require payment of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with any such
transfer or exchange.

 

19

 

All Notes
(together with any Coupons) surrendered for registration of transfer and
exchange or for payment shall be canceled and disposed of in a manner
satisfactory to the Trustee. The Trustee shall cancel and destroy any Global
Note upon its exchange in full for definitive Notes and shall deliver a
certificate of destruction to the Issuer. Such certificate shall also state that
a certificate or certificates of a Foreign Clearing Agency referred to in the
applicable Series Supplement was received with respect to each portion of the
Global Note exchanged for definitive Notes.

 

The
Issuer shall execute and deliver to the Trustee Notes in such amounts and at
such times as are necessary to enable the Trustee to fulfill its
responsibilities under this Agreement, the Series Supplements and the
Notes.

 

(b)  The Note
Registrar will maintain at its expense in the Borough of Manhattan, The City of
New York, an office or agency where Notes may be surrendered for registration of
transfer or exchange (except that Bearer Notes may not be surrendered for
exchange at any such office or agency in the United States or its territories
and possessions).

 

Section
2.6  Mutilated,
Destroyed, Lost or Stolen Notes.

 

If (a)
any mutilated Note (together, in the case of Bearer Notes, with all unmatured
Coupons (if any) appertaining thereto) is surrendered to the Note Registrar, or
the Note Registrar receives evidence to its satisfaction of the destruction,
loss or theft of any Note, and (b) in case of destruction, loss or theft there
is delivered to the Note Registrar such security or indemnity as may be required
by it to hold the Issuer, the Note Registrar 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 (as defined in the New York
UCC), the Issuer shall execute, and the Trustee shall authenticate and the Note
Registrar shall deliver (in the case of Bearer Notes, outside the United
States), in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Note, a replacement Note of like tenor and aggregate principal amount,
bearing a number not contemporaneously outstanding; provided, however, that if
any such mutilated, destroyed, lost or stolen Note shall have become or within
seven days shall be due and payable, or shall have been selected or called for
redemption, instead of issuing a replacement Note, the Issuer may pay such Note
without surrender thereof, except that any mutilated Note shall be surrendered.
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, cost
or expense incurred by the Issuer or the Trustee in connection
therewith.

 

In
connection with the issuance of any replacement Note under this Section 2.6, the
Issuer or the Note Registrar 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 

 

20

 

and any
other reasonable expenses (including the reasonable fees and expenses of the
Trustee or the Note Registrar) connected therewith.

 

Any
replacement Note issued pursuant to this Section in replacement of any
mutilated, destroyed, lost or stolen Note shall constitute complete and
indefeasible evidence of a debt of the Issuer, as if originally issued, whether
or not the destroyed, lost or stolen Note shall be found at any time, and shall
be entitled to all the benefits of this Agreement equally and proportionately
with any and all other Notes duly issued hereunder. 

 

The
provisions of this Section 2.6 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
2.7  Persons
Deemed Owners.

 

The
Trustee, the Paying Agent, the Note Registrar, the Depositor, the Issuer and any
agent of any of them may (a) prior to due presentation of a Registered Note for
registration of transfer, treat the Person in whose name any Registered Note is
registered as the owner of such Registered Note for the purpose of receiving
distributions pursuant to the terms of the applicable Series Supplement and for
all other purposes whatsoever, and (b) treat the bearer of a Bearer Note or
Coupon as the owner of such Bearer Note or Coupon for the purpose of receiving
distributions pursuant to the terms of the applicable Series Supplement and for
all other purposes whatsoever; and, in any such case, neither the Trustee, the
Paying Agent, the Note Registrar, the Depositor, the Issuer nor any agent of any
of them shall be affected by any notice to the contrary.

 

Section
2.8  Appointment
of Paying Agent.

 

The
Paying Agent shall make distributions to Noteholders from the applicable
Collection Account or other applicable Series Account pursuant to the provisions
of the applicable Series Supplement and shall report the amounts of such
distributions to the Issuer. Any Paying Agent shall have the revocable power to
withdraw funds from the applicable Collection Account or applicable Series
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
2.9  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 be promptly cancelled by it. 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 lawful manner whatsoever,
and all Notes so delivered shall be promptly cancelled by the 

 

21

 

Trustee.
No Notes shall be authenticated in lieu of or in exchange for any Notes
cancelled as provided in this Section, except as expressly permitted by this
Agreement. All cancelled Notes held by the Trustee shall be destroyed unless the
Issuer shall direct by a timely order that they be returned to it.

 

Section
2.10  New
Issuances.

 

(a)  Pursuant
to this Agreement and the Series Supplement, the Issuer may issue only one
Series of Notes. The total principal amount of Notes that may be authenticated
and delivered and Outstanding under this Agreement and the Series Supplement is
not limited.

 

(b)  On or
before the Series Issuance Date relating to the Series 2002-1 Notes, the parties
hereto executed and delivered the Series Supplement which specifies the terms of
the Series. The terms of such Series Supplement may modify or amend the terms of
this Agreement solely as applied to such Series.

 

Section
2.11  Book-Entry
Notes.

 

If so
specified in any related Series Supplement for any Series or Class, the Notes of
that Series or Class, upon original issuance, shall be issued in the form of one
or more Notes representing the Book-Entry Notes, to be delivered to the Clearing
Agency or Foreign Clearing Agency on behalf of the Issuer. If issued as
Book-Entry Notes, such Notes shall initially be registered on the Note Register
in the name of the Clearing Agency or Foreign Clearing Agency or its nominee,
and no beneficial owner will receive a definitive note representing such
beneficial owner’s interest in the Notes, except as provided in Section 2.13. In
such case and until definitive, fully registered Notes (“Definitive
Notes”) have
been issued to the applicable beneficial owners pursuant to Section 2.13 or as
otherwise specified in any such Series Supplement:

 

(a)  the
provisions of this Section 2.11 shall be in full force and effect with respect
to each such Series or Class;

 

(b)  the
Issuer, the Depositor and the Trustee shall be entitled to deal with the
Clearing Agency or Foreign Clearing Agency for all purposes of this Agreement
(including the meaning of distributions) as the authorized representatives of
the beneficial owners;

 

(c)  to the
extent that the provisions of this Section 2.11 conflict with any other
provisions of this Agreement or the applicable Series Supplement, the provisions
of this Section 2.11 shall control with respect to each such Series or
Class; and

 

(d)  the
rights of the respective owners of security entitlements to the Notes of each
such Series or Class shall be exercised only through the Clearing Agency or
Foreign Clearing Agency and the applicable Clearing Agency Participants and
shall be limited to those established by law and agreements between such
beneficial owners and the Clearing Agency or Foreign Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Depository Agreement applicable to
a Series or Class, unless and until Definitive Notes of such Series or Class are
issued pursuant to Section 2.13, the initial Clearing Agency shall make
book-entry 

 

22

 

transfers
among the Clearing Agency Participants and receive and transmit distributions of
principal and interest on the related Series or Class to such Clearing Agency
Participants.

 

For
purposes of any provision of this Agreement requiring or permitting actions with
the consent of, or at the direction of, Noteholders evidencing a specified
percentage of the aggregate unpaid principal amount of Notes of a Series, such
direction or consent may be given by beneficial owners (acting through the
Clearing Agency and the Clearing Agency Participants) owning security
entitlements to the Notes evidencing the requisite percentage of principal
amount of Notes.

 

Section
2.12  Notices
to Clearing Agency or Foreign Clearing Agency.

 

Whenever
a notice or other communication is required to be given to the Noteholders of
any Series or Class with respect to which Book-Entry Notes have been issued,
unless and until Definitive Notes shall have been issued to the related
beneficial owners pursuant to Section 2.13, the Trustee shall give all such
notices and communications to the Clearing Agency or Foreign Clearing Agency, as
applicable. 

 

Section
2.13  Definitive
Notes.

 

If
Book-Entry Notes have been issued with respect to any Series or Class and (i)
the Issuer, at its option, advises the Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or Foreign Clearing
Agency with respect to such Series or Class or (ii) after the occurrence of a
Servicer Default or an Event of Default, beneficial owners of such Series or
Class representing not less than 50% of the principal amount of the Book-Entry
Notes of such Series or Class advise the Trustee and the applicable Clearing
Agency or Foreign Clearing Agency in writing through the applicable Clearing
Agency Participants that the continuation of a book-entry system with respect to
the Notes of such Series or Class is no longer in the best interests of the
beneficial owners of such Series or Class, then the Trustee shall notify all
beneficial owners of such Series or Class, through the Clearing Agency or
Foreign Clearing Agency, as applicable, of the occurrence of such event and of
the availability of Definitive Notes to beneficial owners of such Series or
Class. Upon surrender to the Trustee of such Notes by the Clearing Agency,
accompanied by registration instructions from the applicable Clearing Agency for
registration, the Issuer shall execute and the Trustee shall authenticate
Definitive Notes of such Class and shall recognize the registered holders of
such Definitive Notes as Noteholders under this Agreement. Neither the Issuer
nor the Trustee shall be liable for any delay in delivery of such instructions,
and the Issuer and the Trustee may conclusively rely on, and shall be protected
in relying on, such instructions. Upon the issuance of Definitive Notes of such
Series, all references herein to obligations imposed upon or to be performed by
the applicable Clearing Agency or Foreign Clearing Agency shall be deemed to be
imposed upon and performed by the Trustee, to the extent applicable with respect
to such Definitive Notes, and the Trustee shall recognize the registered Holders
of such Definitive Notes of such Series or Class as Noteholders of such Series
or Class hereunder. Definitive Notes will be transferable and exchangeable at
the offices of the Note Registrar.

 

23

 

Section
2.14  Global
Note.

 

If
specified in the related Series Supplement for any Series or Class, the Notes
for such Series or Class will initially be issued in the form of a single
temporary global Note (the “Global
Note”) in
bearer form, without interest coupons, in the denomination of the entire
aggregate principal amount of such Series or Class and substantially in the form
set forth in the applicable Series Supplement. The Global Note will be executed
by the Issuer and authenticated by the Trustee at the written direction of the
Issuer upon the same conditions, in substantially the same manner and with the
same effect as the Definitive Notes. The Global Note may be exchanged for Bearer
or Registered Notes in definitive form, as provided in the related Series
Supplement. Except as otherwise specifically provided in the Series Supplement,
any Notes that are issued in bearer form shall be issued in accordance with the
requirements of Section 163(f)(2) of the Code.

 

Section
2.15  Meetings
of Noteholders.

 

To the
extent and as more specifically provided by the Series Supplement for any Series
issued in whole or in part in Bearer Notes, the Trustee may at any time call a
meeting of the Noteholders of such Series, for the purpose of approving, as
provided in subsection 13.1(b), a modification of or amendment to, or obtaining
a waiver of, any covenant or condition set forth in the applicable Series
Supplement or this Agreement.

 

Section
2.16  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 Master Servicer
appointed pursuant to Section 10.2, (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 or any Series Supplement. 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 2.16.

 

Section
2.17  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 Master Servicer, the Pledged Loans
or the Notes required pursuant to Rule 144A promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended, to enable such
Noteholder to effect resales of the Notes (or interests therein) pursuant to
such rule.

 

24

 

ARTICLE
III

REPRESENTATIONS
AND WARRANTIES OF THE ISSUER

 

Section
3.1  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 and to Noteholders of a Series as of the
Series Issuance Date or any Addition Date for that Series 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 Facility
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 Facility
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 Pool Purchase Agreement and the
making of the Grants contemplated hereunder and under the Series Supplements,
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 Facility Documents); and no transaction contemplated hereby
requires compliance with any bulk sales act or similar law. Each of the other
Facility 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 Facility 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 Facility Documents. Each of
the Facility 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 

 

25

 

accordance
with their respective terms, except as enforceability may be subject to or
limited by Debtor Relief Laws or by general principles of equity (whether
considered in a suit at law or in equity).

 

(e)  No
Litigation. Except,
with respect to a Series, as disclosed in a schedule to the Series Supplement
for such Series, 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 Facility Documents, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any of the other Facility
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 Facility 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 Facility 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 Pool 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
Facility 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
2046, Las Vegas, Nevada 89135. As of the date hereof, the principal place of
business and chief executive office of the Master Servicer is located at 10750
West Charleston Boulevard, Suite 130, Las Vegas, Nevada 89135. As of the date
hereof, neither the Issuer nor the Master 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.

 

26

 

(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 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 the respective Purchase Agreements. From
and after the Initial Closing Date 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. Subject
to the Issuer’s rights under Section 4.2(p), 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)  Facility
Documents. The
Pool 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 Facility 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. Upon each
Purchase pursuant to the Pool Purchase Agreement, the Issuer shall be the lawful
owner of, and have good title to, each Pledged Loan and all related Pledged
Assets, free and clear of any Liens (other than the Lien of the applicable
Series Supplement and any Permitted Encumbrances on the related Timeshare
Properties), or shall have 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 Pool Purchase Agreement.
The Purchases by the Issuer under the Pool Purchase Agreement constitute either
sales or first-priority perfected security interests, 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 Facility Documents contemplated hereby, the
Purchase of Loans thereunder, the issuance and payment of 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 Facility
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 tax returns which are required to be filed by it, and has paid or caused
to be paid all 

 

27

 

taxes
shown to be due and payable on such returns or on any assessments received 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 has set aside adequate reserves on its books in accordance with GAAP and
which proceedings have not given rise to any Lien.

 

(q)  Solvency. The
Issuer, both prior to and immediately after giving effect to any Purchase
occurring on any day (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.

 

(r)  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.

 

(s)  No
Adverse Selection. No
selection procedures materially adverse to the Noteholders of a Series, the
Trustee or the Collateral Agent have been employed by the Issuer in selecting
the Pledged Loans for inclusion in the Series Collateral for such Series on the
related Closing Date for such Series.

 

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

 

(a)  Possession. On or
immediately prior to each Closing Date or an Addition Date, as applicable, a
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 each Closing Date and each Addition Date, each of the Issuer and the
Master 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 Series
Collateral Granted by the Issuer in accordance with the terms of a Series
Supplement.

 

The
representations and warranties of the Issuer set forth in this Section 3.2 shall
be deemed to be remade without further act by any Person on and as of each
Closing Date and each 

 

28

 

Addition
Date with respect to each Loan Granted by the Issuer on and as of each such
date. The representations and warranties set forth in this Section 3.2 shall
survive any Grant of the respective Loans by the Issuer.

 

Section
3.3  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 or the Series Supplement, 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 under the appropriate Series
Supplement 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 Master
Servicer shall notify the Trustee by a certificate substantially in the form
attached hereto as Exhibit A (which certificate shall include a statement to the
effect that all amounts received in connection with such payment have been
deposited in the appropriate Collection Account) of a Servicing Officer and
shall request delivery to the Master 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 Master Servicer (in all cases in
accordance with the provisions of the Custodial Agreements), (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
Master 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 Master Servicer’s need therefor no longer
exists.

 

29

 

ARTICLE
IV

ADDITIONAL
COVENANTS OF ISSUER

 

Section
4.1  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
Facility 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 and the Series Supplements hereto and, in
particular, that it shall limit its debt so that at all times it has a positive
net worth of not less than $5 million.

 

(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 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 

 

30

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 Master Servicer promptly instructs such
Obligor to commence one of the two alternative methods of funds transfer
provided for in either of sub-classes (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 Master 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 and the Noteholders of the appropriate
Series and deposit such Collections into a Lockbox Account or the appropriate
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).

 

(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 Series Collateral for any Series, 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 

 

31

 

relevant
declarations (or any similar charter document) governing the POA and/or any
similar charter documents of such POA (which efforts shall include, in any case,
voting as a member of the POA or as a proxy or attorney-in-fact for a member).
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 appropriate 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 each Closing Date and thereafter promptly upon the generation of any
documents, instruments and agreements evidencing or otherwise relating to the
Pledged Loans or related Pledged Assets received by any of the Issuer or the
Master Servicer, 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 all such documents, instruments and agreements of the Issuer,
including without limitation all original Pledged Loans (or in the case of
Pledged Loans consisting of a sales contract and a separate promissory note, the
original of such promissory note), installment promissory notes, mortgages, and
all ancillary and collateral documentation executed in connection therewith
(collectively, the “Primary
Custodial Documents”). Such
Primary Custodial Documents 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 all such Primary
Custodial Documents 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 Primary
Custodial Documents for the benefit of the Collateral Agent on behalf of the
Trustee and the Noteholders, in each case pursuant to the Custodial Agreement.
Each of the Issuer and the Master Servicer may access the Primary Custodial
Documents 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 Master Servicer may only remove Primary Custodial Documents
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).

 

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

 

32

 

(iv)  Notwithstanding
the foregoing provisions of this subsection (l), the Issuer shall not be
required to deliver Primary Custodial Documents to the Custodian earlier than
the requirements contained in the respective Purchase Agreement.

 

(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 Facility 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 Facility 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,

 

33

 

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 Facility 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 Facility Documents, pay
all expenses, indebtedness and other obligations incurred by it using its own
funds.

 

(xiii)  Except as
provided herein and in any other Facility 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
consolidated with, any reports prepared for any of its Affiliates so long as

 

34

 

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 3.2(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 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, or
which could otherwise be reasonably expected to expose the Issuer to a material
liability. The Issuer shall pay or cause to be paid all taxes shown to be due
and payable on such returns or on any assessments received 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, or which could otherwise be reasonably expected to expose the
Issuer to a material liability.

 

(p)  Facility
Documents. Comply
in all material respects with the terms of, employ the procedures outlined in
and enforce the obligations of the Depositor under the Pool Purchase Agreement
and of the Parties to each of the other Facility Documents, and take all such
action as may reasonably be required to maintain all such Facility Documents to
which the Issuer is a party in full force and effect.

 

(q)  Loan
Schedule. At
least once each calendar month, provide to the Trustee with respect to each
Series an amendment to the Loan Schedule, or cause the Master Servicer to
provide an amendment to the Loan Schedule, listing for the Pledged Loans added
to the Series Collateral for that Series and the Pledged Loans released from the
Series Collateral for that Series 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 for that Series or since the most
recent amendment thereto.

 

(r)  Segregation
of Collections.

 

(i)  Prevent
the deposit into any Series Account of any funds other than Collections or other
funds to be deposited into such accounts under this Agreement, a Series
Supplement or the other Facility 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

 

(ii)  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 

 

35

 

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 (ii) 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).

 

(s)  Filings;
Further Assurances.

 

(i)  On or
prior to each 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 Series Collateral to be filed or recorded in the
appropriate offices.

 

(ii)  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 Master Servicer or the Trustee or as
the Master Servicer or the Trustee otherwise deems reasonably necessary or
advisable to perfect the Lien created by a Series Supplement in the Series
Collateral. The Master Servicer agrees, at its sole expense, to cooperate with
and assist 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 to the Series Supplements 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 Master Servicer or the Trustee deems reasonably
necessary or advisable to: (i) Grant more effectively all or any portion of the
Series Collateral; (ii) maintain or preserve the Lien Granted under a Series
Supplement (and the priority thereof) or carry out more effectively the purposes
hereof or thereof; (iii) perfect, maintain the perfection of, publish notice of,
or protect the validity of any Grant made or to be made pursuant to any Series
Supplement; (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 Master 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 Series Collateral.

 

(iii)  The
Issuer shall, on or prior to the date of Grant of any Pledged Loans under any
Series Supplement, 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 

 

36

 

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 4.l(s)(iv) shall be for the sole account and responsibility of the
Issuer.

 

(t)  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
4.2  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 the respective Series Supplements 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 the Series Supplements
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 Series Collateral under any Series Supplements. 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.

 

(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 

 

37

 

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 the exhibits to the
respective Purchase Agreements 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 Master
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)  Change
in Name, Etc. Use any
trade names, fictitious names, assumed names or “doing business as”
names.

 

(g)  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; (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 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.

 

(h)  Terminate
or Reject Loans. Without
limiting anything in subsection 4.2(b), terminate or reject any Pledged Loan
prior to the end of the term of such Loan, whether such 

 

38

 

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 the applicable Series
Supplement.

 

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

 

(j)  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
Facility Documents.

 

(k)  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 Facility 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.

 

(l)  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 Facility Documents to which it is a
party.

 

(m)  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 Pool Purchase Agreement.

 

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

 

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

 

(p)  Place
of Business; Change of Name. Change
(x) its type or jurisdiction of organization from that listed in Section 3.1(i),
(y) its name or (z) the location of its Records relating to the Series
Collateral or its chief executive office from the location listed in
Section 3.1(i), unless in any such event the Issuer shall have given the
Trustee and the Collateral Agent 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

 

39

 

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 each Series
Supplement.

 

ARTICLE
V

SERVICING
OF PLEDGED LOANS

 

Section
5.1  Responsibility
for Loan Administration. The
Master 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 Master Servicer a limited power of attorney
to execute and the Master 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 Master Servicer.

 

The
Trustee, the Issuer and the Collateral Agent, at the request of a Servicing
Officer, shall furnish the Master Servicer with any reasonable documents or take
any action reasonably requested, necessary or appropriate to enable the Master
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 4.1(l)(ii)).

 

Cendant
Timeshare Resort Group - Consumer Finance, Inc. is hereby appointed as the
Master Servicer until such time as another entity becomes the Master Servicer
under subsection 5.12(b) or until such time as any Service Transfer shall be
effected under Article X.

 

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

 

Section
5.3  Records. The
Master Servicer shall, during the period it is Master 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 Master Servicer following a Service Transfer.

 

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

 

40

 

Section
5.5  Enforcement.

 

(a)  The
Master Servicer will, consistent with Section 5.2, 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).

 

(b)  The
Master Servicer may sue to enforce or collect upon Pledged Loans, in its own
name, if possible, or as agent for the Issuer. If the Master 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 Master
Servicer for purposes of collection only. If, however, in any enforcement suit
or legal proceeding it is held that the Master 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 Master Servicer’s expense, take such steps as the Master 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 Master Servicer shall provide to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred thereby.

 

(c)  The
Master 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 Master 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 appropriate Collection
Account.

 

(d)  The
Master Servicer will not extend, amend, waive or otherwise modify the terms of
any Pledged Loan (other than as a result of a Timeshare Upgrade or 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)  Except as
otherwise provided in the Series Supplement and with respect to the Series
Collateral for the Series, the Master Servicer shall have the discretion to sell
the collateral which secures any Defaulted Loans free and clear of the Lien of
the Series Supplement, 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 Master Servicer into the
Series Collection Account. 

 

(f)  The
Master 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 Master Servicer shall have no
obligation to, and shall not, foreclose on the collateral securing any Pledged
Loan unless 

 

41

 

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 Master Servicer on the collateral securing any
Pledged Loans shall first be applied by the Master Servicer to reimburse itself
for the expenses of such foreclosure, and any remaining proceeds shall be
deposited into the applicable Collection Account.

 

Section
5.6  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 Master Servicer
(including without limitation the execution of documents) and otherwise
cooperate with the Master Servicer in enforcement of the Trustee’s rights and
remedies with respect to Pledged Loans.

 

Section
5.7  Other
Matters Relating to the Master Servicer. The
Master 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 and any Series
Supplement;

 

(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, except
to the extent it is directed to take instructions from a different party under
the terms of a Series Supplement, it shall promptly follow the instructions of
the Master Servicer duly given to withdraw funds from the Accounts.

 

Section
5.8  Servicing
Compensation. As
compensation for its servicing activities hereunder and under each Series
Supplement, the Master Servicer shall be entitled to receive the Monthly Master
Servicer Fee with respect to each Series which shall be calculated for each
Series under the applicable Series Supplement and be paid to the Master Servicer
pursuant to the terms of the respective Series Supplements.

 

Section
5.9  Costs
and Expenses. The
costs and expenses incurred by the Master 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 Master
Servicer and the Master Servicer shall be entitled to reimbursement hereunder
from the Issuer as provided herein and in the respective Series Supplements.
Failure by the Master Servicer to receive reimbursement shall not relieve the
Master Servicer of its obligations under this Agreement and the Series
Supplements.

 

42

 

Section
5.10  Representations
and Warranties of the Master Servicer. The
Master Servicer hereby represents and warrants to the Trustee and the Collateral
Agent as of the date of this Agreement and represents to the Noteholders of a
Series as of the Series Issuance Date for that Series:

 

(a)  Organization
and Good Standing. The
Master 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 and the Series
Supplements. The Master 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 of any
Series.

 

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

 

(c)  Binding
Obligations. Each of
the Facility Documents to which Master Servicer is a party constitutes a legal,
valid and binding obligation of the Master Servicer enforceable against the
Master 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 Master Servicer of each of the Facility Documents
to which the Master Servicer is a party, and the performance by the Master
Servicer of the transactions contemplated by such agreements and the fulfillment
by the Master Servicer of the terms hereof and thereof applicable to the Master
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 Master 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 Master
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 Master
Servicer threatened, against the Master 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 Facility
Documents, (ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or any of the other Facility Documents, (iii)
seeking any determination or ruling that, in the reasonable judgment of the
Master Servicer, would adversely affect the performance by the Master Servicer
of its obligations under this Agreement or any of the other Facility Documents,
(iv) seeking any determination or ruling that would adversely affect the
validity or enforceability of this 

 

43

 

Agreement
or any of the other Facility 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 Master Servicer of this Agreement or of the other Facility
Documents to which it is a party or the performance by the Master Servicer of
the transactions contemplated hereby and thereby and the fulfillment by the
Master 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
5.11  Additional
Covenants of the Master Servicer. The
Master Servicer further agrees as provided in this Section 5.11.

 

(a)  Change
in Payment Instructions to Obligors. The
Master Servicer will not add or terminate any bank as a Lockbox Bank from those
listed in the exhibits to the respective Purchase Agreements or make any change
in its 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 Master 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
Master Servicer receives any Collections, the Master Servicer shall hold such
Collections in trust for the benefit of the Trustee and deposit such Collections
into a Lockbox Account or the appropriate Collection Account as soon as
practicable but in any event within two Business Days following the Master
Servicer’s receipt thereof.

 

(c)  Compliance
with Requirements of Law. The
Master 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
Master 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 Series Collateral, or violate the Collateral Agency
Agreement.

 

(e)  Credit
Standards and Collection Policies. The
Master 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
Master Servicer will ensure that the Obligor of each Pledged Loan
either:

 

44

 

(1) has been
instructed, pursuant to the Master 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 Master
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 Master Servicer. The
Master Servicer shall give the Trustee, the Collateral Agent and each Rating
Agency at least 30 days, prior written notice of any relocation of any office
from which it services Pledged Loans or keeps records concerning the Pledged
Loans. The Master Servicer shall at all times maintain each office from which it
services Pledged Loans within the United States of America.

 

(h)  Instruments. The
Master 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 the appropriate Series Supplement with respect
to such property will continue to be maintained after giving effect to such
action or actions; provided, however, that each Custodian, the Collateral Agent
and the Master 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. With
respect to each Series, the Master Servicer will promptly amend the related Loan
Schedule to reflect terms or discrepancies that become known to the Master
Servicer at any time.

 

(j)  Segregation
of Collections. The
Master Servicer will:

 

(i)  prevent
the deposit into any Series Account of any funds other than Collections or other
funds to be deposited into such accounts under this Agreement, a Series
Supplement or the other Facility 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

 

45

 

(ii)  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
(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 4.2(b), the Master 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 the respective Series Supplement.

 

(l)  Change
in Business or Credit Standards and Collection Policies. The
Master 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
Master 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).

 

Section
5.12  Master
Servicer not to Resign.

 

(a)  Resignation. The
entity then serving as Master Servicer shall not resign from the obligations and
duties hereby imposed on it hereunder except as provided in 5.12(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 Master Servicer shall have been appointed
and accepted the duties as Master Servicer pursuant to Section 10.2. Any such
determination permitting the resignation of the Master 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 Master Servicer shall have assumed the responsibilities and
obligations of the Master Servicer in accordance with Section 10.2.

 

(b)  Transfer
to Certain Cendant Affiliates.
CTRG-CF, as Master Servicer, may resign as Master Servicer and be replaced by
Trendwest, and Trendwest, as Master Servicer, may 

 

46

resign as
Master Servicer and be replaced by CTRG-CF, in either case, only upon the
following terms and conditions:

 

(i)  the
resigning Master Servicer shall give the Trustee, the Issuer and the Collateral
Agent not less than 10 Business Days notice of the resignation and substitution
of Trendwest in place of CTRG-CF or CTRG-CF in place of Trendwest as Master
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 Master Servicer;

 

(iii)  the
entity which is to become the new Master 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 Master Servicer
shall assume all of the rights, obligations and responsibilities of the Master
Servicer under this Agreement and each Series Supplement; and

 

(iv)  the
satisfaction of any additional conditions to such transfer set forth in a Series
Supplement.

 

Section
5.13  Merger
or Consolidation of, or Assumption of the Obligations of Master
Servicer.

 

The
Master 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 Master Servicer is
merged or the Person which acquires by conveyance or transfer the properties and
assets of the Master 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 Master 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 Master Servicer
hereunder;

 

(ii)  the
Master 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 5.13, and all
conditions precedent provided for herein relating to such transaction have been
satisfied;

 

(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.

 

47

 

Section
5.14  Examination
of Records. Each of
the Issuer and the Master 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
or pursuant to a Series Supplement. Each of the Issuer and the Master 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
5.15  Subservicing
Agreements. The
Master Servicer, including any Successor Master 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 Master
Servicer is responsible hereunder, provided that, in each case, the Subservicing
Agreement is not inconsistent with this Agreement or any Series Supplement.
References in this Agreement and the Series Supplements to actions taken or to
be taken by the Master Servicer include actions taken or to be taken by a
Subservicer. As part of its servicing activities hereunder, the Master 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 Master Servicer shall have the right to remove a
Subservicer retained by it at any time it considers to be appropriate. Upon the
resignation or removal of a Master Servicer, all Subservicing Agreements shall
also be terminated unless accepted or reaffirmed by the Successor Master
Servicer.

 

Notwithstanding
anything to the contrary contained herein, or any Subservicing Agreement, the
Master 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 and the
Series Supplement 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 Master Servicer and neither the
Issuer nor any other Person shall bear any responsibility for such
fees.

 

ARTICLE
VI

REPORTS

 

Section
6.1  Noteholder
Statements. By not
later than 3:00 p.m., Las Vegas, Nevada time, on each Determination Date, the
Master Servicer shall transmit to the Trustee in a form or forms acceptable to
the Trustee information necessary to direct the Trustee to transfer funds and
make payments in accordance with the terms of the Series Supplements and to
produce the statements to be delivered by the Trustee for the immediately
following Payment Date. Transmission of such information to the Trustee shall be
deemed to be a representation and warranty by the Master Servicer to the
Trustee, the Issuer, and the Noteholders that such information is true and
correct in all material respects. Each such statement shall be delivered as
provided in and contain the information required in the Series
Supplement.

 

48

 

Section
6.2  Monthly
Servicing Reports. On each
Payment Date, the Master Servicer shall, with respect to each Series, deliver
the monthly servicing report in the form set forth in the Series Supplement for
that Series.

 

Section
6.3  Other
Data. In
addition, the Master 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 Master Servicer’s
existing data processing system without undue modification or expense;
provided,
however, nothing
in this Section 6.3 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 VI.

 

Section
6.4  Annual
Master Servicer’s Certificate. The
Master 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, 2002, an Officer’s Certificate stating that
(a) a review of the activities of the Master Servicer during the preceding
calendar year (or, in the case of the first such Officer’s Certificate, the
period since the Initial Closing Date) and of its performance under this
Agreement and the Series Supplements during such period was made under the
supervision of the officer signing such certificate and (b) to the Master
Servicer’s knowledge, based on such review, the Master Servicer has fully
performed all of its obligations under this Agreement and all Series Supplements
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.

 

Section
6.5  Notices
to CTRG-CF. In the
event that neither CTRG-CF nor Trendwest is acting as Master Servicer, any
Successor Master Servicer appointed and acting pursuant to Section 10.2 shall
deliver or make available to the Issuer and CTRG-CF each certificate and report
required to be prepared, forwarded or delivered thereafter pursuant to the
provisions of this Article VI.

 

ARTICLE
VII

RIGHTS OF
NOTEHOLDERS;

ACCOUNTS
AND PRIORITY OF PAYMENTS

 

Section
7.1  Collection
Accounts. The
Trustee shall pursuant to the terms of the respective Series Supplements
establish for each Series and maintain in the name of the Trustee, a segregated
account in its name designated as the “Cendant Timeshare Conduit Receivables
Funding, LLC Collection Account” and indicating in the designation, the
applicable Series and each such designation.

 

Section
7.2  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 3.1(j), 4.l(g), 4.l(r) and 4.2(d). 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 and 

 

49

 

derived
from Pledged Loans for a specific Series, to the appropriate Collection Accounts
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
Master 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 a 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 appropriate
Collection Accounts.

 

Section
7.3  Tax
Treatment. 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 treat the
Notes (or beneficial interest therein) as indebtedness for purposes of federal,
state and local income or franchise taxes or any other tax imposed on or
measured by income.

 

ARTICLE
VIII

INDEMNITIES

 

Section
8.1  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
8.2  Tax
Indemnification. The
Issuer agrees to pay, and to indemnify, defend and hold harmless the Trustee and
the Noteholders 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 and the Noteholders, 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
8.3  Master
Servicer’s Indemnities. Each
entity serving as Master Servicer shall defend and indemnify the Trustee, the
Issuer and the Noteholders 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 Master Servicer (but not by any predecessor or
successor Master Servicer) with respect to this Agreement, the Series
Supplements or any Pledged Loan; provided,
however, that
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 Master Servicer. This indemnity shall
survive any Service Transfer (but a Master Servicer’s obligations under this
Section 8.3 shall not relate to any actions of any Successor Master Servicer

 

50

 

after a
Service Transfer) and any payment of the amount owing hereunder or under the
Series Supplement or any release by the Issuer of any such Pledged
Loan.

 

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

 

ARTICLE
IX

EVENTS OF
DEFAULT

 

Section
9.1  Events
of Default. For
each Series, the related Series Supplement shall set forth the events and
circumstances which constitute an Event of Default for that Series.

 

Promptly
after the occurrence of an Event of Default with respect to a Series, and, in
any event, within two Business Days thereafter, the Trustee shall notify each
Noteholder of the affected Series and each Rating Agency, if any, for that
Series 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.

 

Section
9.2  Acceleration
of Maturity; Rescission and Annulment.

 

(a)  If an
Event of Default for a Series has occurred and is continuing, then on the terms
set forth in the Series Supplement, the Notes of that Series may be declared to
be immediately due and payable, by a notice in writing to the Issuer (and to the
Trustee if declared by Series Noteholders), and upon any such declaration the
unpaid principal amount of the Notes of that Series, together with accrued or
accreted and unpaid interest thereon through the date of acceleration, shall
become immediately due and payable.

 

(b)  At any
time after such an acceleration or declaration of acceleration of a Series of
Notes has been made and before a judgment or decree for payment of the money due
has been obtained by the Trustee as hereinafter provided in this Article IX such
acceleration may be rescinded if so provided in the Series Supplement and if so
provided, in accordance with the terms of the Series Supplement. No such
rescission shall affect any subsequent Event of Default or impair any right
consequent thereon.

 

Section
9.3  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, the whole amount then due and payable on the Notes
of the Series for principal and interest, with interest upon the overdue
principal and upon overdue installments of interest, as determined for such
Series and each Class within that Series in the respective Series Supplement, 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 

 

51

 

compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel;
provided,
however, the
amount due under this Section 9.3 shall not exceed the aggregate proceeds from
the sale of the relevant Series 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 of the affected Series to the Trustee for the benefit of
the registered Holders to be applied as provided in the Series Supplements,
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 of the affected Series and as trustee of an
express trust, may, with the prior written consent of or at the direction of the
Series Majority Holders, institute suits in equity, actions at law or other
legal, judicial or administrative proceedings (each, a “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 Series Collateral for such Series wherever situated. In the event
a Proceeding shall involve the liquidation of Series 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 appropriate Collection
Accounts).

 

If an
Event of Default occurs and is continuing with respect to a Series, the Trustee
may, and with the prior written consent of or at the direction of the Series
Majority Holders, shall, proceed to protect and enforce its rights and the
rights of the Series Noteholders hereunder and under the applicable Series
Supplement 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 the applicable Series Supplement or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.

 

Section
9.4  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)  with
respect to each Series, to file a proof of claim for the whole amount of
principal and interest owing and unpaid in respect of the Notes of such Series
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 of such Series allowed in such Proceeding,
and

 

52

 

(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 of the respective
Series;

 

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 XI.

 

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 of
any Series 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.

 

Section
9.5  Remedies.

 

(a)  If an
Event of Default shall have occurred and be continuing with respect to a Series,
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 of the
affected Series, do one or more of the following (subject to Section
9.6):

 

(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 and
the Series Supplement, whether by declaration or otherwise, enforce any judgment
obtained, and collect from the Series Collateral and the property of the Issuer
monies adjudged due;

 

(2) obtain
possession of the Pledged Loans related to the affected Series in accordance
with the terms of the Custodial Agreement and sell the Series 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 9.13;

 

(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 the Series Supplement with respect to
the Series Collateral; and

 

(4) exercise
any remedies of a secured party under the UCC with respect to the Series
Collateral (including any Series Accounts) and take any other appropriate action
to protect and enforce the rights and remedies of the Trustee or the Holders of
such Series and each other agreement contemplated hereby (including retaining
the Series Collateral pursuant to Section 9.6 and applying distributions from
the Series Collateral pursuant to Section 9.7);

 

provided,
however, that
neither the Trustee nor the Collateral Agent may sell or otherwise liquidate the
Series Collateral which constitutes Loans and Pledged Assets following an Event
of Default other than an Event of Default described in the Series Supplement
resulting from an 

 

53

 

Insolvency
Event, unless either (i) the Holders of 100% of the Aggregate Principal Amount
of the Notes of the affected Series then outstanding consent thereto, (ii) the
proceeds of such sale or liquidation distributable to the Noteholders of the
Series are sufficient to discharge in full the amounts then due and unpaid upon
the Notes of such Series for principal and accrued interest and the fees and
other amounts required to be paid prior to payment of amounts due on the Notes
of such Series pursuant to Section 9.7 or (iii) the Holders of 66 2/3% of the
Aggregate Principal Amount of such Series consent thereto and the Trustee
determines that the Series Collateral will not continue to provide sufficient
funds for the payment of principal of, and interest on, the Notes of such Series
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
9.6, 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 Series 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.

 

(b)  In
addition to the remedies provided in Section 9.5(a), if so provided in the
Series Supplement, the Trustee may, and at the request of the Majority Holders
of such Series 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
9.6  Optional
Preservation of Collateral. If the
Notes of a Series 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 of the affected Series
shall, elect to retain the Series Collateral securing the Notes intact for the
benefit of the Holders of the Notes and in such event it shall deposit all funds
received with respect to the Series Collateral into the Collection Account for
such Series and apply such funds in accordance with the payment priorities set
forth in the respective Series Supplements, 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 Series Collateral are sufficient to provide the
funds required to pay the principal of and interest on the Notes of such Series
as and when such principal and interest would have become due and payable
pursuant to the terms of the Series Supplement 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 Series
Collateral pursuant to this Section 9.6, the Trustee shall continue to apply all
distributions received on such Series Collateral in accordance with the
respective Series Supplement. If the Trustee determines to retain the Series
Collateral as provided in this Section 9.6, such determination shall be deemed
to be a rescission and annulment (but not a waiver) of the aforementioned Event
of Default and 

 

54

its
consequences pursuant to Section 9.2, 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
9.7  Application
of Monies Collected During Event of Default. If the
Notes of a Series have been accelerated following an Event of Default and such
acceleration and its consequences have not been rescinded and annulled, and
distributions on the Series Collateral securing the Notes of such Series are not
being applied pursuant to Section 9.6, any monies collected by the Trustee
pursuant to this Article IX or otherwise with respect to such Notes shall be
applied in accordance with the respective Series Supplement.

 

Section
9.8  Limitation
on Suits by Individual Noteholders. Subject
to Section 9.9, no Noteholder shall have any right to institute any
Proceeding with respect to this Agreement or the Series Supplement under which
its Notes were issued, 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 of such Series shall have made written requests to the Trustee
to institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder and under the Series Supplement;

 

(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 or the Series Supplement 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 or the
Series Supplement, except in the manner herein provided.

 

Section
9.9  Unconditional
Rights of Noteholders to Receive Principal and Interest.
Notwithstanding any other provision in this Agreement or any Series Supplement,
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 or the Series Supplement 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
9.10  Restoration
of Rights and Remedies. If the
Trustee or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Agreement or any Series Supplement 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 

 

55

 

and
remedies of the Trustee and the Noteholders shall continue as though no such
Proceeding had been instituted.

 

Section
9.11  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 a Series Supplement and the Notes issued thereunder the Holders of
66 2/3% of the Aggregate Principal Amount of Notes of such Series have the
right to waive any Event of Default with respect to such Series 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 and the Series Supplement but no
such waiver shall extend to any subsequent or other Event of Default or impair
any right consequent thereon.

 

Section
9.12  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.

 

Section
9.13  Sale
of Series Collateral.

 

(a)  The power
to effect any sale (a “Sale”) of any
portion of the Series Collateral pursuant to Section 9.5 shall not be exhausted
by any one or more Sales as to any portion of such Series Collateral remaining
unsold, but shall continue unimpaired until the entire Series Collateral shall
have been sold or all amounts payable on the Notes of the affected Series and
the respective Series Supplement with respect thereto 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 the applicable Series
Supplement.

 

(b)  The
Trustee and the Collateral Agent shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion of the Series
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 Series 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
9.14  Action
on Notes. The
Trustee’s right to seek and recover judgment on the Notes or under this
Agreement or a Series Supplement shall not be affected by the seeking, obtaining
or application of any other relief under or with respect to this Agreement or
the Series 

 

56

 

Supplement.
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 Series Collateral or upon any of the assets of the
Issuer.

 

Section
9.15. Control
by Series of Noteholders. If an
Event of Default with respect to a Series has occurred and is continuing, the
Majority Holders of such Series or such other portion of the Holders of such
Series as is specified in the Series Supplement 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 of such Series 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 Series Collateral which
constitutes Loans and the related Pledged Assets shall be subject to the
provisions of Sections 9.5 and 9.6;

 

(iii)  if the
conditions set forth in Section 9.6 have been satisfied and the Trustee elects
to retain the Series Collateral pursuant to such Section, then any direction to
the Indenture Trustee by Holders of Notes representing less than 66 2/3rds % of
the Notes Principal Amount of such Series to sell or liquidate the Series
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;

 

provided,
however, that, subject to Section 11.01, the Trustee need not take any action
that it determines might involve it in liability.

 

ARTICLE
X

SERVICER
DEFAULTS

 

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

 

(a)  any
failure by the Master 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 or a Series Supplement and such failure
remains unremedied for two Business Days; provided,
however, that if
the Master Servicer is unable to make a payment, transfer or deposit when due
and such failure is as a result of circumstances beyond the Master Servicer’s
control, the grace period shall be extended to five Business Days;

 

(b)  failure
on the part of the Master Servicer duly to observe or perform any other
covenants or agreements of the Master Servicer set forth in this Agreement, a
Series Supplement or any other Facility Document to which the Master Servicer is
a party and such failure continues

 

57

 

unremedied
for a period of 20 days after the earlier of the date on which the Master
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 Master Servicer by the Trustee, or to the Master Servicer and the Trustee
by any Noteholder;

 

(c)  any
representation and warranty made by the Master 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 Master Servicer is not in compliance with such
representation or warranty within ten Business Days after the earlier of the
date on which the Master 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 Master Servicer by the Trustee or to the
Master Servicer and the Trustee by any Noteholder;

 

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

 

(e)  the
Master Servicer fails to deliver reports to the Trustee in accordance with
Section 6.1 of this Agreement and such failure remains unremedied for five
Business Days; or

 

(f)  the
occurrence of any event which is designated as a Servicer Default under any
Series Supplement.

 

THEN, so
long as such Master Servicer Default shall be continuing, either the Trustee, or
the Majority Holders of all Notes by notice then given in writing to the Master
Servicer 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 Master Servicer as Master
Servicer under this Agreement (such termination being herein called a
“Service
Transfer”). After
receipt by the Master Servicer of such Termination Notice and subject to the
terms of Section 10.2(a), the Trustee shall automatically assume the
responsibilities of the Master Servicer hereunder until the date that a
Successor Master Servicer shall have been appointed pursuant to Section 10.2 and
all authority and power of the Master Servicer under this Agreement shall pass
to and be vested in the Trustee or such Successor Master 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 Master Servicer to cooperate)
to execute and deliver, on behalf of the Master Servicer, as attorney-in-fact or
otherwise, all documents and other instruments upon the failure of the Master
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
Master Servicer agrees to cooperate with the Trustee and such Successor Master
Servicer in effecting the termination of the responsibilities and rights of the
Master Servicer to conduct servicing hereunder, including without limitation the
transfer to such Successor Master Servicer of all authority of the Master
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 Master Servicer for deposit in a Lockbox
Account or which shall thereafter be received by the Master Servicer with
respect to the Pledged Loans, and in assisting the Successor Master Servicer in
enforcing all rights under this Agreement including, 

 

58

 

without
limitation, allowing the Successor Master Servicer’s personnel access to the
Master Servicer’s premises for the purpose of collecting payments on the Pledged
Loans made at such premises. The Master Servicer shall promptly transfer its
electronic records relating to the Pledged Loans to the Successor Master
Servicer in such electronic form as the Successor Master Servicer may reasonably
request and shall promptly transfer to the Successor Master 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 Master
Servicer shall reasonably request. The Master Servicer shall allow the Successor
Master Servicer access to the Master Servicer’s officers and employees. To the
extent that compliance with this Section 10.1 shall require the Master Servicer
to disclose to the Successor Master Servicer information of any kind which the
Master Servicer reasonably deems to be confidential, the Successor Master
Servicer shall be required to enter into such customary licensing and
confidentiality agreements as the Master Servicer shall deem necessary to
protect its interest and as shall be satisfactory in form and substance to the
Successor Master Servicer. The Master 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 Master
Servicer with the provisions of this paragraph.

 

Section
10.2  Appointment
of Successor.

 

(a)  Appointment. On and
after the receipt by the Master Servicer of a Termination Notice pursuant to
Section 10.1, or any permitted resignation of the Master Servicer pursuant to
Section 5.13, the Master Servicer shall continue to perform all servicing
functions under this Agreement and all Series Supplements until the date
specified in the Termination Notice or otherwise specified by the Trustee or
until a date mutually agreed upon by the Master Servicer and the Trustee. Upon
receipt by the Master Servicer of a Termination Notice, the Trustee or the
Trustee, acting on behalf of the Majority Holders which gave the Termination
Notice, shall as promptly as possible after the giving of a Termination Notice
appoint a successor servicer (in any case, the “Successor
Master Servicer”) and
such Successor Master 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 Master 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
Master Servicer has not been appointed and has not accepted its appointment and
the Trustee is legally unable or otherwise not capable of assuming
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 Master Servicer, the Trustee will act as the
Successor Master Servicer.

 

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

 

59

 

all
references in this Agreement to the Master Servicer shall be deemed to refer to
the Successor Master Servicer.

 

(c)  Compensation
of Successor Master 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 Master Servicer as provided
in the Series Supplements. The costs and expenses of transferring servicing
shall be paid by the Master 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 in the Series Supplements.

 

Section
10.3  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 Master
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. Upon any termination or appointment of
a Successor Master Servicer pursuant to this Article X, the Trustee shall give
prompt written notice thereof to the Issuer and to the Noteholders at their
respective addresses appearing in the Note Register.

 

Section
10.4  Waiver
of Past Defaults. If a
Servicer Default is a Servicer Default as described in subsection 10.1(f), the
Majority Holders of the Notes of the Series issued under the Series Supplement
containing such Servicer Default may waive such default and, with respect to a
Servicer Default described in subsections 10.1(a) through (e), the Majority
Holders of all Notes may, on behalf of all Holders, waive any default by the
Master 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
10.5  Termination
of Master Servicer’s Authority. All
authority and power granted to the Master 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 Master 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 Master Servicer shall
cooperate with the Issuer in effecting the termination of the responsibilities
and rights of the Master Servicer to conduct servicing on the Pledged Loans. The
Master Servicer shall transfer its electronic records relating to the Pledged
Loans to the Issuer in such electronic form as Issuer may 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 10.5 shall
require the Master Servicer to disclose information of any kind which the Master
Servicer deems to be confidential, the Issuer shall be required to enter into
such customary licensing and confidentiality agreements as the Master Servicer
shall deem necessary to protect its interests and as shall be reasonably
satisfactory in form and substance to the Issuer.

 

60

 

Section
10.6  Matters
Related to Successor Master Servicer.

 

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

 

The
Successor Master Servicer will make arrangements with the Master Servicer for
the prompt and safe transfer of, and the Master Servicer shall provide to the
Successor Master Servicer, all necessary servicing files and records, including
(as deemed necessary by the Successor Master 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
Master Servicer, reflecting all applicable Pledged Loan information. The current
Master Servicer shall be obligated to pay the costs associated with the transfer
of the servicing files and records to the Successor Master
Servicer.

 

The
Successor Master 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 Master Servicer acting in accordance
with information prepared or supplied by a Person other than the Successor
Master Servicer or the failure of any such Person to prepare or provide such
information. The Successor Master 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 Master Servicer, the Issuer or the Trustee or
for any inaccuracy or omission in a notice or communication received by the
Successor Master 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 Master Servicer assumes the role of Successor
Master Servicer hereunder, such Successor Master Servicer shall be entitled to
appoint subservicers whenever it shall be deemed necessary by such Successor
Master Servicer.

 

ARTICLE
XI 

THE
TRUSTEE; THE COLLATERAL AGENT; THE CUSTODIAN

 

Section
11.1  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 

 

61

 

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 and the Series Supplements until the termination of this Agreement in
accordance with Section 12.1 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 Master 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 11.1(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 communication or a Responsible Officer of the Trustee
receives written notice of such failure from the Master 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 

 

62

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 Series 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
Master 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 Master 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 or the applicable Series Supplement, the Trustee
shall have no power to dispose of or vary any Series Collateral.

 

(g)  In the
event that the Registrar shall fail to perform any obligation, duty or agreement
in the manner or on the day required to be performed by the Registrar, as the
case may be, under this Agreement, the Trustee (if it is not then the 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, any part of any Series Collateral other than from funds available in
the related Series Collection Account, or (D) confirm or verify the contents of
any reports or certificates of the Master 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.

 

63

 

Section
11.2  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 Master 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, any other report or statement delivered
to the Trustee by the Master 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 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 

 

64

 

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 11.1(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 Master 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
11.3  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 11.14, 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 Master 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
11.4  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
Master 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.

 

Section
11.5  Trustee’s
Fees and Expenses; Indemnification. The
Trustee shall be entitled to receive from time to time pursuant to the Series
Supplements 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 

 

65

 

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 8.3, the Issuer and the Master
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, any Series Supplement, the Collateral
Agency Agreement or any other Facility 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 Master Servicer pursuant
to Section 10.2, the provisions of this Section 11.5 shall not apply to
expenses, disbursements and advances made or incurred by the Trustee in its
capacity as Successor Master Servicer. The agreements in this Section 11.5 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
11.6  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 11.6, 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 11.6, the Trustee shall resign immediately in the
manner and with the effect specified in Section 11.7.

 

66

 

Section
11.7  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 Master
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 11.6 and the Master Servicer shall notify
the Trustee 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. 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 11.6 and shall fail to resign after written request therefor by the
Issuer or the Master 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, the
Master Servicer 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 11.7 shall not become
effective until acceptance of appointment by the successor Trustee as provided
in Section 11.8.

 

Section
11.8  Successor
Trustee.

 

(a)  Any
successor Trustee, appointed as provided in Section 11.7, shall execute,
acknowledge and deliver to the Issuer, the Master 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 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.

 

67

 

(b)  No
successor Trustee shall accept appointment as provided in this Section 11.8
unless at the time of such acceptance such successor Trustee shall be eligible
under the provisions of Section 11.6.

 

(c)  Upon
acceptance of appointment by a successor Trustee as provided in this Section
11.8, such successor Trustee shall mail notice of such succession hereunder to
the Trustee, the Issuer, the Master Servicer and all Noteholders at their
addresses as shown in the Note Register.

 

Section
11.9  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 11.6, 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
11.10  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 Series
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 Series Collateral and to vest in such Person or Persons, in such
capacity and for the benefit of the Noteholders, such title to the Series
Collateral, or any part thereof, and subject to the other provisions of this
Section 11.10, 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 11.6 and no notice to the Noteholders of the appointment
of any co-trustee or separate trustee shall be required under Section
11.8.

 

(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 Series 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;

 

(ii)  no
trustee hereunder shall be personally liable by reason of any act or omission of
any other trustee hereunder; and

 

68

 

(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 XI.
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
Master 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
11.11  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
11.12  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 IX and
Section 10.1, 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
11.13  Rights
of Noteholders to Direct the Trustee. The
Majority Holders of a Series shall, with respect to such Series, 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 11.1, 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 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 

 

69

 

been
offered reasonable security or indemnity, as contemplated by Section 11.2, 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
11.14  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 the Series Supplements and has taken all necessary action to
authorize the execution, delivery and performance by it of this Agreement and
the Series Supplements; 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
11.15  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 Master Servicer and
the Noteholders of any change in the location of any such office or
agency.

 

Section
11.16  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
11.17  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 and the Series Supplements
in order to perfect the security interest in the Series Collateral, that such
listings shall be for administrative convenience only in creating a
representative of the secured party to take certain actions under the Facility
Documents on behalf of one or more secured parties including the Trustee and
that 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
11.18  Replacement
of the Custodian. Each of
the Issuer and the Master Servicer agree not to replace either of the Custodians
unless the Rating Agency Condition has been satisfied with respect to such
replacement.

 

70

 

ARTICLE
XII

TERMINATION

 

Section
12.1  Termination
of Agreement. The
respective obligations and responsibilities of the Issuer, the Master 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 appropriate Collection Accounts sufficient to pay the Aggregate
Principal Amount of all Series plus all interest accrued on the Notes of all
Series accrued 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
12.2  Final
Payment.

 

(a)  Written
notice of any termination of a Series or of all Series shall be given (subject
to at least two Business Days’ prior notice from the Master Servicer to the
Trustee) by the Trustee to the Noteholders 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 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
12.3  Defeasance. The
Issuer’s obligations with respect to any Series of Notes may be defeased prior
to payment of the Notes of that Series if so provided in the applicable Series
Supplement and subject to the terms and conditions contained in that Series
Supplement.

 

Section
12.4  Release
of Collateral. Upon
the termination of this Agreement pursuant to Sections 12.1, 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 Series
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 Series Collateral.

 

ARTICLE
XIII

MISCELLANEOUS
PROVISIONS

 

Section
13.1  Amendment.

 

(a)  Supplemental
Indentures and Amendments Without Consent of the Noteholders. The
Issuer, the Trustee, the Collateral Agent and the Master 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 or into
a Series Supplement in form satisfactory to the Trustee for any of the following
purposes:

 

71

 

(i)  to add to
the covenants of the Issuer for the benefit of the Noteholders 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 of one or more Series;

 

(iii)  to
correct or amplify the description of any property at any time subject to the
Lien of a Series Supplement, 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, any property subject to the Lien
of a Series Supplement;

 

(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 a Series of Notes, so long as any such modifications
comply with the Securities Act and the Investment Company Act;

 

(vi)  Reserved;
or

 

(vii)  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 (vii), the Issuer shall
have delivered to the Trustee an Officer’s Certificate of the Issuer and an
Officer’s Certificate of the Master Servicer both to the effect that such change
will not adversely affect the rights of any Noteholders and evidence that any
additional conditions to such amendment contained in one or more Series
Supplements have been satisfied.

 

Subject
to Section 13.1(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 of each affected Series 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 any Series Supplement, or modifying in any
manner the rights of the Holders of the Notes under this Agreement or any Series

 

72

 

Supplement;
provided that, 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 Series 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 any Series Supplement; or

 

(iv)  permit
the creation of any lien ranking prior to or on a parity with the lien of this
Agreement or any Series Supplement, with respect to any part of the Series
Collateral or terminate the lien of this Agreement or any Series Supplement on
any property at any time subject thereto or deprive the Noteholders of the
security afforded by the lien of this Agreement or any Series
Supplement.

 

It shall
not be necessary in connection with any consent of the Noteholders under this
Section 13.1(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 Series or
Class of 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
Master Servicer of any amendment or supplemental indenture pursuant to this
Section 13.1(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 13.1 or the modifications
thereby of the trusts created by this Agreement or any Series Supplement, the
Trustee shall be entitled to receive, and (subject to Sections 11.1 and 11.2)
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, any Series Supplement, or otherwise.

 

(d)  Effect
of Amendments and Supplemental Indentures. Upon
the execution of any amendment or supplemental indenture under this Section
13.1, 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.

 

73

 

(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 13.1 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 its
authenticating 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.

 

Section
13.2  Reserved.

 

Section
13.3  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 Series
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
13.4  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
13.5  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:

 

74

If to the
Issuer:

 

CENDANT
TIMESHARE CONDUIT RECEIVABLES FUNDING, LLC

10750
West Charleston Boulevard

Suite
130

Mailstop
2046

Las
Vegas, Nevada 89135

Attention:
 Mark A.
Johnson

(or such
other address as may hereafter be furnished to the Trustee, the Master Servicer
and the Collateral Agent in writing by the Issuer).

 

If to the
Master Servicer:

 

CENDANT
TIMESHARE RESORTS GROUP - CONSUMER FINANCE, INC. 

10750
West Charleston Boulevard

Suite
130

Las
Vegas, Nevada 89135

Fax
number: 702-304-4211 

Attention:
Mark A. Johnson

(or such
other address as may hereafter be furnished to the Trustee, the Issuer and the
Collateral Agent in writing by the Master Servicer).

 

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:
Cendant Timeshare Conduit Receivables Funding, LLC

Series
2002-1

 

75

 

(or such
other address as may be furnished to the Master Servicer, the Issuer or the
Collateral Agent in writing by the Trustee).

 

If to the
Collateral Agent:

 

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:
Cendant Timeshare Conduit Receivables Funding, LLC

Series
2002-1

(or such
other address as may be furnished in writing to the Trustee, the Issuer and the
Master Servicer by the Collateral Agent).

 

If to
each Rating Agency:

 

Fitch
Ratings, Inc.

One State
Street Plaza

New York,
New York, 10004

Fax
number: 212-480-4438

Attention:
Timeshare Asset-Backed Group

(or such
other address as may be furnished in writing to the Trustee, the Issuer and the
Master Servicer).

 

Moody’s
Investor 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
Master Servicer).

 

Standard
& Poor’s Ratings Services

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
Master Servicer).

 

If to the
Noteholders:

 

(to such
addresses as may be furnished in writing by any Noteholder to the
Trustee).

 

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
13.6  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
13.7  Assignment.
Notwithstanding anything to the contrary contained herein, except as provided in
Section 10.2, this Agreement may not be assigned by the Issuer or the Master
Servicer without the prior consent of the Majority Holders.

 

76

 

Section
13.8  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
13.9  Further
Assurances. Each of
the Issuer, the Master 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 execution 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
13.10  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
13.11  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
13.12  Third-Party
Beneficiaries. This
Agreement will inure to the benefit of and be binding upon the parties hereto,
the Noteholders and their respective successors and permitted assigns. Except as
otherwise provided in this Article XIII, no other person will have any right or
obligation hereunder.

 

Section
13.13  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 Master Servicer in reliance thereon, whether or not notation of
such action is made upon such Note.

 

Section
13.14  Merger
and Integration. Except
as set forth in the Trustee Fee Letter, and except as specifically stated
otherwise herein, this Agreement and the other Facility Documents set forth the
entire understanding of the parties relating to the subject matter hereof, and,
except 

 

77

 

as set
forth in such Trustee Fee Letter, all prior understandings, written or oral, are
superseded by this Agreement and the other Facility Documents. This Agreement
may not be modified, amended, waived or supplemented except as provided
herein.

 

Section
13.15  No
Bankruptcy Petition. The
Trustee, the Master 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
13.16  Headings. The
headings herein are for purposes of reference only and shall not otherwise
affect the meaning or interpretation of any provision hereof.

 

78

 

IN
WITNESS WHEREOF, Issuer, the Master 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.

 

	 	 	
      CENDANT
      TIMESHARE CONDUIT RECEIVABLES FUNDING, LLC,

      as
      Issuer
	 
	 	 	
      By:
	
      /s/
      Mark A. Johnson_

	 	 	 	
      Name:
      Mark A. Johnson

      Title:
      President

	 	 	
      CENDANT
      TIMESHARE RESORT GROUP-

      CONSUMER
      FINANCE, INC.,

      as
      Master Servicer
	 
	 	 	
      By:
	
      /s/
      Mark A. Johnson

	 	 	 	
      Name:
      Mark A. Johnson

      Title:
      President 

	 	 	
      WACHOVIA
      BANK, NATIONAL ASSOCIATION,

      as
      Trustee
	 
	 	 	
      By:
	
      /s/
      Amedeo Morreale

	 	 	 	
      Name:
      Amedeo Morreale

      Title:
      Vice President

	 	 	
      WACHOVIA
      BANK, NATIONAL ASSOCIATION,

      as
      Collateral Agent
	 
	 	 	
      By:
	
      /s/
      Cheryl Whitehead

	 	 	 	
      Name:
      Cheryl Whitehead

      Title:
      Vice President

[Signature
page for Amended and Restated Master Indenture and Servicing
Agreement]

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