Document:

INDENTURE AND SERVICING AGREEMENT

 

EXECUTION COPY

 

 

Exhibit 10.2

 

INDENTURE AND SERVICING AGREEMENT

 

Dated as of May 27, 2004

by and among

CENDANT TIMESHARE 2004-1 RECEIVABLES FUNDING, LLC,

as Issuer

and

FAIRFIELD ACCEPTANCE CORPORATION — NEVADA,

as Servicer

and

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Trustee

and

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Collateral Agent

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 
	 	 	 	 
	ARTICLE I
DEFINITIONS

	 
	 	 
	 	 	 	 
	Section 1.1
	 	Definitions

	 	 	4	 
	 
	 	 
	 	 	 	 
	Section 1.2
	 	Other Definitional Provisions

	 	 	29	 
	 
	 	 
	 	 	 	 
	Section 1.3
	 	Intent and Interpretation of Documents

	 	 	29	 
	 
	 	 
	 	 	 	 
	ARTICLE II
THE NOTES

	 
	 	 
	 	 	 	 
	Section 2.1
	 	Designation

	 	 	29	 
	 
	 	 
	 	 	 	 
	Section 2.2
	 	Form Generally

	 	 	30	 
	 
	 	 
	 	 	 	 
	Section 2.3
	 	[Reserved]

	 	 	30	 
	 
	 	 
	 	 	 	 
	Section 2.4
	 	Determination of LIBOR

	 	 	30	 
	 
	 	 
	 	 	 	 
	Section 2.5
	 	Execution, Authentication and Delivery

	 	 	31	 
	 
	 	 
	 	 	 	 
	Section 2.6
	 	Registration; Registration of Transfer and Exchange; Transfer Restrictions
	 	 	31	 
	 
	 	 
	 	 	 	 
	Section 2.7
	 	Mutilated, Destroyed, Lost or Stolen Notes

	 	 	36	 
	 
	 	 
	 	 	 	 
	Section 2.8
	 	Persons Deemed Owner

	 	 	37	 
	 
	 	 
	 	 	 	 
	Section 2.9
	 	Payment of Principal and Interest; Defaulted Interest

	 	 	37	 
	 
	 	 
	 	 	 	 
	Section 2.10
	 	Cancellation

	 	 	38	 
	 
	 	 
	 	 	 	 
	Section 2.11
	 	Global Notes

	 	 	39	 
	 
	 	 
	 	 	 	 
	Section 2.13
	 	Special Transfer Provisions

	 	 	41	 
	 
	 	 
	 	 	 	 
	Section 2.14
	 	Notices to Clearing Agency

	 	 	43	 
	 
	 	 
	 	 	 	 
	Section 2.15
	 	Definitive Notes

	 	 	43	 
	 
	 	 
	 	 	 	 
	Section 2.16
	 	Payments on the Notes

	 	 	44	 
	 
	 	 
	 	 	 	 
	Section 2.17
	 	[Reserved]

	 	 	45	 
	 
	 	 
	 	 	 	 
	Section 2.18
	 	Clean-Up Call

	 	 	45	 
	 
	 	 
	 	 	 	 
	Section 2.19
	 	Authentication Agent

	 	 	45	 
	 
	 	 
	 	 	 	 
	Section 2.20
	 	Appointment of Paying Agent

	 	 	46	 
	 
	 	 
	 	 	 	 
	Section 2.21
	 	Confidentiality

	 	 	47	 
	 
	 	 
	 	 	 	 
	Section 2.22
	 	144A Information

	 	 	47	 
	 
	 	 
	 	 	 	 
	ARTICLE III
PAYMENTS, SECURITY AND ALLOCATIONS

	 
	 	 
	 	 	 	 
	Section 3.1
	 	Priority of Payments, Rapid Amortization

	 	 	48	 

i

 

TABLE OF
CONTENTS
(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 
	 	 	 	 
	Section 3.2
	 	Information Provided to Trustee

	 	 	50	 
	 
	 	 
	 	 	 	 
	Section 3.3
	 	Payments

	 	 	50	 
	 
	 	 
	 	 	 	 
	Section 3.4
	 	Collection Account

	 	 	50	 
	 
	 	 
	 	 	 	 
	Section 3.5
	 	Reserve Account

	 	 	51	 
	 
	 	 
	 	 	 	 
	Section 3.6
	 	Interest Rate Swap

	 	 	53	 
	 
	 	 
	 	 	 	 
	Section 3.7
	 	Custody of Permitted Investments and other Collateral

	 	 	55	 
	 
	 	 
	 	 	 	 
	Section 3.8
	 	The Policy

	 	 	55	 
	 
	 	 
	 	 	 	 
	ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ISSUER

	 
	 	 
	 	 	 	 
	Section 4.1
	 	Representations and Warranties Regarding the Issuer

	 	 	57	 
	 
	 	 
	 	 	 	 
	Section 4.2
	 	Representations and Warranties Regarding the Loan Files

	 	 	60	 
	 
	 	 
	 	 	 	 
	Section 4.3
	 	Rights of Obligors and Release of Loan Files

	 	 	61	 
	 
	 	 
	 	 	 	 
	ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE ISSUER; ASSIGNMENT OF
REPRESENTATIONS AND WARRANTIES

	 
	 	 
	 	 	 	 
	Section 5.1
	 	Representations and Warranties of the Issuer

	 	 	62	 
	 
	 	 
	 	 	 	 
	Section 5.2
	 	Eligible Loans

	 	 	62	 
	 
	 	 
	 	 	 	 
	Section 5.3
	 	Assignment of Representations and Warranties

	 	 	65	 
	 
	 	 
	 	 	 	 
	Section 5.4
	 	Release of Defective Loans

	 	 	65	 
	 
	 	 
	 	 	 	 
	ARTICLE VI
ADDITIONAL COVENANTS OF ISSUER

	 
	 	 
	 	 	 	 
	Section 6.1
	 	Affirmative Covenants

	 	 	67	 
	 
	 	 
	 	 	 	 
	Section 6.2
	 	Negative Covenants of the Issuer

	 	 	74	 
	 
	 	 
	 	 	 	 
	ARTICLE VII
SERVICING OF PLEDGED LOANS

	 
	 	 
	 	 	 	 
	Section 7.1
	 	Responsibility for Loan Administration

	 	 	76	 
	 
	 	 
	 	 	 	 
	Section 7.2
	 	Standard of Care

	 	 	77	 
	 
	 	 
	 	 	 	 
	Section 7.3
	 	Records

	 	 	77	 
	 
	 	 
	 	 	 	 
	Section 7.4
	 	Loan Schedule

	 	 	77	 
	 
	 	 
	 	 	 	 
	Section 7.5
	 	Enforcement

	 	 	77	 
	 
	 	 
	 	 	 	 
	Section 7.6
	 	Trustee and Collateral Agent to Cooperate

	 	 	78	 
	 
	 	 
	 	 	 	 
	Section 7.7
	 	Other Matters Relating to the Servicer

	 	 	78	 

ii

 

TABLE OF
CONTENTS
(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 
	 	 	 	 
	Section 7.8
	 	Servicing Compensation

	 	 	79	 
	 
	 	 
	 	 	 	 
	Section 7.9
	 	Costs and Expenses

	 	 	79	 
	 
	 	 
	 	 	 	 
	Section 7.10
	 	Representations and Warranties of the Servicer

	 	 	79	 
	 
	 	 
	 	 	 	 
	Section 7.11
	 	Additional Covenants of the Servicer

	 	 	80	 
	 
	 	 
	 	 	 	 
	Section 7.12
	 	Servicer not to Resign

	 	 	83	 
	 
	 	 
	 	 	 	 
	Section 7.13
	 	Merger or Consolidation of, or Assumption of the Obligations of Servicer
	 	 	84	 
	 
	 	 
	 	 	 	 
	Section 7.14
	 	Examination of Records

	 	 	84	 
	 
	 	 
	 	 	 	 
	Section 7.15
	 	Subservicing Agreements; Delegation of Duties

	 	 	84	 
	 
	 	 
	 	 	 	 
	Section 7.16
	 	Servicer Advances

	 	 	85	 
	 
	 	 
	 	 	 	 
	Section 7.17
	 	Delivery of Monthly Files

	 	 	85	 
	 
	 	 
	 	 	 	 
	ARTICLE VIII
REPORTS

	 
	 	 
	 	 	 	 
	Section 8.1
	 	Monthly Servicing Report

	 	 	85	 
	 
	 	 
	 	 	 	 
	Section 8.2
	 	Other Data

	 	 	86	 
	 
	 	 
	 	 	 	 
	Section 8.3
	 	Annual Servicer’s Certificate

	 	 	86	 
	 
	 	 
	 	 	 	 
	Section 8.4
	 	Notices to FAC

	 	 	86	 
	 
	 	 
	 	 	 	 
	Section 8.5
	 	Tax Reporting

	 	 	86	 
	 
	 	 
	 	 	 	 
	ARTICLE IX
LOCKBOX ACCOUNTS

	 
	 	 
	 	 	 	 
	Section 9.1
	 	Lockbox Accounts

	 	 	86	 
	 
	 	 
	 	 	 	 
	ARTICLE X
INDEMNITIES

	 
	 	 
	 	 	 	 
	Section 10.1
	 	Liabilities to Obligors

	 	 	87	 
	 
	 	 
	 	 	 	 
	Section 10.2
	 	Tax Indemnification

	 	 	87	 
	 
	 	 
	 	 	 	 
	Section 10.3
	 	Servicer’s Indemnities

	 	 	87	 
	 
	 	 
	 	 	 	 
	Section 10.4
	 	Operation of Indemnities

	 	 	88	 
	 
	 	 
	 	 	 	 
	ARTICLE XI
EVENTS OF DEFAULT

	 
	 	 
	 	 	 	 
	Section 11.1
	 	Events of Default

	 	 	88	 
	 
	 	 
	 	 	 	 
	Section 11.2
	 	Acceleration of Maturity; Rescission and Annulment

	 	 	89	 
	 
	 	 
	 	 	 	 
	Section 11.3
	 	Collection of Indebtedness and Suits for Enforcement by Trustee

	 	 	90	 

iii

 

TABLE OF
CONTENTS
(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 
	 	 	 	 
	Section 11.4
	 	Trustee May File Proofs of Claim

	 	 	91	 
	 
	 	 
	 	 	 	 
	Section 11.5
	 	Remedies

	 	 	92	 
	 
	 	 
	 	 	 	 
	Section 11.6
	 	Optional Preservation of Collateral

	 	 	93	 
	 
	 	 
	 	 	 	 
	Section 11.7
	 	Application of Monies Collected During Event of Default

	 	 	93	 
	 
	 	 
	 	 	 	 
	Section 11.8
	 	Limitation on Suits by Individual Noteholders

	 	 	95	 
	 
	 	 
	 	 	 	 
	Section 11.9
	 	Unconditional Rights of Noteholders to Receive Principal and Interest

	 	 	95	 
	 
	 	 
	 	 	 	 
	Section 11.10
	 	Restoration of Rights and Remedies

	 	 	95	 
	 
	 	 
	 	 	 	 
	Section 11.11
	 	Waiver of Event of Default

	 	 	96	 
	 
	 	 
	 	 	 	 
	Section 11.12
	 	Waiver of Stay or Extension Laws

	 	 	96	 
	 
	 	 
	 	 	 	 
	Section 11.13
	 	Sale of Collateral

	 	 	96	 
	 
	 	 
	 	 	 	 
	Section 11.14
	 	Action on Notes

	 	 	96	 
	 
	 	 
	 	 	 	 
	Section 11.15
	 	Control by the Insurer or the Noteholders

	 	 	97	 
	 
	 	 
	 	 	 	 
	ARTICLE XII
SERVICER DEFAULTS

	 
	 	 
	 	 	 	 
	Section 12.1
	 	Servicer Defaults

	 	 	97	 
	 
	 	 
	 	 	 	 
	Section 12.2
	 	Appointment of Successor

	 	 	99	 
	 
	 	 
	 	 	 	 
	Section 12.3
	 	Notification to Noteholders

	 	 	99	 
	 
	 	 
	 	 	 	 
	Section 12.4
	 	Waiver of Past Defaults

	 	 	100	 
	 
	 	 
	 	 	 	 
	Section 12.5
	 	Termination of Servicer’s Authority

	 	 	100	 
	 
	 	 
	 	 	 	 
	Section 12.6
	 	Matters Related to Successor Servicer

	 	 	100	 
	 
	 	 
	 	 	 	 
	ARTICLE XIII
THE TRUSTEE; THE COLLATERAL AGENT; THE CUSTODIAN

	 
	 	 
	 	 	 	 
	Section 13.1
	 	Duties of Trustee

	 	 	101	 
	 
	 	 
	 	 	 	 
	Section 13.2
	 	Certain Matters Affecting the Trustee

	 	 	103	 
	 
	 	 
	 	 	 	 
	Section 13.3
	 	Trustee Not Liable for Recitals in Notes or Use of Proceeds of Notes

	 	 	104	 
	 
	 	 
	 	 	 	 
	Section 13.4
	 	Trustee May Own Notes; Trustee in its Individual Capacity

	 	 	105	 
	 
	 	 
	 	 	 	 
	Section 13.5
	 	Trustee’s Fees and Expenses; Indemnification

	 	 	105	 
	 
	 	 
	 	 	 	 
	Section 13.6
	 	Eligibility Requirements for Trustee

	 	 	106	 
	 
	 	 
	 	 	 	 
	Section 13.7
	 	Resignation or Removal of Trustee

	 	 	106	 
	 
	 	 
	 	 	 	 
	Section 13.8
	 	Successor Trustee

	 	 	107	 
	 
	 	 
	 	 	 	 
	Section 13.9
	 	Merger or Consolidation of Trustee

	 	 	107	 

iv

 

TABLE OF
CONTENTS
(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 
	 	 	 	 
	Section 13.10
	 	Appointment of Co-Trustee or Separate Trustee

	 	 	107	 
	 
	 	 
	 	 	 	 
	Section 13.11
	 	Trustee May Enforce Claims Without Possession of Notes

	 	 	109	 
	 
	 	 
	 	 	 	 
	Section 13.12
	 	Suits for Enforcement

	 	 	109	 
	 
	 	 
	 	 	 	 
	Section 13.13
	 	Rights of the Insurer or the Noteholders to Direct the Trustee

	 	 	109	 
	 
	 	 
	 	 	 	 
	Section 13.14
	 	Representations and Warranties of the Trustee

	 	 	110	 
	 
	 	 
	 	 	 	 
	Section 13.15
	 	Maintenance of Office or Agency

	 	 	110	 
	 
	 	 
	 	 	 	 
	Section 13.16
	 	No Assessment

	 	 	110	 
	 
	 	 
	 	 	 	 
	Section 13.17
	 	UCC Filings and Title Certificates

	 	 	110	 
	 
	 	 
	 	 	 	 
	Section 13.18
	 	Replacement of the Custodian

	 	 	110	 
	 
	 	 
	 	 	 	 
	ARTICLE XIV
TERMINATION

	 
	 	 
	 	 	 	 
	Section 14.1
	 	Termination of Agreement

	 	 	111	 
	 
	 	 
	 	 	 	 
	Section 14.2
	 	Final Payment

	 	 	111	 
	 
	 	 
	 	 	 	 
	Section 14.3
	 	[Reserved]

	 	 	111	 
	 
	 	 
	 	 	 	 
	Section 14.4
	 	Release of Collateral

	 	 	111	 
	 
	 	 
	 	 	 	 
	Section 14.5
	 	Release of Defaulted Loans

	 	 	112	 
	 
	 	 
	 	 	 	 
	Section 14.6
	 	Release of Trendwest Timeshare Upgrades

	 	 	113	 
	 
	 	 
	 	 	 	 
	Section 14.7
	 	Release Upon Payment in Full

	 	 	114	 
	 
	 	 
	 	 	 	 
	ARTICLE XV
MISCELLANEOUS PROVISIONS

	 
	 	 
	 	 	 	 
	Section 15.1
	 	Amendment

	 	 	114	 
	 
	 	 
	 	 	 	 
	Section 15.2
	 	Discretion with Respect to Derivative Financial Instruments

	 	 	117	 
	 
	 	 
	 	 	 	 
	Section 15.3
	 	Limitation on Rights of the Noteholders

	 	 	117	 
	 
	 	 
	 	 	 	 
	Section 15.4
	 	Governing Law

	 	 	118	 
	 
	 	 
	 	 	 	 
	Section 15.5
	 	Waiver of Jury Trial

	 	 	118	 
	 
	 	 
	 	 	 	 
	Section 15.6
	 	Notices

	 	 	118	 
	 
	 	 
	 	 	 	 
	Section 15.7
	 	Severability of Provisions

	 	 	121	 
	 
	 	 
	 	 	 	 
	Section 15.8
	 	Assignment

	 	 	121	 
	 
	 	 
	 	 	 	 
	Section 15.9
	 	Notes Non-assessable and Fully Paid

	 	 	121	 
	 
	 	 
	 	 	 	 
	Section 15.10
	 	Further Assurances

	 	 	121	 
	 
	 	 
	 	 	 	 
	Section 15.11
	 	No Waiver; Cumulative Remedies

	 	 	121	 

v

 

TABLE OF
CONTENTS
(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 
	 	 	 	 
	Section 15.12
	 	Counterparts

	 	 	121	 
	 
	 	 
	 	 	 	 
	Section 15.13
	 	Third-Party Beneficiaries

	 	 	121	 
	 
	 	 
	 	 	 	 
	Section 15.14
	 	Actions by the Noteholders

	 	 	122	 
	 
	 	 
	 	 	 	 
	Section 15.15
	 	Merger and Integration

	 	 	122	 
	 
	 	 
	 	 	 	 
	Section 15.16
	 	No Bankruptcy Petition

	 	 	122	 
	 
	 	 
	 	 	 	 
	Section 15.17
	 	Headings

	 	 	122	 

vi

 

EXHIBITS

	 	 	 	 	 
	Exhibit A
	 	Forms of Class A-1 Notes

	 	A-1-1
	 	 	Forms of Class A-2 Notes

	 	A-4-1
	 
	 	 
	 	 
	Exhibit B
	 	Form of Payment and Release Certificate

	 	B-1
	 
	 	 
	 	 
	Exhibit C
	 	Form of Regulation S Certificate

	 	C-1-1
	 	 	Form of Non-U.S. Certificate

	 	C-2-1
	 
	 	 
	 	 
	Exhibit D
	 	Form of Monthly Servicing Report

	 	D-1-1
	 	 	Form of Servicing Officer’s Certificate

	 	D-2-1
	 
	 	 
	 	 
	Exhibit E
	 	Form of Annual Servicer’s Certificate

	 	E-1
	 
	 	 
	 	 
	Exhibit F
	 	Form of Lockbox Agreement

	 	F-1
	 
	 	 
	 	 
	Exhibit G
	 	Form of Supplemental Grant

	 	G-1
	 
	 	 
	 	 
	Exhibit H
	 	Credit Standards and Collection Policies

	 	H-1

vii

 

SCHEDULES

	1.	 	Schedule of Trustee’s fees.

	 
	2.	 	List of Lockbox Banks.

	 
	3.	 	Schedule for Collateral Agent’s and Custodian’s Fees

viii

 

INDENTURE AND SERVICING AGREEMENT

THIS INDENTURE AND SERVICING AGREEMENT dated as of May 27, 2004 is by and
among CENDANT TIMESHARE 2004-1 RECEIVABLES FUNDING, LLC, a limited liability
company organized under the laws of the State of Delaware, as issuer, FAIRFIELD
ACCEPTANCE CORPORATION-NEVADA, a Delaware corporation, as Servicer, and
WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as trustee
and as collateral agent. This Indenture may be supplemented and amended from
time to time in accordance with Article XV hereof.

RECITALS

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

All covenants and agreements made by the Issuer herein are for the benefit
and security of the Trustee, acting on behalf of the Noteholders, the Insurer
and the Swap Counterparty.

The Issuer is entering into this Indenture, 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 as provided herein, the valid obligations of the
Issuer and to make this Indenture a valid agreement of the Issuer, enforceable
in accordance with its terms.

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

GRANTING CLAUSES

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

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

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

 

 

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

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

	 
	 	(e)	 	the Interest Rate Swap;

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

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

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

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

2

 

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

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

	 
	 	(l)	 	all proceeds of the foregoing.

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

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

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

3

 

ARTICLE I

DEFINITIONS

Section 1.1     Definitions

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

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

“Accrued Interest” shall mean, with respect to each Class of Notes,
an amount equal to the sum of (i) the interest accrued during the related
Interest Accrual Period at the applicable Note Interest Rate on the Principal
Amount of such Class of Notes as of the immediately preceding Payment Date (or,
in the case of the initial Payment Date, the Principal Amount as of the Closing
Date) and (ii) any amounts payable pursuant to clause (i) above for such Class
of Notes from all prior Payment Dates remaining unpaid, if any, plus, to the
extent permitted by law, interest thereon for each Interest Accrual Period for
such Class of Notes at the applicable Note Interest Rate.

“Administrative Services Agreement” shall mean either the
Administrative Services Agreement dated as of August 29, 2002 by and between
the Depositor and the Administrator or the Administrative Services Agreement
dated as of May 27, 2004 by and between the Issuer and the Administrator, as
the same may be amended, supplemented or otherwise modified from time to time
in accordance with the terms of the respective agreements.

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

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

“Aggregate Default Rate” shall mean as of any Determination Date, a
percentage obtained by dividing (i) the sum of the outstanding principal
balance of each Pledged Loan (each such principal balance determined as of the
day immediately preceding the date on which such Pledged Loan became a
Defaulted Loan) that became a Defaulted Loan during the period commencing with
the Cut-Off Date and ending at the end of the prior Due Period by (ii) the
Aggregate Loan Balance as of the Cut-Off Date.

“Aggregate Loan Balance” shall mean, as of any time, the sum of the
outstanding principal balances due under or in respect of all Pledged Loans,
excluding Defaulted Loans.

4

 

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

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

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

“Assignment of Mortgage” shall mean any assignment (including any
collateral assignment) of any Mortgage.

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

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

“Available Funds” for any Payment Date shall mean an amount equal
to the sum of (i) all payments (including prepayments) of principal, interest
and fees (which, for the sake of clarity, excludes maintenance fees assessed
with respect to POAs) collected from or on behalf of the Obligors during the
related Due Period on the Pledged Loans, and the amounts deposited into the
Collection Account during the related Due Period in respect of the release of
Trendwest Loans which have become Timeshare Upgrades and are treated as
prepayments; (ii) any Servicer Advances made on or prior to the Payment Date
with respect to payments due from the Obligors on the Pledged Loans during the
related Due Period; (iii) all amounts received as the Release Price paid to the
Trustee for the release from the Lien of this Indenture securing the Notes of
any Pledged Loan that has become a Defaulted Loan; (iv) all Net Liquidation
Proceeds from the disposition of Pledged Assets securing Defaulted Loans
received during the related Due Period; (v) the amounts received by the Trustee
as the Release Price in connection with the release of a Defective Loan; (vi)
all other proceeds of the Collateral received by the Trustee or the Servicer
during the related Due Period; (vii) the amount in excess of the Reserve
Required Amount, if any, withdrawn from the Reserve Account in accordance with
subsection 3.5(c) of this Indenture and deposited in the Collection Account on
such Payment Date; and (viii) all amounts received by the Issuer under the
Interest Rate Swap.

5

 

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

“Bankruptcy Trustee” shall have the meaning assigned to that term
in the Insurance Policy.

“Benefit Plan” shall mean any “employee pension benefit plan” as
defined in ERISA which is subject to Title IV of ERISA (other than a
“multiemployer plan,” as defined in Section 4001 of ERISA) and to which the
Issuer, any eligible Seller or any ERISA Affiliate of the Issuer has liability,
including any liability by reason of having been a substantial employer within
the meaning of Section 4063 of ERISA for any time within the preceding five
years or by reason of being deemed to be a contributing sponsor under Section
4069 of ERISA.

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

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

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

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

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

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

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

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

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

“Class” shall mean the Class A-1 Notes or the Class A-2 Notes.

“Class A-1 Notes” shall mean any of the $235,690,000 3.67% Vacation
Timeshare Loan Backed Notes, Series 2004-1, Class A-1, due 2016.

6

 

“Class A-2 Notes” shall mean any of the $100,000,000 Floating Rate
Vacation Timeshare Loan Backed Notes, Series 2004-1, Class A-2, due 2016.

“Class Percentages” shall mean for each Class, at any time, the
percentage equivalent of a fraction the numerator of which is the Principal
Amount of such Class and the denominator of which is the Aggregate Principal
Amount of all Classes.

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

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

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

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

“Closing Date” shall mean May 27, 2004.

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

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

“Collateral Agency Agreement” shall mean the Collateral Agency
Agreement dated as of January 15, 1998 by and between Fleet National Bank as
predecessor Collateral Agent, Fleet Securities, Inc. as deal agent and the
secured parties named therein, as subsequently amended, including as amended by
the Eighth Amendment to the Collateral Agency Agreement dated as of May 27,
2004 and all prior amendments, by and among the Collateral Agent, the Trustee
and other secured parties, as such Collateral Agency Agreement may be amended,
supplemented or otherwise modified from time to time in accordance with its
terms.

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

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

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

7

 

Pledged Loan or the related Timeshare Property and
(iii) all amounts received by the Issuer, the Servicer (or the Subservicer) or
the Trustee in respect of any proceeds of a condemnation of property in any
Resort, which proceeds relate to such Pledged Loan or the related Timeshare
Property.

“Control Party” shall mean, (a) unless an Insurer Default has
occurred and is continuing, the Insurer and (b) during the continuation of an
Insurer Default, Noteholders representing 66 2/3% of the Aggregate Principal
Amount of the Notes.

“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 Indenture is located at 401
South Tryon Street, NC-1179, 12th Floor, Charlotte, NC 28288-1179, Attention:
Structured Finance Trust Services, Cendant Timeshare 2004-1 Receivables
Funding, LLC.

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

“Credit Standards and Collection Policies” shall mean the
individual credit standards established by FRI and Trendwest and the collection
policies established by FAC, attached hereto as Exhibit H and as amended from
time to time in accordance with the restrictions of this Indenture.

“Custodial Agreement” shall mean the Fourth Amended and Restated
Custodial Agreement dated as of May 27, 2004 by and among the Issuer, Sierra
2002, Sierra 2003-1, Sierra 2003-2, the Depositor, FAC, Trendwest, Wachovia
Bank, National Association, as Custodian, the Trustee and the Collateral Agent,
the Sierra 2002 Trustee, the Sierra 2003-1 Trustee, and the Sierra 2003-2
Trustee, 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
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, the
close of business on March 31, 2004.

“Debt” of any Person shall mean (a) indebtedness of such Person for
borrowed money, (b) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) obligations of such Person to pay the
deferred purchase price of property or
services, (d) obligations of such Person as lessee under leases which have
been or should be, in accordance with GAAP, 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,

8

 

indebtedness or
obligations of others of the kinds referred to in clauses (a) through (e)
above, and (g) liabilities of such Person in respect of unfunded vested
benefits under Benefit Plans covered by Title IV of ERISA.

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

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

“Default Percentage” shall mean, for any Due Period, the percentage
equivalent of a fraction the numerator of which is the sum of the outstanding
principal balance of each Pledged Loan (each such principal balance determined
as of the day immediately preceding the date on which such Pledged Loan became
a Defaulted Loan) that became a Defaulted Loan during such Due Period, and the
denominator of which is the Aggregate Loan Balance as of the last day of such
Due Period.

“Default Percentage Threshold” shall mean (i) for any Determination
Date occurring before or during May 2005, 0.85%, (ii) for any Determination
Date occurring after May 2005 and before or during May 2006, 1.00% and (iii)
for any Determination Date occurring after May 2006, 1.25%.

“Defective Loan” shall mean any Pledged Loan with an uncured
material breach (with all breaches that give rise to actual recission being
deemed material on a Pledged Loan by Pledged Loan basis) of any representation
or warranty of the Issuer set forth in Section 5.2 of this Indenture.

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

“Delinquency Ratio” shall mean, for any Due Period, a fraction the
numerator of which is the sum of the outstanding principal balance of each
Pledged Loan (each such principal balance determined as of the last day of such
Due Period) which is a Delinquent Loan as of the last day of such Due Period
and the denominator of which is the Aggregate Loan Balance as of the last day
of such Due Period.

“Delinquent Loan” shall mean a Pledged Loan for which all or a
portion of the Scheduled Payments are more than 60 days delinquent, other than
a Pledged Loan that is a Defaulted Loan.

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

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

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

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

“Due Period” shall mean, for the Payment Date occurring in June
2004, the two full calendar months preceding such Payment Date, and for each
other Payment Date, the immediately preceding calendar month.

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

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

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

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

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

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

“ERISA Affiliate” shall mean with respect to any Person, (i) any
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as such Person; or (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.

10

 

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

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

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

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

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

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

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

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

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

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

“Fairfield Resort” shall mean a resort developed by FRI or its
subsidiaries or in which FRI or its subsidiaries sell Timeshare Properties.

“FairShare Plus Agreement” shall mean the Amended and Restated
FairShare Vacation Plan Use Management Trust Agreement effective as of January
1, 1996 by and between FRI, and certain of its subsidiaries and third party
developers, as the same may be further amended, supplemented or otherwise
modified from time to time hereafter in accordance with its terms.

“FairShare Plus Program” shall mean the program pursuant to which
the occupancy and use of a Timeshare Property is assigned to the trust created
by the FairShare Plus Agreement in

11

 

exchange for annual symbolic points that are
used to establish the location, timing, length of stay and unit type of a
vacation, including without limitation systems relating to reservations,
accounting and collection, disbursement and enforcement of assessments in
respect of contributed units.

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

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

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

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

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

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

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

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

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

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

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

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

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Granting party or otherwise, and generally to do and receive
anything which the Granting party is or may be entitled to do or receive
thereunder or with respect thereto.

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

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

“Indenture” shall mean this Agreement.

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

“Initial Principal Amount” shall mean the aggregate amount of
$335,690,000 of the Notes composed of the initial principal amounts of
$235,690,000 of the Class A-1 Notes and $100,000,000 of the Class A-2 Notes at
the time such Notes were issued.

“Initial Purchasers” shall mean Credit Suisse First Boston LLC,
Banc of America Securities LLC, Greenwich Capital Markets, Inc., Calyon
Securities (USA) Inc., and Scotia Capital (USA), Inc.

“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 Debtor Relief Law, or the filing of a
petition against such Person in an involuntary case under any Debtor Relief
Law, 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 Debtor Relief Law, 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 Agreement” shall mean the Insurance and Reimbursement
Agreement dated as of May 27, 2004 by and among the Insurer, the Issuer, the
Servicer, the Depositor, the Sellers, the Performance Guarantor and the
Trustee, as the same may be further amended, supplemented or otherwise modified
from time to time in accordance with its terms.

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“Insurance Policy” shall mean the Financial Guaranty Insurance
Policy, policy number 44032, issued by the Insurer in favor of the Trustee for
the benefit of the Noteholders, which policy has an effective date of May 27,
2004.

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

“Insurer” shall mean MBIA Insurance Corporation, a New York stock
insurance company.

“Insurer Default” shall mean (i) the occurrence of an Insolvency
Event with respect to the Insurer, or (ii) the failure of the Insurer to make a
payment as and when due under the Insurance Policy.

“Insurer Premium” shall have the meaning assigned to that term in
the Premium Letter.

“Intercreditor Agreement” shall mean the intercreditor and clearing
account agreement dated as of January 3, 2001, among Trendwest, LaSalle Bank
National Association, Wells Fargo Bank Minnesota, National Association, the
issuers named therein, Bank One, NA, Jupiter Securitization Corporation, TW
Holdings III, Key Bank National Association and any other bank serving as
clearing account bank, and other parties thereto by accession, as the same may
be further amended, supplemented or otherwise modified from time to time
hereafter in accordance with its terms.

“Interest Accrual Period” shall mean, with respect to the Notes for
any Payment Date, the period beginning on and including the immediately
preceding Payment Date and ending on and excluding such Payment Date, except
that the first Interest Accrual Period will begin on and include May 27, 2004
and end on and exclude the June 2004 Payment Date.

“Interest Rate Swap” shall mean the ISDA Master Agreement, together
with the Schedule thereto and the “Confirmation For U.S. Dollar Interest Rate
Swap Transaction Under 1992 Master Agreement,” each dated as of May 18, 2004 between the Issuer
and the Swap Counterparty, as such Interest Rate Swap may be amended, modified
or replaced.

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

“Issuer” shall mean Cendant Timeshare 2004-1 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.

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

“LIBOR” shall mean, for any Interest Accrual Period, the London
interbank offered rate for one-month United States dollar deposits determined
by the Trustee on the LIBOR

14

 

Determination Date for such Interest Accrual Period
in accordance with the provisions of Section 2.4.

“LIBOR Determination Date” shall mean, with respect to each
Interest Accrual Period, the second London Business Day immediately preceding
the first day of such Interest Accrual Period.

“Lien” shall mean any mortgage, security interest, deed of trust,
pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC (other than
any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing.

“LLC Agreement” shall mean the Limited Liability Company Agreement
of Cendant Timeshare 2004-1 Receivables Funding, LLC dated as of May 11, 2004
as amended, supplemented, restated or otherwise modified from time to time in
accordance with its terms.

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

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

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

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

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

“Loan Schedule” shall mean the Loan Schedule containing information
about the Pledged Loans, which Loan Schedule is delivered electronically by the
Issuer to the Trustee as of the Closing Date and as such schedule is amended by
delivery electronically by the Issuer to the Trustee of information relating to
the release of Pledged Loans or the Grant of Qualified Substitute Loans.

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

15

 

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

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

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

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

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

“Majority Holders” shall mean with respect to all Notes issued and
outstanding, the holders of greater than fifty percent of the Aggregate
Principal Amount of all Notes.

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

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

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

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

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

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

16

 

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

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

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

“Monthly Collateral Agent Fee” shall mean, in respect of any Due
Period (or portion thereof), the amount due to the Collateral Agent for fees
related to the Collateral for the Series 2004-1 Notes calculated in accordance
with Schedule 3 attached hereto.

“Monthly Custodian Fee” shall mean, in respect of any Due Period
(or portion thereof), the amount due to the Custodian under the Custodial
Agreement for fees related to the Pledged Loans and related Pledged Assets such
amounts to be calculated in accordance with Schedule 3 attached hereto.

“Monthly Principal” shall mean on any Payment Date, the sum of (i)
the principal portion of Scheduled Payments collected during the related Due
Period on the Pledged Loans; (ii) the principal portion of Servicer Advances,
if any; (iii) the principal amount of any prepayments collected on any Pledged
Loan during the related Due Period, and the amounts deposited into the
Collection Account during the related Due Period in respect of the release of
Trendwest Loans which have become Timeshare Upgrades and are treated as
prepayments; (iv) principal proceeds from the purchase by the Sellers of any
Pledged Loans that have become Defaulted Loans during the related Due Period;
and (v) the principal proceeds of any repurchase of a Defective Loan funded by
a Seller or the Performance Guarantor or any deposit in respect of a Defective
Loan by the Issuer.

“Monthly Servicer Fee” shall mean, in respect of any Due Period (or
portion thereof), an amount equal to one-twelfth of the product of (a) 1.25%
and (b) the Aggregate Loan Balance of the Pledged Loans at the beginning of
such Due Period; or if a Successor Servicer has been appointed and accepted the
appointment or if the Trustee is acting as Servicer, an amount
equal to one-twelfth of the product of (x) the lesser of (i) if FAC is
replaced (A) prior to the third anniversary of the Closing Date, 1.75%, or (B)
on or after the third anniversary of the Closing Date, 2.00% and (ii) the
Market Servicing Rate (or, in either case, such higher rate as may be consented
to by the Control Party) and (y) the Aggregate Loan Balance of the Pledged
Loans and all Defaulted Loans that have not been released from the lien of this
Indenture at the beginning of such Due Period.

“Monthly Servicing Report” shall mean each monthly report prepared
by the Servicer as provided in Section 8.1.

“Monthly Trustee Fee” shall mean, in respect of any Due Period, an
amount equal to one-twelfth of 0.01% of the Aggregate Loan Balance as of the
first day of such Due Period as an administration fee plus an additional
monthly fee not to exceed one-twelfth of 0.0175% of the Aggregate Loan Balance
as of the first day of such Due Period as a backup servicer fee.

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

17

 

“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.

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

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

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

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

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

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

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

	 	 	 	 	 
	Class of Notes	 	Note Interest Rate
	Class A-1 Notes

	 	3.67%
	Class A-2 Notes

	 	LIBOR as determined from time to time plus 0.18%

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

“Note Purchase Agreement” shall mean the Note Purchase Agreement
dated May 18, 2004 among the Issuer, the Sellers, the Depositor and the Initial
Purchasers named therein.

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

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

“Notes” shall mean the Cendant Timeshare 2004-1 Receivables
Funding, LLC Vacation Timeshare Loan Backed Notes, Series 2004-1.

“Notice for Payment” shall have the meaning assigned to that term
in the Insurance Policy.

18

 

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

“Offering Circular” shall mean the final Offering Circular dated
May 18, 2004 relating to the Notes.

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

“Operating Agreement” shall mean the Ninth Amended and Restated
Operating Agreement dated as of March 31, 2003 by and between FRI, FMB, FAC,
Kona and the VB Subsidiaries as described therein, as the same may be further
amended, supplemented or otherwise modified from time to time hereafter in
accordance with its terms.

“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 and the Insurer.

“Order” shall have the meaning assigned thereto in subsection
3.8(b).

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

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

“Overcollateralization Deficiency Amount” shall mean, for any
Payment Date, the excess, if any, of (i) the Required Overcollateralization
Amount on such Payment Date over (ii) the Pro Forma Overcollateralization
Amount on such Payment Date.

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

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

19

 

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

“Payment
Date” shall mean the 20th day of each calendar month, or,
if such 20th day is not a Business Day, the next succeeding Business Day,
commencing in June 2004.

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

“Performance Guaranty” shall mean that Performance Guaranty dated
as of May 27, 2004 made by Cendant in favor of the Issuer, the Trustee and the
Collateral Agent, as amended from time to time.

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

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

“Permitted Investments” shall mean (i) U.S. Government Obligations
having maturities on or before the first Payment Date after the date of
acquisition; (ii) time deposits and certificates of deposit having maturities
on or before the first Payment Date after the date of acquisition, maintained
with or issued by any commercial bank having capital and surplus in excess of
$500,000,000 and having a short term senior unsecured debt rating of at least
“A-1” by S&P and “P-l” by Moody’s and “F1” by Fitch if rated by Fitch; (iii)
repurchase agreements having maturities on or before the first Payment Date
after the date of acquisition for underlying securities of the types described
in clauses (i) and (ii) above or clause (iv) below with any
institution having a short term senior unsecured debt rating of at least
“P-1” by Moody’s and “A-1” by S&P and “F1” by Fitch if rated by Fitch; (iv)
commercial paper maturing on or before the first Payment Date after the date of
acquisition and having a short term senior unsecured debt rating of at least
“P-1” by Moody’s and “A-1+” by S&P and “F1” by Fitch if rated by Fitch; and (v)
money market funds rated “Aaa” by Moody’s and rated “AAAm” or “AAAm-G” by S&P
and which invest solely in any of the foregoing (without regard to maturity),
including any such funds in which the Trustee or an Affiliate of the Trustee
acts as an investment advisor or provides other investment related services;
provided, however, that no obligation of any Seller, the
Depositor or the Performance Guarantor shall constitute a Permitted Investment
and provided further, that no interest only obligation and no
investment purchased by the Issuer or the Trustee at a premium shall constitute
Permitted Investments.

“Person” shall mean any person or entity including any individual,
corporation, limited liability company, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental entity or other entity or organization of any nature, whether or
not a legal entity.

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

20

 

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

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

“Points” shall mean, with respect to any lodging unit at a
Timeshare Property Regime, the number of points of symbolic value assigned to
such unit pursuant to the FairShare Plus Program.

“Policy Claim Amount” shall have the meaning assigned thereto in
subsection 3.8(b).

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

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

“Preference Amount” shall have the meaning assigned thereto in
subsection 3.8(b).

“Premium Letter” shall have the meaning assigned to that term in
the Insurance Agreement.

“Principal Amount” shall mean, the Initial Principal Amount of a
Class, less principal payments previously paid to such Class as of such date
and which payments have not been subsequently rescinded or recaptured.

“Principal Distribution Amount” shall mean, for any Payment Date,
an amount equal to the sum, without duplication, of the Monthly Principal for
such Payment Date plus the outstanding principal balance of all Pledged Loans
that became Defaulted Loans during the related Due Period that were not
repurchased by a Seller, as reduced by the Overcollateralization Release
Amount, if any, for such Payment Date.

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

“Pro Forma Overcollateralization Amount” shall mean, on any Payment
Date, the excess, if any, of (i) the Aggregate Loan Balance as of the last day
of the related Due Period over (ii) (x) the Aggregate Principal Amount on such
Payment Date, before taking into account any distributions of principal to the
Noteholders on such Payment Date, minus (y) an amount equal to the sum of (i)
the Monthly Principal for such Payment Date and, without duplication, (ii) the
outstanding principal balance of all Pledged Loans that became Defaulted Loans
during the related Due Period that were not repurchased by a Seller.

21

 

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

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

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

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

“Rapid Amortization Events” shall mean: (i) an Insolvency Event
has occurred with respect to the Issuer; (ii) if on any two consecutive Payment
Dates, either (A) the sum of Available Funds plus, without duplication, amounts
on deposit in the Reserve Account are not sufficient to pay all Accrued
Interest due on the Notes, or (B) after application of all Available Funds in
accordance with the Priority of Payments, the Overcollateralization Amount
would be less than the Required Overcollateralization Amount; (iii) if on any
Payment Date, after application of all Available Funds in accordance with the
Priority of Payments on such Payment Date, the sum of the Aggregate Loan
Balance plus the amount on deposit in the Reserve Account would be less than
the Aggregate Principal Amount; or (iv) the Control Party has provided
written notice to the Trustee that an event described in subsection
11.1(a), (b), (d), (e) or (f) has occurred and is continuing and that such
event has been designated a Rapid Amortization Event by the Control Party
whether or not such event has also been declared an Event of Default. The
Rapid Amortization Events described in (ii), (iii) and (iv) above will continue
to be in effect until such time, if ever, that the Control Party has consented
to the termination of the Rapid Amortization Event.

“Rated Final Maturity Date” shall mean the Payment Date occurring
in May 2016.

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

“Rating Agency Condition” shall mean, with respect to any action
taken or to be taken, that each Rating Agency shall have notified the Issuer
and the Trustee in writing that such action would not have resulted in a
reduction, downgrade, suspension or withdrawal of the rating that would have
been assigned to any outstanding Class of Notes, without giving any effect to
the Insurance Policy.

“Receipt” and “Received” shall have the meanings assigned
thereto in subsection 3.8(b).

“Record Date” shall mean, for any Payment Date, (i) for Notes in
book-entry form, the close of business on the Business Day immediately
preceding such Payment Date and (ii) for Definitive Notes, the close of
business on the last Business Day of the month preceding the month in which
such Payment Date occurs.

22

 

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

“Reference Banks” shall mean leading banks selected by the Servicer
and engaged in transactions in Eurodollar deposits in the international
Eurocurrency market (i) with an established place of business in London and
(ii) which have been designated as such by the Servicer.

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

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

“Reimbursement Amount” shall mean, on any Payment Date, the sum of
(i) all Policy Claim Amounts previously received by the Trustee from the
Insurer and not previously repaid to the Insurer pursuant to this Agreement,
plus (ii) interest (in accordance with the Insurance Agreement) accrued on each
such Policy Claim Amount from the date the Trustee received the related Policy
Claim Amount to, but not including, such Payment Date that has not been
previously repaid to the Insurer.

“Release Date” shall mean, with respect to any Pledged Loan, the
date on which such Pledged Loan is released from the Lien of this Indenture.

“Release Price” shall mean an amount equal to the outstanding Loan
Balance of the Pledged Loan as of the close of business on the Calculation Date
immediately preceding the date on which the release is to be made, plus accrued
and unpaid interest thereon to the date of such release; provided that
for purposes of calculating the Release Price with respect to any Trendwest
Timeshare Upgrade the Release Price will be calculated without regard to the
upgrade.

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

“Required Overcollateralization Amount,” shall mean, as of any
Payment Date, an amount equal to (i) prior to the Stepdown Date, 14.50% of the
Aggregate Loan Balance as of the Cut-Off Date, and (ii) on and after the
Stepdown Date, (A) if no Cash Accumulation Event has occurred and is
continuing, the greater of (x) 0.50% of the Aggregate Loan Balance as of the
Cut-Off Date and (y) 29.00% of the Aggregate Loan Balance as of the last day of
the related Due Period and (B) if a Cash Accumulation Event has occurred and is
continuing, the Required Overcollateralization Amount as determined on the
immediately preceding Payment Date; provided that if a Rapid
Amortization Event has occurred and is then continuing, the Required
Overcollateralization Amount will be equal to the Aggregate Loan Balance as of
the last day of the related Due Period.

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

“Reserve Account Draw Amount” shall have the meaning set forth in
subsection 3.5(b).

23

 

“Reserve Required Amount” shall mean (a) as of the Closing Date,
1.0% of the Aggregate Loan Balance as of the Cut-Off Date, and (b) at any time
after the Closing Date, (i) if no Cash Accumulation Event has occurred and is
continuing 2.0% of the Aggregate Loan Balance at such time; and (ii) if a Cash
Accumulation Event has occurred and is continuing, the product of (A) the
Aggregate Loan Balance as of the last day of the immediately preceding Due
Period and (B) the greater of (x) 10% or (y) 2 times the Delinquency Ratio for
such Due Period; provided that in no event will the Reserve Required
Amount be less than 0.50% of the Aggregate Loan Balance as of the Cut-Off Date;
provided further, that in no event will the Reserve Required
Amount be greater than the Aggregate Principal Amount.

“Resort” shall mean a Fairfield Resort or a Trendwest Resort.

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

“Rule 144A” shall have the meaning set forth in subsection 2.6(c).

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

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

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

“Sale and Assignment Agreement” shall mean the Sale and Assignment
Agreement dated as of May 27, 2004 entered into by Sierra 2002 and the
Depositor and pursuant to which Sierra 2002 sells and assigns to the Depositor
all of Sierra 2002’s right, title and interest in the Pledged Loans and the
Pledged Assets related thereto.

“Scheduled Final Maturity Date” shall mean the Payment Date
occurring in May 2014.

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

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

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

“Senior Priority Swap Termination Amount” shall mean the amount, if
any, owing to the Swap Counterparty in respect of Termination Payments relating
to a termination of the Interest Rate Swap arising from (a) the Swap
Counterparty not receiving any Net Swap Payment owing to it, (b) bankruptcy,
insolvency or similar event of the Issuer or (c) the liquidation of all of the
Pledged Loans (excluding Defaulted Loans) pursuant to this Indenture.

“Series Termination Date” shall mean the Termination Date.

24

 

“Servicer” shall mean FAC, in its capacity as Servicer pursuant to
this Indenture or, after any Service Transfer, the Successor Servicer.

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

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

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

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

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

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

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

“Sierra 2003-1” shall mean Sierra 2003-1 Receivables Funding
Company, LLC, a Delaware limited liability company.

“Sierra 2003-1 Trustee” shall mean the trustee under the terms of
the Indenture and Servicing Agreement dated as of March 31, 2003 which is among
the trustee named therein, FAC and Sierra 2003-1.

“Sierra 2003-2” shall mean Sierra 2003-2 Receivables Funding
Company, LLC, a Delaware limited liability company.

“Sierra 2003-2 Trustee” shall mean the trustee under the terms of
the Indenture and Servicing Agreement dated as of December 5, 2003 among the
trustee named therein, FAC and Sierra 2003-2.

“Stepdown Date” shall mean the later to occur of the Payment Date
in May 2006 or the Payment Date on which the Aggregate Loan Balance as of the
last day of the related Due Period is less than 50% of the Aggregate Loan
Balance as of the Cut-Off Date.

25

 

“Subservicer” shall mean each of Trendwest and FAC (if FAC is no
longer the Servicer), solely to the extent such entity enters into a
Subservicing Agreement with the Servicer and agrees to perform specified
servicing functions with respect to all or a portion of the Pledged Loans.

“Subservicing Agreement” shall mean the agreement between the
Servicer and Trendwest relating to the performance of specified servicing
functions with respect to the Pledged Loans originated by Trendwest.

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

“Substitution Adjustment Amount” shall mean, with respect to any
Qualified Substitute Loan or Qualified Substitute Loans to be substituted for a
Defective Loan or a Defaulted Loan, the amount, if any, by which the aggregate
principal balance of all such Qualified Substitute Loans as of the date of
substitution is less than the aggregate principal balance of all such Defective
Loans or Defaulted Loans each determined as of the Calculation Date immediately
prior to the date of substitution.

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

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

“Swap Rating Agency Condition” shall mean, with respect to any
action with respect to the Interest Rate Swap, a condition that is satisfied
when S&P, Moody’s and Fitch have notified the Issuer and the Trustee in writing
that such action would not have resulted in a reduction, downgrade or
suspension of the rating that would have been assigned to the Class A-2 Notes,
without giving effect to the Insurance Policy.

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

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

“Term Purchase Agreement” shall mean the Series 2004-1 Term
Purchase Agreement dated as of May 27, 2004 between the Depositor as seller of
the Pledged Loans and the Issuer.

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

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

26

 

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

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

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

“Timeshare Property” shall mean the underlying ownership interest
that is the subject of a Loan, which ownership interest may be either a Fixed
Week, a UDI, the Points with respect thereto under the FairShare Plus Program,
or Vacation Credits.

“Timeshare Property Regime” shall mean any of the various interval
ownership regimes located at a Resort, each of which is an arrangement
established under applicable state law whereby all or a designated portion of a
development is made subject to a declaration permitting the transfer of
Timeshare Properties therein, which Timeshare Properties shall, in the case of
Fixed Weeks and UDIs, constitute real property under the applicable local law
of each of the jurisdictions in which such regime is located.

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

“Title Clearing Agreement” shall have the meaning assigned thereto
in the Fairfield Master Loan Purchase Agreement.

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

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

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

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

27

 

“Trendwest Master Loan Purchase Agreement” shall mean that Master
Loan Purchase Agreement dated as of August 29, 2002, as amended from time to
time, by and between Trendwest and the Depositor, together with the Series
2002-1 Supplement thereto also dated as of August 29, 2002, as amended from
time to time.

“Trendwest Originator” shall mean Trendwest.

“Trendwest Resort” shall mean a resort developed by Trendwest or in
which Trendwest sells Timeshare Properties.

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

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

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

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

“UDI” shall mean an undivided interest in fee simple (as tenants in
common with all other undivided interest owners) in a lodging unit or group of
lodging units at a Resort.

“U.S. Government Obligations” shall mean (i) obligations of, or
obligations guaranteed as to principal and interest by, the U.S. Government or
any agency or instrumentality thereof, when these obligations are backed by the
full faith and credit of the United States (ii) and certain obligations of
government-sponsored agencies that are not backed by the full faith credit of
the United States which are limited to: Federal Home Loan Mortgage Corp. debt
obligations; Farm Credit System (formerly Federal Land Banks, Federal
Intermediate Credit Banks, and Banks for Cooperatives) consolidated system-wide
bonds and notes; Federal Home Loan Banks consolidated debt obligations; Federal
National Mortgage Association debt obligations; Student Loan Marketing
Association debt obligations which mature before September 30, 2008; Financing
Corp. debt obligations; and Resolution Funding Corp. debt obligations.

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

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

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

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Section 1.2     Other Definitional Provisions.

(a)      Terms used in this Indenture and not otherwise defined herein such
terms shall have the meanings ascribed to them in the Term Purchase Agreement.

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

(c)      As used in this Indenture and in any certificate or other document
made or delivered pursuant hereto, 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 GAAP as in effect from
time to time. To the extent that the definitions of accounting terms herein or
in any certificate or other document made or delivered pursuant
hereto are inconsistent with the meanings of such terms under GAAP, the
definitions contained herein or in any such certificate or other document shall
control.

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

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

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

Section 1.3     Intent and Interpretation of Documents

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

ARTICLE II

THE NOTES

Section 2.1     Designation.

(a)      There is hereby created a series of Notes of the Issuer to be issued
pursuant to this Indenture and which are hereby designated as “Cendant
Timeshare 2004-1 Receivables Funding, 

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LLC Vacation Timeshare Loan Backed Notes,
Series 2004-1,” the “Series 2004-1 Notes” or the “Notes.”
The Issuer will issue notes in two classes as follows: (i) $235,690,000 3.67%
Vacation Timeshare Loan Backed Notes, Series 2004-1, Class A-1, due 2016 and
(ii) $100,000,000 Floating Rate Vacation Timeshare Loan Backed Notes, Series
2004-1, Class A-2, due 2016.

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

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

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

Section 2.3     [Reserved].

Section 2.4     Determination of LIBOR.

On each LIBOR Determination Date, the Trustee shall determine LIBOR on the
basis of the rate for deposits in United States dollars for a one-month period
which appears on Telerate Page 3750 as of 11:00 a.m., London time, on such
date. If such rate does not appear on Telerate Page 3750, the rate for that
LIBOR Determination Date will be determined on the basis of the rates at which
deposits in United States dollars are offered by the Reference Banks at
approximately 11:00 a.m., London time, on that day to prime banks in the London
interbank market for a one-month period. If on such LIBOR Determination Date
two or more Reference Banks provide such offered quotations, LIBOR for such
related Interest Accrual Period will be the arithmetic mean of such offered
quotations (rounded upwards if necessary to the nearest whole multiple of
0.0001%). If on such LIBOR Determination Date fewer than two Reference Banks
provide such offered quotations, LIBOR for the related Interest Accrual Period
will be the arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 0.0001%) of the one-month U.S. dollar lending rates that three New
York City banks selected by the Trustee are quoting at approximately 11:00 a.m.
(New York City time) on the relevant LIBOR Determination Date to leading
European banks.

The establishment of LIBOR on each LIBOR Determination Date by the Trustee
and the Trustee’s calculation of the rate of interest applicable to the Class
A-2 Notes for the related Interest Accrual Period will (in the absence of
manifest error) be final and binding. The Trustee shall, upon the
establishment of LIBOR on each LIBOR Determination Date, notify the Issuer and
the Servicer of the rate.

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

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

The Trustee shall, upon written order of the Issuer, authenticate and
deliver Notes for original issue in an aggregate principal amount of
$335,690,000, comprising $235,690,000 principal amount of Class A-1 Notes and
$100,000,000 principal amount of Class A-2 Notes. The Trustee shall be
entitled to rely upon such written order as authority to so authenticate and
deliver the Notes without further inquiry of any Person.

Each Note shall be dated the date of its authentication. Beneficial
interests in the Notes may be purchased in minimum denominations of $500,000
and in integral multiples of $1,000 in excess thereof.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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ACT. EACH
NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE, UNLESS SUCH
PERSON ACQUIRED THIS NOTE IN A TRANSFER DESCRIBED IN CLAUSE (3) ABOVE, IS
DEEMED TO REPRESENT THAT IT IS EITHER A QIB PURCHASING FOR ITS OWN
ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB.

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

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

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

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

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

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

34

 

made in reliance on Rule 144A or (C) in an offshore transaction meeting
the requirements of Rule 903 or Rule 904 of Regulation S under the
Securities Act.

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

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

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

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

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

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

(xiv)     Either (A) it is not (i) an employee benefit plan that is
subject to Title I of ERISA, (ii) a plan, individual retirement account
or other arrangement that is subject to Section 4975 of the Code, or
(iii) an entity the underlying assets of which are considered to include
“plan assets” of, and it is not purchasing the Notes on behalf of, any
such plan, account or arrangement; or (B) its purchase, holding and
subsequent disposition of the Notes either (i) will not constitute or
result in a prohibited transaction under ERISA or

35

 

Section 4975 of the
Code or (ii) it is entitled to exemptive relief from the prohibited
transaction provisions of ERISA and Section 4975 of the Code in
accordance with one or more available statutory, class or individual
prohibited transaction exemptions. It will not transfer the Notes to any
person or entity, unless such person or entity could itself truthfully
make the foregoing representations and covenants as presented in this
clause (xiv).

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

(e)      It understands and acknowledges that the Issuer has structured this
Indenture 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 interests therein) as indebtedness for purposes of federal,
state, local and foreign income or franchise taxes or any other applicable tax.

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

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

36

 

claim, liability, cost or expense incurred by the Issuer or the Trustee, its
agents and/or counsel, in connection therewith.

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

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

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

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

Section 2.9     Payment of Principal and Interest; Defaulted Interest.

(a)      The Notes of each Class shall accrue interest from and including the
Closing Date at the Note Interest Rate for that Class. Interest on the Class
A-1 Notes will be computed on the basis of a 360-day year consisting of twelve
30-day months. Interest on the Class A-2 Notes will be calculated on the basis
of a 360-day year and the actual number of days that elapsed during the related
Interest Accrual Period. Interest shall be due and payable on June 21, 2004
and each Payment Date thereafter until all principal amounts on the Notes have
been repaid. The amount of interest due and payable on the Notes with respect
to each Payment Date shall be an amount equal to the Accrued Interest with
respect to such Payment Date. Any installment of interest or principal, if
any, or any other amount, payable on any Note which is punctually paid or duly
provided for by the Issuer on the applicable Payment Date shall be paid to the
Person in whose name such Note (or one or more Predecessor Notes) is registered
on the Record Date, by check mailed first-class, postage prepaid to such
Person’s address as it appears on the Note Register on such Record Date, (i)
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payment will be made by wire transfer in immediately available funds to the
account designated by such nominee, and (ii) except for (A) the final
installment of principal payable with respect to such Note on a Payment Date
and (B) the redemption price for any Note called for redemption pursuant to
Section 2.18, in each case which shall be payable as provided below;
provided,

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however, that the Insurer will be subrogated to the
rights of each Noteholder to receive payments of principal and interest, as
applicable, with respect to distributions on the Notes to the extent of any
payment by the Insurer under the Insurance Policy and the Insurer will be
reimbursed therefor, together with interest thereon as provided in the
Insurance Agreement, in accordance with Sections 3.1 and 11.7.

(b)      To the extent of Available Funds, principal shall be due and payable
on the Notes as provided in Section 3.1(a) or if a Rapid Amortization Event has
occurred and is continuing as provided in Section 3.1(b), and the principal
amount of the Notes to the extent not previously paid, shall be due and payable
on the Rated Final Maturity Date. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable, if not
previously paid, on the date on which an Event of Default described in Section
11.1 shall have occurred and be continuing, if the Notes have been declared to
be immediately due and payable as provided in Section 11.1. Principal payments
on the Notes shall be made pro rata to the Noteholders entitled thereto. The
Insurer will be subrogated to the rights of each Noteholder to receive payments
of principal with respect to distributions on the Notes to the extent of any
payment by the Insurer under the Insurance Policy and the Insurer will be
reimbursed therefor, together with interest thereon as provided in the
Insurance Agreement, in accordance with Sections 3.1 and 11.7.

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

(c)      If the Issuer defaults in a payment of interest on the Notes when such
interest becomes due and payable on any Payment Date, the Issuer shall pay
defaulted interest (plus interest on such defaulted interest to the extent
lawful) at the applicable Note Interest Rate in any lawful manner. Unless the
interest shall have been paid by the Insurer, the Issuer may pay such defaulted
interest to the persons who are Noteholders on a subsequent special record
date, which date shall be fixed or caused to be fixed by the Issuer and shall
be at least three Business Days prior to the payment date. The Issuer shall
fix or cause to be fixed any such payment date, and, prior to the third
Business Day prior to any such special record date, the Issuer shall mail or
transmit by facsimile to each Noteholder, the Insurer and the Swap Counterparty
a notice that states the special record date, the payment date and the amount
of defaulted interest to be paid.

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

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

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Notes shall be authenticated in lieu of
or in exchange for any Notes canceled as provided in this Section 2.10, except
as expressly permitted by this Indenture. All canceled Notes shall be returned
to the Issuer.

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

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

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

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

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

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

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

39

 

Clearing Agency or another nominee of the Clearing Agency or by
the Clearing Agency or any such nominee to a successor Clearing Agency or a
nominee of such successor Clearing Agency.

Section 2.12     Regulation S Global Notes.

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

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

(c)      Any payments of principal of, interest on or any other payment on a
Temporary Regulation S Global Note received by Euroclear or Clearstream with
respect to any portion of such Regulation S Global Note owned by a Note Owner
that has not delivered the Regulation S Certificate required by this Section
2.12 shall be held by Euroclear and Clearstream solely as agents for the Paying
Agent and the Trustee. Euroclear and Clearstream shall remit such payments to
the applicable Note Owner (or to a Euroclear or Clearstream member on behalf of
such Note Owner) only after Euroclear or Clearstream has received the requisite
Regulation S Certificate. Until the Paying Agent or the Trustee has received a
Non-U.S. Certificate from Euroclear or Clearstream, as applicable, that it has
received the requisite Regulation S Certificate with respect to the ownership
of a beneficial interest in any portion of a Temporary Regulation S Global
Note, the Paying Agent or the Trustee may revoke the right of Euroclear or
Clearstream, as applicable, to hold any payments made with respect to such
portion of such Temporary Regulation S Global Note. If the Paying Agent or the
Trustee exercises its right of revocation pursuant to the immediately preceding
sentence, Euroclear or Clearstream, as applicable, shall return such payments
to the Paying Agent or the Trustee and the Trustee shall hold such

40

 

payments in
the Collection Account until Euroclear or Clearstream, as applicable, has
provided the necessary Non-U.S. Certificates to the Paying Agent or the Trustee
(at which time the Paying Agent shall forward such payments to Euroclear or
Clearstream, as applicable, to be remitted to the Note Owner that is entitled
thereto on the records of Euroclear or Clearstream (or on the records of their
respective members)).

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

Section 2.13     Special Transfer Provisions.

(a)      If a holder of a beneficial interest in the Rule 144A Global Note
wishes at any time to exchange its beneficial interest in the Rule 144A Global
Note for a beneficial interest in the Regulation S Global Note, or to transfer
a beneficial interest in the Rule 144A Global Note to a person who wishes to
take delivery thereof in the form of a beneficial interest in the Regulation S
Global Note, such holder may, subject to the rules and procedures of the
Clearing Agency and to the requirements set forth in the following sentence,
exchange or cause the exchange or transfer or cause the transfer of the
beneficial interest for an equivalent beneficial interest in the Regulation S
Global Note. Upon receipt by the Trustee of (1) instructions given in
accordance with the Clearing Agency’s procedures from or on behalf of a Note
Owner of the Rule 144A Global Note, directing the Trustee (via the Clearing
Agency’s Deposit/Withdrawal of Custodian System (“DWAC”)), as transfer
agent, to credit or cause to be credited a beneficial interest in the
Regulation S Global Note in an amount equal to the beneficial interest in the
Rule 144A Global Note to be exchanged or transferred, (2) a written order in
accordance with the Clearing Agency’s procedures containing information
regarding the Euroclear or Clearstream account to be credited with such
increase and the name of such account, and (3) a certificate given by such

41

 

Note Owner stating that the exchange or transfer of such beneficial interest has
been made pursuant to and in accordance with Rule 903 or Rule 904 of Regulation
S under the Securities Act, the Trustee, as transfer agent, shall promptly
deliver appropriate instructions to the Clearing Agency (via DWAC), its
nominee, or the custodian for the Clearing Agency, as the case may be, to
reduce or reflect on its records a reduction of the Rule 144A Global Note by
the aggregate principal amount of the beneficial interest in the Rule 144A
Global Note to be so exchanged or transferred from the relevant participant,
and the Trustee, as transfer agent, shall promptly deliver appropriate
instructions (via DWAC) to the Clearing Agency, its nominee, or the custodian
for the Clearing Agency, as the case may be, concurrently with such reduction,
to increase or reflect on its records an increase of the principal amount of
such Regulation S Global Note by the aggregate principal amount of the
beneficial interest in the Rule 144A Global Note to be so exchanged or
transferred, and to credit or cause to be credited to the account of the person
specified in such instructions (who may be Euroclear Bank S.A./N.V., as
operator of
Euroclear or Clearstream or another agent member of Euroclear, or
Clearstream, or both, as the case may be, acting for and on behalf of them) a
beneficial interest in such Regulation S Global Note equal to the reduction in
the principal amount of the Rule 144A Global Note. Notwithstanding anything to
the contrary, the Trustee may conclusively rely upon the completed schedule set
forth in the certificate evidencing the Notes.

(b)      If a holder of a beneficial interest in the Regulation S Global Note
wishes at any time to exchange its beneficial interest in the Regulation S
Global Note for a beneficial interest in the Rule 144A Global Note, or to
transfer a beneficial interest in the Regulation S Global Note to a person who
wishes to take delivery thereof in the form of beneficial interest in the Rule
144A Global Note, such holder may, subject to the rules and procedures of
Euroclear or Clearstream and the Clearing Agency, as the case may be, and to
the requirements set forth in the following sentence, exchange or cause the
exchange or transfer or cause the transfer of such beneficial interest for an
equivalent beneficial interest in the Rule 144A Global Note. Upon receipt by
the Trustee, as transfer agent of (1) instructions given in accordance with the
procedures of Euroclear or Clearstream and the Clearing Agency, as the case may
be, from or on behalf of a Note Owner of the Regulation S Global Note directing
the Trustee, as transfer agent, to credit or cause to be credited a beneficial
interest in the Rule 144A Global Note in an amount equal to the beneficial
interest in the Regulation S Global Note to be exchanged or transferred, (2) a
written order given in accordance with the procedures of Euroclear or
Clearstream and the Clearing Agency, as the case may be, containing information
regarding the account with the Clearing Agency to be credited with such
increase and the name of such account, and (3) prior to the expiration of the
Distribution Compliance Period, a certificate given by such Note Owner stating
that the person transferring such beneficial interest in such Regulation S
Global Note reasonably believes that the person acquiring such beneficial
interest in the Rule 144A Global Note is a QIB and is obtaining such beneficial
interest for its own account or the account of a QIB in a transaction meeting
the requirements of Rule 144A under the Securities Act and any applicable
securities laws of any state of the United States or any other jurisdiction,
the Trustee, as transfer agent, shall promptly deliver (via DWAC) appropriate
instructions to the Clearing Agency, its nominee, or the custodian for the
Clearing Agency, as the case may be, to reduce or reflect on its records a
reduction of the Regulation S Global Note by the aggregate principal amount of
the beneficial interest in such Regulation S Global Note to be exchanged or
transferred, and the Trustee, as transfer agent, shall promptly deliver (via
DWAC) appropriate instructions to the Clearing Agency, its nominee, or the
custodian for the Clearing Agency, as the

42

 

case may be, concurrently with such
reduction, to increase or reflect on its records an increase of the principal
amount of the Rule 144A Global Note by the aggregate principal amount of the
beneficial interest in the Regulation S Global Note to be so exchanged or
transferred, and to credit or cause to be credited to the account of the person
specified in such instructions a beneficial interest in the Rule 144A Global
Note equal to the reduction in the principal amount of the Regulation S Global
Note. After the expiration of the Distribution Compliance Period, the
certification requirement set forth in clause (3) of the second sentence of
this subsection 2.13(b) will no longer apply to such exchanges and transfers.
Notwithstanding anything to the contrary, the Trustee may conclusively rely
upon the completed schedule set forth in the certificate evidencing the Notes.

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

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

Section 2.14     Notices to Clearing Agency. Whenever a notice or
other communication to the Holders of the Notes is required under this
Indenture, unless and until Definitive Notes shall have been issued to Note
Owners pursuant to Section 2.15, the Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency, and shall have no obligation to the Note Owners.

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

43

 

instructions. Upon the issuance of Definitive Notes to Note Owners, the
Trustee shall recognize the Holders of such Definitive Notes as Noteholders.

Section 2.16     Payments on the Notes.

(a)      Subject to the availability of funds and to the Priority of Payments,
the Notes will provide for (i) the payment of Accrued Interest on each Payment
Date through the Rated Final Maturity Date and (ii) (A) absent the occurrence
and continuation of a Rapid Amortization Event, the payment of the Principal
Distribution Amount on each Payment Date until the earlier of the date on which
all Notes are paid in full or the Rated Final Maturity Date or (B) if a Rapid
Amortization Event has occurred and is continuing, the payment of all Available
Funds remaining after the application of clause “EIGHTH” in subsection 3.1(a)
in respect of principal until the earlier of the date on which all Notes are
paid in full or the Rated Final Maturity Date.
All outstanding principal of the Notes will be due and payable (unless
paid on an earlier date) on the Rated Final Maturity Date.

(b)      Interest and principal payable in respect of the Notes of any Class on
any Payment Date shall be paid to the Holders of the Notes of such Class as of
the related Record Date; provided, however, that the Insurer will
be subrogated to the rights of each Noteholder to receive payments of principal
and interest, as applicable, with respect to distributions on the Notes to the
extent of any payment by the Insurer under the Insurance Policy and the Insurer
will be reimbursed therefor, together with interest thereon as provided in the
Insurance Agreement in accordance with Sections 3.1 and 11.7.

(c)      All reductions in the principal amount of a Note (or one or more
predecessor Notes) effected by payments of installments of principal made on
any Payment Date shall be binding upon all future Holders of such Note and of
any Note issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, whether or not such payment is noted on such Note;
provided, however, that any installment of principal that (i) is
subsequently rescinded or recaptured or (ii) is paid by the Insurer as a result
of a draw under the Insurance Policy shall not be considered paid by the
Issuer.

(d)      Notwithstanding any other provision of this Indenture, principal of,
interest on and all other amounts payable on or in respect of the Notes will
constitute limited recourse obligations of the Issuer secured by, and payable
from and to the extent of available proceeds of, the Collateral and any amounts
paid by the Insurer pursuant to claims made under the Insurance Policy. The
Holders of the Notes shall have recourse to the Issuer only to the extent of
the Collateral, and following realization of the Collateral and all amounts
available to the Trustee under the Insurance Policy, any claims of the Holders
of the Notes shall be extinguished and shall not revive thereafter. Neither
the Issuer, nor any of its respective agents, members, partners, beneficiaries,
officers, directors, employees or any Affiliate of any of them or any of their
respective successors or assigns or any other Person or entity shall be
personally liable for any amounts payable, or performance due, under the Notes
or this Indenture. It is understood that the foregoing provisions of this
paragraph shall not (i) prevent recourse to the Collateral for the sums due or
to become due under any security, instrument or agreement which is secured by
the Collateral, or (ii) constitute a waiver, release or discharge of any
indebtedness or obligation evidenced by the Notes or secured by this Indenture
until such Collateral has been realized

44

 

whereupon any outstanding indebtedness
or obligation shall be extinguished. It is further understood that the
foregoing provisions of this paragraph shall not limit the right of any Person
to name the Issuer as party defendant in any action, suit or in the exercise of
any other remedy under the Notes or in this Indenture, so long as no judgment
in the nature of a deficiency judgment or seeking personal liability shall be
asked for or (if obtained) enforced against the Issuer.

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

Section 2.17     [Reserved].

Section 2.18     Clean-Up Call. The Notes are subject to redemption by
the Issuer on any Payment Date on or after the date on which the Aggregate Loan
Balance as of the end of the related Due Period is 10% or less of the Aggregate
Loan Balance as of the Cut-Off Date. The redemption price will be equal to the
Aggregate Principal Amount plus accrued and unpaid interest to the date of
redemption; provided that any Termination Payments due to the Swap
Counterparty under the Interest Rate Swap plus all amounts then due and owing
to the Insurer under the Insurance Agreement will be required to be paid
concurrently with or prior to any such redemption.

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

Section 2.19     Authentication Agent.

(a)      The Trustee may appoint one or more Authentication Agents with respect
to the Notes which shall be authorized to act on behalf of the Trustee in
authenticating the Notes in connection with the issuance, delivery,
registration of transfer, exchange or repayment of the Notes. Whenever
reference is made in this Indenture 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

45

 

authentication executed on behalf of the Trustee by
an Authentication Agent. Each Authentication Agent must be acceptable to the
Issuer and the Servicer.

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

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

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

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

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

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

	 	 	 	 	 
	 	 	 
	 	 	 	 	 
	 	 	 
	 	
as Authentication Agent

for the Trustee

 	 
	 	 	 	 	 
	 	By:  	 	 
	 	 	Authorized Signatory”	 
	 	 	 	 
	 

Section 2.20     Appointment of Paying Agent. The Paying Agent shall
make payments to Noteholders from the Collection Account or other applicable
Account pursuant to the provisions of this Indenture and shall report the
amounts of such distributions to the Issuer. Any Paying Agent shall have the
revocable power to withdraw funds from the Collection Account or other
applicable Account for the purpose of making the distributions referred to
above. The Issuer (with the prior written consent of the Insurer) may revoke
such power and remove the Paying

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Agent if the Issuer determines in its sole
discretion that the Paying Agent shall have failed to perform its obligations
under this Indenture in any material respect. The Issuer (with the prior
written consent of the Insurer) 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 (with the prior written consent of the Insurer) may
appoint a successor to act as Paying Agent. Any reference in this Indenture to
the Paying Agent shall include any co-paying agent unless the context requires
otherwise.

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

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

Section 2.22     144A Information. So long as the Issuer is not
subject to Section 13 or 15(d) of the Exchange Act, upon the request of a
Holder of Notes, the Issuer shall promptly furnish or cause to be furnished to
such Holder and to a prospective purchaser of such Note designated by such
Holder, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act to permit compliance with Rule 144A in connection with
resales of the

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Notes in accordance with the terms hereof (such information
being contemplated to consist of a copy of the Offering Circular together with
all Monthly Servicing Reports delivered to the Issuer since the Closing Date).

ARTICLE III

PAYMENTS, SECURITY AND ALLOCATIONS

Section 3.1     Priority of Payments, Rapid Amortization.

(a)      The Trustee shall apply, based on written instruction to the Trustee
from the Servicer, on each Payment Date, (i) Available Funds for that Payment
Date on deposit in the Collection Account, (ii) pursuant to Section 3.5(b), the
Reserve Account Draw Amount, if any, for that Payment Date and (iii) proceeds
of any claims on the Insurance Policy to make the following payments and in the
following order of priority (provided that claims on the Insurance Policy shall
be used solely to pay interest and principal on the Notes):

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

SECOND, to the Servicer, the Monthly Servicer Fee plus any
unreimbursed Servicer Advances made in respect of any prior Payment
Dates, plus any accrued and unpaid Monthly Servicer Fees;

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

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

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

SIXTH, as long as no Insurer Default has occurred and is continuing,
to the Insurer, any accrued and unpaid Insurer Premium;

SEVENTH, to the holders of the Class A-1 Notes, Accrued Interest on
the Class A-1 Notes, and to the holders of the Class A-2

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Notes, Accrued
Interest on the Class A-2 Notes; to the extent that there are
insufficient funds to pay both such amounts in full, such amounts shall
be paid pro rata in proportion to their respective Class Percentages;

EIGHTH, to the Insurer, any Reimbursement Amounts then due and owing
to the Insurer;

NINTH, (A) if no Rapid Amortization Event has occurred and is
continuing, (i) first, to the Noteholders, the Principal Distribution
Amount, allocated among the Classes pro rata based on their respective
Class Percentages and (ii) second, to the Swap Counterparty, the unpaid
Senior Priority Swap Termination Amount, if any; otherwise (B) if a Rapid
Amortization Event has occurred and is continuing, all remaining
Available Funds will be paid to the Noteholders and the Swap Counterparty
according to subsection 3.1(b);

TENTH, to the Noteholders of each Class, the Extra Principal
Distribution Amount, pro rata in proportion to their respective Class
Percentages;

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

TWELFTH, (i) first, to the Insurer, any other amounts due to the
Insurer pursuant to the Insurance Agreement and (ii) second, to the
Trustee, any other amounts due to the Trustee under this Indenture;

THIRTEENTH, to the Swap Counterparty, any amounts owing to the Swap
Counterparty in respect of a termination of the Interest Rate Swap not
paid pursuant to clause NINTH, above; and

FOURTEENTH, to the Issuer, any remaining Available Funds free and
clear of the lien of this Indenture.

(b)      Rapid Amortization. If a Rapid Amortization Event occurs and
is continuing, on each Payment Date all Available Funds remaining after
application of clause “EIGHTH” in subsection (a) above shall be applied to pay
principal of the Notes and the Senior Priority Swap Termination Amount, if any,
as follows: (i) to the holders of the Class A-1 Notes the lesser of (a) the
amount allocated to the Class A-1 Notes when all Available Funds are allocated
pro rata between the Class A-1 Notes and the Class A-2 Notes in proportion to
their respective Class Percentages and (b) the Principal Amount of the Class
A-1 Notes and (ii) to the holders of the Class A-2 Notes and the Swap
Counterparty, the amount allocated to the Class A-2 Notes when all Available
Funds are allocated pro rata between the Class A-1 Notes and the Class A-2
Notes in proportion to their respective Class Percentages, pro rata between the
Class A-2 Notes and the Swap Counterparty in proportion to the Principal Amount
of the Class A-2 Notes and the unpaid Senior Priority Swap Termination Amount,
respectively, until such amounts are reduced to zero.

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Funds remaining on any Payment Date after making the payments described in
the preceding paragraph while a Rapid Amortization Event shall be in effect,
shall be applied as provided in provisions TENTH through FOURTEENTH in
subsection 3.1(a) above.

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

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

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

Section 3.4     Collection Account.

(a)      Collection Account. The Trustee, for the benefit of the
Noteholders, the Insurer and the Swap Counterparty, shall establish and
maintain in the name of the Trustee, a segregated account designated as the
“Cendant Timeshare 2004-1 Receivables Funding, LLC Series 2004-1 Collection
Account” bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Noteholders, the Insurer and the Swap
Counterparty pursuant to this Indenture. Deposits made into the Collection
Account shall be limited to amounts deposited therein on the Closing Date,
amounts paid to the Issuer under the terms of the Interest Rate Swap,
Collections and other Available Funds and earnings on the Collection Account.
If, at any time, the Collection Account ceases to be an Eligible Account, the
Trustee (or the Servicer on its behalf) shall within 10 Business Days establish
a new Collection Account as an Eligible Account and shall transfer any property
in the Collection Account to the new Collection Account. So long as the
Trustee is an Eligible Institution, the Collection Account may be maintained
with it in an Eligible Account.

(b)     Withdrawals. The Trustee shall have the sole and exclusive
right to withdraw or order a transfer of funds from the Collection Account, in
all events in accordance with the terms and provisions of this Indenture and
the information most recently delivered to the Trustee pursuant to Section 8.1;
provided, however, that the Trustee shall be authorized to accept
and act upon instructions from the Servicer regarding withdrawals or transfers
of funds from the Collection Account, in all events in accordance with the
provisions of this Indenture and the information most recently delivered
pursuant to Sections 3.1 and 8.1. In addition, notwithstanding anything in the
foregoing to the contrary, the Trustee shall be authorized to accept
instructions from the Servicer on a daily basis regarding withdrawals or order
transfers of funds from the Collection Account, to the extent such funds either
(i) have been mistakenly deposited into the Collection Account (including
without limitation funds representing assessments or dues payable by Obligors
to property owners associations or other entities) or

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(ii) relate to items
subsequently returned for insufficient funds or as a result of stop payments.
In the case of any withdrawal or transfer pursuant to the foregoing sentence,
the Servicer shall provide the Trustee, the Insurer and the Swap Counterparty
with notice of such withdrawal or transfer, together with reasonable supporting
details, on the next Monthly
Servicing Report to be delivered by the Servicer following the date of
such withdrawal or transfer (or in such earlier written notice as may be
required by the Trustee from the Servicer from time to time). Notwithstanding
anything therein to the contrary, the Trustee shall be entitled to make
withdrawals or order transfers of funds from the Collection Account, in the
amount of all reasonable and appropriate out-of-pocket costs and expenses
incurred by the Trustee in connection with any misdirected funds described in
clause (i) and (ii) of the second foregoing sentence. Within two Business Days
of receipt, the Servicer shall transfer all Collections and other proceeds of
the Collateral processed by the Servicer to the Trustee for deposit into the
Collection Account. The Trustee shall deposit or cause to be deposited into
the Collection Account upon receipt the Release Price in respect of releases of
Pledged Loans by the Issuer. On each Payment Date, the Trustee shall apply
amounts in the Collection Account to make the payments and disbursements
described in Section 3.1 and this Section 3.4.

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

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

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

Section 3.5     Reserve Account.

(a)     Creation and Funding of the Reserve Account. The Trustee shall
establish and maintain in the name of the Trustee, an Eligible Account
designated as the “Cendant Timeshare 2004-1 Receivables Funding, LLC Reserve
Account” bearing a designation clearly indicating

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that the funds deposited
therein are held for the benefit of the Noteholders, the Insurer and the Swap
Counterparty pursuant to this Indenture. The Reserve Account shall be under
the sole dominion and control of the Trustee; however, if so directed by the
Servicer, the Reserve Account may be an Eligible Account in the name of the
Trustee opened at another
Eligible Institution. If, at any time, the Reserve Account ceases to be
an Eligible Account, the Trustee (or the Servicer on its behalf) shall within
10 Business Days establish a new Reserve Account as an Eligible Account and
shall transfer any property in the Reserve Account to such new Reserve Account.
So long as the Trustee is an Eligible Institution, the Reserve Account may be
maintained with it in an Eligible Account.

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

(b)      Withdrawals from the Reserve Account. If Available Funds are
not sufficient to pay (i) on each Payment Date prior to the Rated Final
Maturity Date, those amounts described in provisions FIRST through NINTH(A)(i)
of subsection 3.1(a) or (ii) on the Rated Final Maturity Date, those amounts
described in provisions FIRST through NINTH(A)(i) of subsection 3.1(a) and all
unpaid Principal Amounts on the Notes, the Trustee, at the direction of the
Servicer, shall withdraw from the Reserve Account the lesser of the amounts
sufficient to make such payments and the balance in the Reserve Account (the
“Reserve Account Draw Amount”).

(c)      Release of Funds from Reserve Account. On each Payment Date,
the Trustee shall withdraw all cash on deposit in the Reserve Account in excess
of the Reserve Required Amount and deposit such amount in the Collection
Account, for application on such Payment Date as Available Funds in accordance
with Section 3.1 of this Indenture.

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

(e)      Administration of the Reserve Account. Funds in the Reserve
Account shall be invested in Permitted Investments as directed by the Servicer;
provided, however, that all Permitted Investments shall mature on
or before the next Payment Date. Subject to the restrictions set forth in the
first sentence of this subsection (e), the Servicer shall instruct the Trustee
in writing regarding the investment of funds on deposit in the Reserve Account.
The Trustee shall be fully protected in following the investment instructions
of the Servicer, and shall have no obligation for keeping the funds fully
invested at all times or for making any investments other than in accordance
with such written investment instructions. If no investment instructions are
received from the Servicer, the Trustee is authorized to invest the funds in
Permitted Investments described in clause (v) of the definition thereof. In no
event shall the Trustee be liable for any investment losses incurred in
connection with the investment of funds on deposit in the Reserve Account by
the Trustee pursuant to this Indenture.

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

Section 3.6     Interest Rate Swap.

(a)      The Issuer shall enter into the Interest Rate Swap, certain terms of
which are set forth herein for the convenience of the parties thereto for
incorporation therein by reference, with the Swap Counterparty on the Closing
Date. The Interest Rate Swap shall have a termination date which is the
earlier of May 20, 2016 or when the notional amount thereunder has been reduced
to zero, subject to early termination in accordance with the terms of the
Interest Rate Swap. The Interest Rate Swap shall have a notional amount for
each Interest Accrual Period equal to the Principal Amount of the Class A-2
Notes as of the close of business on the first day of such Interest Accrual
Period. Under the Interest Rate Swap, the Issuer shall be the fixed rate payer
and shall pay a fixed rate of 3.7465% and the Swap Counterparty shall be the
floating rate payer and shall pay a floating rate of LIBOR plus 0.18%.
Pursuant to the terms of the Interest Rate Swap, the Swap Counterparty shall
pay to the Trustee, on behalf of the Issuer, on each Payment Date, the Net Swap
Receipt, if any, plus the amount of any Net Swap Receipt due but not paid with
respect to any previous Payment Date. The Trustee shall deposit such Net Swap
Receipts, if any, into the Collection Account and shall apply such amounts as
Available Funds pursuant to subsection 3.1 of this Indenture. In addition, in
accordance with the terms of the Interest Rate Swap, the Issuer shall pay to
the Swap Counterparty the Net Swap Payment, if any, for such Payment Date, plus
the amount of any Net Swap Payment due but not paid on any previous Payment
Date, from amounts available pursuant to provision THIRD of subsection 3.1(a).

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

(c)      Following the termination of the Interest Rate Swap pursuant to the
terms thereof, the Issuer shall pay to the Swap Counterparty the amount of the
Termination Payment, if any, to be made by the Issuer pursuant to the Interest
Rate Swap to the extent of funds available therefore under provision NINTH of
subsection 3.1(a) or Section 11.7, if applicable, or provision THIRTEENTH of
subsection 3.1(a) or provision ELEVENTH of Section 11.7, if applicable, or if a
Rapid Amortization Event has occurred and is continuing, as provided in
subsection 3.1(b).

(d)     The Interest Rate Swap shall provide that if a Ratings Event (as
defined below) shall occur and be continuing with respect to the Swap
Counterparty, then the Swap Counterparty shall (A) within five Business Days of
such Ratings Event, give notice to the Issuer and the Insurer of the occurrence
of such Ratings Event, and (B) use reasonable efforts to transfer (at its own
cost) the Swap Counterparty’s rights and obligations under the Interest Rate

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Swap to another party, subject to satisfaction of the Swap Rating Agency
Condition solely in respect of the Class A-2 Notes. If a Ratings Event occurs,
the Issuer, to the extent it has been notified of such event, shall notify the
Trustee, the Insurer and the Servicer. Unless such a
transfer by the Swap Counterparty has occurred within 20 Business Days
after the occurrence of a Ratings Event, the Issuer shall demand that the Swap
Counterparty post Eligible Collateral, as defined in the Interest Rate Swap, to
secure the Issuer’s exposure or potential exposure to the Swap Counterparty and
the Eligible Collateral shall be provided in accordance with a credit support
annex as provided in the Interest Rate Swap. The Eligible Collateral to be
posted and the credit support annex shall be subject to satisfaction of the
Swap Rating Agency Condition solely in respect of the Class A-2 Notes.
Valuation and posting of Eligible Collateral shall be made as of each Payment
Date or more frequently as provided in the Interest Rate Swap. Notwithstanding
the addition of the credit support annex and the posting of Eligible
Collateral, the Swap Counterparty shall continue to use reasonable efforts to
transfer its rights and obligations under the Interest Rate Swap to an
acceptable third party; provided, however, that the Swap
Counterparty’s obligations to find a transferee and to post Eligible Collateral
shall remain in effect only for so long as a Ratings Event is continuing.

(e)     The Interest Rate Swap shall provide that a “Ratings Event”
will occur with respect to the Swap Counterparty if such party is not rated by
at least two of S&P, Moody’s and Fitch, or if the long-term and short-term
senior unsecured deposit ratings of the Swap Counterparty cease to be at least
Aa3 and P-1 by Moody’s or are withdrawn by Moody’s, or cease to be at least A
and A-1 by S&P or at least A and F1 by Fitch, to the extent such obligations
are rated by S&P or Moody’s or Fitch.

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

If the Interest Rate Swap is terminated for any reason and no successor
swap is entered into, the Servicer shall solicit bids from three or more
prospective replacement swap counterparties for the price of a replacement swap
agreement with a notional amount equal to the outstanding principal amount of
the Class A-2 Notes. With the consent of (A) the Insurer, if no Insurer
Default has occurred and is continuing or (B) during the continuation of an
Insurer Default, the Noteholders of greater than 50% of the Aggregate Principal
Amount of the Notes, and in either case upon satisfaction of the Swap Rating
Agency Condition solely in respect of the Class A-2 Notes, the Issuer will
enter into such replacement swap agreement. If (A) the Insurer, if no Insurer
Default has occurred and is continuing or (B) during the continuation of an
Insurer Default, the Noteholders of greater than 50% of the Aggregate Principal
Amount of the Notes does not consent to such replacement swap agreement, or if
such Swap Rating Agency Condition is not met, the Issuer will not enter into a
replacement swap agreement.

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Section 3.7     Custody of Permitted Investments and other Collateral.

The Trustee shall hold such of the Collateral (and any other collateral
that may be granted to the Trustee) and the Permitted Investments (other than
the Pledged Loans, the related Loan Files, or the related Timeshare Property)
as consists of instruments, certificated securities, negotiable documents,
money, goods, or tangible chattel paper in the State of New York or the
State of North Carolina. The Trustee shall hold such of the Collateral
(and any other collateral that may be granted to the Trustee) and the Permitted
Investments (other than the Pledged Loans, the related Loan Files, or the
related Timeshare Property) as constitutes investment property (other than
certificated securities) through a securities intermediary, which securities
intermediary shall agree with the Trustee and the Issuer that (I) such
investment property shall at all times be credited to a securities account of
the Trustee, (II) such securities intermediary shall treat the Trustee as
entitled to exercise the rights that comprise each financial asset credited to
such securities account, (III) all property credited to such securities account
shall be treated as a financial asset, (IV) such securities intermediary shall
comply with entitlement orders originated by the Trustee without the further
consent of any other person or entity, (V) such securities intermediary will
not agree with any person or entity other than the Trustee to comply with
entitlement orders originated by any person or entity other than the Trustee,
(VI) such securities accounts and the property credited thereto shall not be
subject to any lien, security interest, encumbrance, or right of set-off in
favor of such securities intermediary or anyone claiming through it (other than
the Trustee), (VII) such agreement shall be governed by the laws of the State
of New York, and (VIII) the State of New York shall be the “securities
intermediary’s jurisdiction” of such securities intermediary for purposes of
the New York Uniform Commercial Code (the “NYUCC”). The Trustee shall hold such
of the Collateral (and any other collateral that may be granted to the Trustee)
and the Permitted Investments (other than the Pledged Loans, the related Loan
Files, or the related Timeshare Property) as constitutes a deposit account
through a bank, which bank shall agree in writing with the Trustee and the
Issuer that (i) such bank shall comply with instructions originated by the
Trustee directing the disposition of the funds in the deposit account without
further consent of any other person or entity, (ii) such bank will not agree
with any person or entity other than the Trustee to comply with instructions
originated by any person or entity other than the Trustee, (iii) such deposit
account and the money deposited therein shall not be subject to any lien,
security interest, encumbrance, or right of set-off in favor of such bank or
anyone claiming through it (other than the Trustee), (iv) such agreement shall
be governed by the laws of the State of New York, and (v) the State of New York
shall be the “bank’s jurisdiction” of such bank for purposes of Article 9 of
the NYUCC. Terms used in this paragraph that are defined in the NYUCC and not
otherwise defined herein shall have the meaning set forth in the NYUCC. Except
as permitted by this paragraph, the Trustee shall not hold any part of the
Collateral (or any other collateral that may be granted to the Trustee) or the
Permitted Investments (other than the Pledged Loans, the related Loan Files, or
the related Timeshare Property) through an agent or a nominee.

Section 3.8     The Policy.

(a)     The Issuer hereby represents that (i) it has obtained the Insurance
Policy in the name, and for the benefit and security, of the Trustee, acting on
behalf of the Noteholders, (ii) it has entered into the Insurance Agreement
which provides for the issuance of the Insurance Policy by the Insurer and
(iii) the Insurance Policy permits the Trustee to draw on the Policy

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from time
to time for the purposes set forth in this Agreement. The Insurer shall not be
entitled to reimbursement for any draws, interest or fees with respect to the
Insurance Policy, except as specifically provided herein.

(b)      Pursuant to the Insurance Policy, (i) if on any Determination Date
Available Funds and amounts on deposit in the Reserve Account are insufficient
to pay the interest set forth
in clause (i) of the definition of Accrued Interest (excluding interest on
past due Accrued Interest) on the Notes in accordance with the Priority of
Payments or Section 11.7, as applicable, on the immediately following Payment
Date, then the Trustee will no later than 10:00 a.m. New York City time on the
fourth Business Days prior to the Payment Date make a claim under the Insurance
Policy in an amount equal to such insufficiency and (ii) if on the
Determination Date immediately preceding the Rated Final Maturity Date
Available Funds and amounts on deposit in the Reserve Account are insufficient
to reduce the Aggregate Principal Amount of the Notes to zero on the Rated
Final Maturity Date, then the Trustee will no later than 10:00 a.m. New York
City time on the fourth Business Days prior to the Payment Date make a claim
under the Insurance Policy in an amount necessary to reduce the Aggregate
Principal Amount of the Notes to zero on such Payment Date (the aggregate
amounts demanded in (i) and (ii) pursuant to this sentence on any Payment Date,
the “Policy Claim Amount.”) Following receipt by the Insurer of such
demand, the Insurer will pay the Policy Claim Amount by the later of (i) 12:00
noon, New York City time, on the applicable Payment Date and (ii) 12:00 noon,
New York City time, on the fourth Business Day following receipt by the Insurer
of the appropriate demand for payment.

The terms “Receipt” and “Received,” with respect to the
Insurance Policy, mean actual delivery to the Insurer prior to 11:00 a.m., New
York City time, on a Business Day. Notices delivered either on a day that is
not a Business Day or after 11:00 a.m., New York City time, on a Business Day,
shall be deemed Received on the next succeeding Business Day. If any notice or
certificate given under the Insurance Policy by the Trustee is not in proper
form or is not properly completed, executed or delivered, it will be deemed not
to have been Received, and the Insurer or the fiscal agent will promptly advise
the Trustee of such deficiency and the Trustee may submit an amended notice.

Pursuant to the Insurance Policy, the Insurer shall pay any Insured
Payment that is a Preference Amount no later than 12:00 Noon New York City time
on the later of (i) the date on which such Insured Payment is due pursuant to
the Order requiring such payment and (ii) the fourth Business Day following
receipt on a Business Day by the Insurer in Armonk, New York (or such other
location specified in writing by the Insurer to the Trustee) of a notice for
payment relating to such Insured Payment of (i) a certified copy of a final,
non-appealable order requiring the return of such Preference Amount (an
“Order”), (ii) a certificate of the Trustee that the Order has been
entered and is not subject to any stay, (iii) an opinion of counsel reasonably
satisfactory to the Insurer, and upon which the Insurer shall be entitled to
rely, stating that such Order is final and is not subject to appeal, (iv) an
assignment in such form as is reasonably required by the Insurer, irrevocably
assigning to the Insurer all rights and claims of the Noteholders, if any,
relating to or arising under the Notes against the Issuer or otherwise with
respect to such Preference Amount, to the extent of such Preference Amount, (v)
appropriate instruments to effect the appointment of the Insurer as agent for
the Trustee and each Noteholder in any legal proceeding relating to such
Preference Amount in a form reasonably satisfactory to the Insurer, and (vi) a
notice for payment relating to such Preference Amount appropriately completed
and

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executed by the Trustee. Such payments shall be disbursed to the
Bankruptcy Trustee (or other Person, if applicable) named in the Order on
behalf of the Noteholders and not to any Noteholder directly unless such
Noteholder provides proof reasonably satisfactory to the Insurer that such
Noteholder has returned such Preference Amount to such Bankruptcy Trustee (or
other Person, if applicable), in which case such payment shall be disbursed to
such Noteholder.

The term “Preference Amount” has the meaning assigned to that term
in the Insurance Policy.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE ISSUER

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

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

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

(c)     Governmental and Other Consents. All approvals,
authorizations, consents, or orders of any court or governmental agency or
body required in connection with the execution and delivery by the Issuer of
any of the Transaction Documents to which the Issuer is a party, the

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consummation by the Issuer of the transactions contemplated hereby or thereby,
the performance by the Issuer of and the compliance by the Issuer with the
terms hereof or thereof, have been obtained, except where the failure so to do
would not have a Material Adverse Effect on the Issuer.

(d)      Enforceability of Transaction Documents. Each of the
Transaction Documents to which the Issuer is a party has been duly and validly
executed and delivered by the Issuer and constitutes the legal, valid and
binding obligation of the Issuer, enforceable against the Issuer in accordance
with their respective terms, except as enforceability may be subject to or
limited by any Debtor Relief Law or by general principles of equity (whether
considered in a suit at law or in equity).

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

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

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

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

(i)     Location of Issuer. The Issuer was formed on April 1, 2004 as
a limited liability company under the laws of the State of Delaware and has at
all times since such date remained as a limited liability company under the
laws of the State of Delaware. From April 1, 2004 to the

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date of this
Agreement, the Issuer’s correct name has been and is Cendant Timeshare 2004-1
Receivables Funding, LLC.

(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 this Indenture. From and after the Closing Date,
except as provided in the Intercreditor Agreement, the Trustee shall hold all
right and title to and interest in all of the monies, checks, instruments,
depository transfers or automated clearing house electronic transfers and other
items of payment and their proceeds and all monies and earnings, if any,
thereon in the Lockbox Accounts. The Issuer has no other lockbox accounts for
the collection of Scheduled Payments in respect of Pledged Loans except for the
Lockbox Accounts.

(k)      No Other Legal Names. The Issuer has not had any legal name
other than the name set forth herein at any time since its formation.

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

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

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

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

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(p)      Taxes. The Issuer has timely filed or caused to be timely
filed all federal, state, and local and foreign tax returns which are required
to be filed by it, and has paid
or caused to be paid all taxes due and owing by it, other than any taxes
or assessments, the validity of which are being contested in good faith by
appropriate proceedings timely instituted and diligently pursued and with
respect to which the Issuer has set aside adequate reserves on its books in
accordance with GAAP and which proceedings have not given rise to any Lien.

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

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

(s)      ERISA. The Issuer has not established and does not maintain or
contribute to any Benefit Plan that is covered by Title IV of ERISA.

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

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

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

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

The representations and warranties of the Issuer set forth in this Section
4.2 shall be deemed to be remade without further act by any Person on and as of
each date of substitution 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 4.2 shall survive any Grant of the respective Loans by the Issuer.

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Section 4.3     Rights of Obligors and Release of Loan Files.

(a)      Notwithstanding any other provision contained in this Indenture,
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, the Insurer and the Noteholders, and none of the
Collateral Agent, the Trustee, the Insurer 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 Indenture, the Collateral Agent or
the Trustee shall acquire through foreclosure the Issuer’s interest in any
portion of the Timeshare Property subject to a Pledged Loan, the Collateral
Agent and the Trustee hereby specifically agree to release or cause to be
released any Timeshare Property from any Lien hereunder upon completion of all
payments and the performance of all the terms and conditions required to be
made and performed by such Obligor under such Pledged Loan, and each of the
Collateral Agent and the Trustee hereby consents to any such release by, or at
the direction of, the Collateral Agent.

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

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE ISSUER;

ASSIGNMENT OF REPRESENTATIONS AND WARRANTIES

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

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

(b)      the Pledged Loans and the documents evidencing such Pledged Loans
constitute either “accounts,” “chattel paper,” “instruments” or “general
intangibles” within the meaning of the applicable UCC.

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

(a)     the related Timeshare Property has been purchased by an Obligor,
and with respect to a Timeshare Property which is a Fixed Week, a UDI or
which constitutes Points (it being understood in the case of a Timeshare
Property which constitutes Points, that references in this clause (a) to
a Timeshare Property shall be deemed to be references to the related
Fixed Week or UDI deposited into FairShare Plus in exchange for such
points) (i) is not an interest in a Lot, (ii) except in the case of a
Green Loan, a certificate of occupancy has been issued for the Resort
related to such Timeshare Property, (iii) except in the case of a Green
Loan, the unit related to the Timeshare Property is complete and ready
for occupancy, is not in need of material maintenance or repair, except
for ordinary, routine maintenance and repairs that are not substantial in
nature or cost and contains no structural defects materially affecting
its value, (iv) the Resort related to the Timeshare Property is not in
need of maintenance or repair, except for ordinary, routine maintenance
and repairs that are not substantial in nature or cost and contains no
structural defects materially affecting its value, (v) there is no legal,
judicial or administrative proceeding pending, or to the Issuer’s
knowledge threatened, for the total condemnation of the Resort related to
the Timeshare Property or partial condemnation of any portion of the
property related to the Timeshare Property that would have a material
adverse effect on the value of the Timeshare Property, (vi) the Resort
related to the

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Timeshare Property is not located outside of the United States and
(vii) is subject to declarations, covenants and restrictions of record;

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

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

(d)     that was issued in a transaction that complied, and is in
compliance, in all material respects with all requirements of applicable
federal, state and local law, including applicable laws relating to
usury, truth-in-lending, property sales, consumer credit protection and
disclosure, except, with respect only to California Business and
Professions Code Section 11018, where such failure to comply would not
have a Material Adverse Effect on the Sellers or a material adverse
effect on the Pledged Loans;

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

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

(g)     is not a Defaulted Loan;

(h)     the Scheduled Payments on which are not 30 days or more
delinquent as of the Cut-Off Date;

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

(j)     with respect to which the related Timeshare Property (i) if the
Loan is a Fairfield Loan (A) consists of a Fixed Week or a UDI and (B) if
it consists of a Fixed

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Week, it has been converted or is convertible into a UDI or has
become subject to the FairShare Plus Program, which conversion or other
modification does not or would not give rise to the extension of the
maturity of any payments under such Pledged Loan or (ii) if the Loan is a
Trendwest Loan, consists of Vacation Credits;

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

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

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

(n)     arises from transactions in a jurisdiction in which (i) with
respect to Fairfield Loans, FRI and each Subsidiary of FRI (other than
the Depositor, the Issuer, Sierra 2002, Sierra 2003-1 and Sierra 2003-2)
that conducts business in such jurisdiction is duly qualified to do
business, except where the failure to so qualify will not adversely
affect or impair the legality, validity, binding effect and
enforceability of such Pledged Loan and (ii) with respect to Trendwest
Loans, Trendwest is duly qualified to do business, except where the
failure to so qualify will not adversely affect or impair the legality,
validity, binding effect and enforceability of such Pledged Loan;

(o)     constitutes a legal, valid, binding and enforceable obligation
of the related Obligor, except as such enforceability may be limited by
Debtor Relief Laws and as such enforceability may be limited by general
principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law;

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

(q)     with respect to which, (i) the downpayment has been made, (ii)
neither statutory nor regulatively imposed rescission rights exist with
respect to the related Obligor and (iii) no basis for such rights exists
on the Cut-Off Date in the case of any Pledged Loan for which such rights
are, at any time following the Cut-Off Date, granted or imposed;

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

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

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

(u)     the billing address of the Obligor is located in the United
States; provided, however that the billing addresses of not
more than 5% of the Obligors (by Loan Balance) may be located outside the
United States; and

(v)     is not and is not subsequently deemed to have been a Defective
Loan as defined in the Master Loan Purchase Agreement pursuant to which
it was sold by the applicable Seller to the Depositor.

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

Section 5.4     Release of Defective Loans.

(a)     Deposit of Release Price or Substitution of Qualified Substitute
Loan. Subject to subsection (b) of this section, upon discovery by the
Issuer or upon written notice from the Depositor or the Trustee that any
Pledged Loan is a Defective Loan, the Issuer shall, within 90 days after the
earlier of its discovery or receipt of notice thereof (i) if such Defective Loan

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constitutes a Defective Loan as defined in the Purchase Agreement
pursuant to which the Depositor acquired such Defective Loan, direct the
applicable Seller to perform its obligation under such Purchase Agreement to
either (A) deposit the Release Price with the Trustee or (B) deliver to the
Trustee one or more Qualified Substitute Loans in substitution for such
Defective Loan and pay to the Trustee the Substitution Adjustment Amount, or
(ii) if such Defective Loan does not constitute a Defective Loan as defined in
the Purchase Agreement pursuant to which the Depositor acquired such Defective
Loan, deposit the Release Price with the Trustee. If such Defective Loan
constitutes a Defective Loan as defined in the Purchase Agreement pursuant to
which the Depositor acquired such Defective Loan, then, notwithstanding any
other provision of this Indenture, the Issuer shall have no obligation or
liability with respect to such Defective Loan should the applicable Seller fail
to perform its obligations under the Purchase Agreement with respect to such
Defective Loan.

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

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Loan should the applicable Seller
fail to perform its obligation under the Purchase Agreement to pay such
Substitution Adjustment Amount to the Trustee.

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

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

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

ARTICLE VI

ADDITIONAL COVENANTS OF ISSUER

Section 6.1     Affirmative Covenants. The Issuer shall:

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

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

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

(d)     Keeping of Records and Books of Account. Maintain and
implement administrative and operating procedures (including without limitation
an ability to recreate

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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 and other Pledged Assets.

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

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

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

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

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

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

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

(i)     Perfected Security Interest. Take such action with respect to
each Pledged Loan as is necessary to ensure that the Collateral Agent maintains
on behalf of the Trustee, a first

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priority perfected security interest in such
Pledged Loan and the Pledged Assets relating thereto and all other Collateral,
in each case free and clear of any Liens (other than the Lien created by this
Indenture 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 Collateral, or which would
result in the amendment, hypothecation, subordination, termination or discharge
of, or impair the validity or effectiveness of, any such document, instrument
or agreement except as expressly provided in this Indenture or such other
instrument or document.

(k)      Insurance and Condemnation.

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

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

(l)      Custodian.

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

(ii)     The Issuer shall cause the Custodian at all times to maintain control
of the Loan Files for the benefit of the Collateral Agent on behalf of the
Trustee in each case pursuant to the Custodial Agreement. Each of the Issuer
and the Servicer may access the Loan Files at the Custodian’s storage facility
only for the purposes and upon the terms and conditions set forth herein and in
the Custodial Agreement. Each of the Issuer and the Servicer may only remove

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documents from the Loan File for collection services and other routine
servicing requirements from such facility in accordance with the terms of the
Custodial Agreement, all as set forth and pursuant to the “Bailment Agreement”
(as defined in and attached as an exhibit to the Custodial Agreement).

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

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

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

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

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

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

(v)     Ensure that all material transactions between the Issuer and any
of its Affiliates shall be only on an arm’s-length basis and shall not be
on terms more favorable to either party than the terms that would be
found in a similar transaction involving

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

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

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

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

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

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

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

(xiii)     Except as provided herein and in any other Transaction
Document, not enter into any guaranty, or otherwise become liable, with
respect to or hold its assets or

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

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

(xvi)     Take all actions on its part as are necessary to comply with
each assumption contained in the true sale and substantive consolidation
opinions given as of the date hereof.

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

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

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

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

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

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

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

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

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

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

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

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

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

(a)      Sales, Liens, Etc., Against Receivables and Related Security.
Except for the releases contemplated under Sections 5.4, 14.4, 14.5, 14.6 and
14.7 of this Indenture, sell, assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist, any Lien (other than the
Lien created by this Indenture or, with respect to Timeshare Properties
relating to Pledged Loans, any Permitted Encumbrances thereon) upon or
with respect to, any Pledged Loan or any other Pledged Assets, or any interests
in either thereof, or upon or with respect to any Collateral hereunder. The
Issuer shall immediately notify the Trustee, the Insurer 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, the Insurer and the Collateral Agent, Trustee and Noteholders in,
to and under the Pledged Loans and all other Pledged Assets, against all claims
of third parties.

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

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

(d)      Change in Payment Instructions to Obligors. Add or terminate
any bank as a Lockbox Bank from those listed in Schedule 2 hereto or make any
change in the instructions to Obligors regarding payments to be made to any
Lockbox Account at a Lockbox Bank, unless the Trustee shall have received (i)
30 days’ prior notice of such addition, termination or change; (ii) written
confirmation from the Issuer that after the effectiveness of any such
termination, there shall be at least one (1) Lockbox Account in existence; and
(iii) prior to the effective date of such addition, termination or change, (x)
executed copies of Lockbox Agreements executed by each new Lockbox Bank, the
Issuer, the Trustee and the Servicer and (y) copies of all agreements and
documents signed by either the Issuer or the respective Lockbox Bank with
respect to any new Lockbox Account.

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

(f)      No Change in Control. At any time fail to be (i) a wholly
owned member of the group of which Cendant is the common parent and (ii) an
entity wholly owned directly or indirectly by FAC.

(g)      ERISA Matters. Establish or maintain or contribute to any
Benefit Plan that is covered by Title IV of ERISA.

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

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

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course of business and
reimbursement or indemnification obligations as provided for under this
Indenture or as contemplated by the Transaction 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 Transaction Documents; and

	 
	 	(ii)	 	to the extent not otherwise prohibited under this
Indenture, 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 Transaction 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 Term
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 4.1(a) or (y) its
name, unless in any such event the Issuer shall have given the Trustee, the
Collateral Agent and the Insurer and the Swap Counterparty at least ten (10)
days prior written notice thereof and shall take all action necessary or
reasonably requested by the Trustee, the Insurer or the Collateral Agent to
amend its existing Financing Statements and file additional Financing
Statements in all applicable jurisdictions
necessary or advisable to maintain the perfection of the Lien of the
Collateral Agent under this Indenture.

ARTICLE VII

SERVICING OF PLEDGED LOANS

Section 7.1     Responsibility for Loan Administration. The Servicer
shall manage, administer, service and make collections on the Pledged Loans on
behalf of the Trustee and Issuer. Without limiting the generality of the
foregoing, but subject to all other provisions hereof, the Trustee and the
Issuer grant to the Servicer a limited power of attorney to execute and the
Servicer is hereby authorized and empowered to so execute and deliver, on
behalf of itself,

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the Issuer and the Trustee or any of them, any and all
instruments of satisfaction or cancellation or of partial or full release or
discharge and all other comparable instruments with respect to the Pledged
Loans, any related Mortgages and the related Timeshare Properties, but only to
the extent deemed necessary by the Servicer.

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

FAC is hereby appointed as the Servicer until such time as any Service
Transfer shall be effected under Article XII.

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

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

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

Section 7.5     Enforcement.

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

(b)     The Servicer may sue to enforce or collect upon Pledged Loans, in its
own name, if possible, or as agent for the Issuer. If the Servicer elects to
commence a legal proceeding to enforce a Pledged Loan, the act of commencement
shall be deemed to be an automatic assignment of the Pledged Loan to the
Servicer for purposes of collection only. If, however, in any enforcement suit
or legal proceeding it is held that the Servicer may not enforce a Pledged Loan
on the grounds that it is not a real party in interest or a holder entitled to
enforce the

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Pledged Loan, the Trustee on behalf of the Issuer shall, at the
Servicer’s expense, take such steps as the Servicer and the Trustee may
mutually agree are necessary (such agreement not to be unreasonably withheld)
to enforce the Pledged Loan, including bringing suit in its name or the name of
the Issuer. The Servicer shall provide to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
thereby.

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

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

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

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

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

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

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

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

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

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

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

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

Section 7.9     Costs and Expenses. The costs and expenses incurred by
the Servicer in carrying out its duties hereunder, including without limitation
the fees and expenses incurred in connection with the enforcement of Pledged
Loans, shall be paid by the Servicer and the Servicer shall be entitled to
reimbursement hereunder from the Issuer as provided in Section 3.1. Failure by
the Servicer to receive reimbursement shall not relieve the Servicer of its
obligations under this Indenture.

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

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

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

(c)     Binding Obligations. Each of the Transaction Documents to
which Servicer is a party constitutes a legal, valid and binding obligation of
the Servicer enforceable against the Servicer in accordance with its terms,
except as such enforceability may be subject to or limited

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by applicable Debtor
Relief Laws and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity).

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

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

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

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

(a)      Change in Payment Instructions to Obligors. The Servicer will
not add or terminate any bank as a Lockbox Bank from those listed in Schedule 2
to this Indenture or make any change in the instructions to Obligors regarding
payments to be made to any Lockbox Bank, unless the Trustee shall have received
(i) 30 Business Days’ prior notice of such addition, termination or change and
(ii) prior to the effective date of such addition, termination or change, (x)
fully executed copies of the new or revised Lockbox Agreements executed by each
new Lockbox Bank, the Issuer, the Trustee and the Servicer and (y) copies of
all agreements and documents signed by either the Issuer or the respective
Lockbox Bank with respect to any new Lockbox Account.

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

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

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

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

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

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

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

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

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

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

(g)      Relocation of Servicer. The Servicer shall at all times
maintain each office from which it services Pledged Loans within the United
States of America.

(h)     Instruments. The Servicer will not remove any portion of the
Pledged Loans or other collateral that consists of money or is evidenced by an
instrument, certificate or other writing (including any Pledged Loan) from the
jurisdiction in which it is then held unless the

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	 	 	Trustee has first received an
Opinion of Counsel to the effect that the Lien created by this Indenture with
respect to such property will continue to be maintained after giving effect to
such action or actions; provided, however, that the Custodian,
the Collateral Agent and the Servicer may remove Loans from such jurisdiction
to the extent necessary to satisfy any requirement of law or court order, in
all cases in accordance with the provisions of the Custodial Agreement, the
Collateral Agency Agreement and this Indenture.

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

(j)      Segregation of Collections. The Servicer will:

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

(b)     with respect to each Lockbox Account either (i) prevent the
deposit into such account of any funds other than Collections in respect
of Pledged Loans or (ii) enter into an intercreditor agreement with other
entities which have an interest in the amounts in such 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. Except to the extent necessary to
address defects in the sales process or in cases of exceptional hardship of the
Obligor, and without limiting anything in subsection 6.2(b), the Servicer will
not terminate any Pledged Loan prior to the end of the term of such Loan,
whether such early termination is made pursuant to an equitable cause, statute,
regulation, judicial proceeding or other applicable law, unless prior to such
termination, the Issuer consents and any related Pledged Assets have been
released from the Lien of this Indenture.

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

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

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

(o)      Maintenance of Security Interest. Upon its receipt on or
before March 31 of each year, commencing in 2005, of a copy of the opinion
described in Section 2.02(g) of the Insurance Agreement as in effect on the
date hereof, the Servicer shall review the opinion and, to the extent any such
opinion describes the recording, filing, re-recording or refiling of any
document or the filing of any financing statements, continuation statements, or
amendments that, in the opinion of such counsel, are required to maintain the
lien and security interest created by this Indenture, then the Servicer, at the
expense of the Issuer, shall cooperate with the Issuer in taking such actions
within the time limits described in such opinion.

(p)      Credit Standards and Collection Policies. The Servicer will
make a diligent effort to deliver to the Insurer a copy of each material
amendment or material modification of the Credit Standards and Collection
Policies promptly upon the effectiveness of any such amendment or modification
provided that any inadvertent failure to deliver any such amendment or
modification will not be deemed a default under this Agreement.

Section 7.12     Servicer not to Resign.

The entity then serving as Servicer shall not resign from the obligations
and duties hereby imposed on it hereunder 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 Servicer shall have been appointed and accepted the
duties as Servicer pursuant to Section 12.2. Any such determination permitting
the resignation of the Servicer pursuant to clause (i) of the preceding
sentence shall be evidenced by an Opinion of Counsel to such effect delivered
to the Trustee. No such resignation shall be effective until a Successor
Servicer shall have assumed the responsibilities and obligations of the
Servicer in accordance with Section 12.2.

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

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

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

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

(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
Indenture shall have occurred and be continuing.

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

Section 7.15     Subservicing Agreements; Delegation of Duties.

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

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

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

(b)      In the ordinary course of business, the Servicer, including any
Successor Servicer, and each Subservicer may at any time delegate any duties
hereunder to any Person who agrees to conduct such duties in accordance with
the terms of this Indenture. Any such delegations shall not constitute a
resignation within the meaning of Section 7.12 of this Indenture.
Notwithstanding anything to the contrary contained herein, or in any agreement
relating to such delegations, the Servicer shall remain obligated and liable to
the Trustee, the Issuer, the Collateral Agent, the Insurer and the Noteholders
for the servicing and administration of the Pledged Loans in accordance with
the provisions of this Indenture to the same extent and under the same terms
and conditions as if it alone were servicing and administering the Pledged
Loans.

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

Section 7.17     Delivery of Monthly Files. Beginning on the later of
(i) the date the FAC and Trendwest computer systems used for servicing are
fully integrated and (ii) the Determination Date in January 2005, the Servicer
shall on or before the Determination Date in each calendar month deliver to the
Trustee, as backup servicer, an electronic file containing with respect to each
Pledged Loan the loan number, the principal balance of the loan and the next
payment due date for such loan.

ARTICLE VIII

REPORTS

Section 8.1     Monthly Servicing Report. On or before the
Determination Date prior to each Payment Date, the Servicer shall deliver to
the Trustee, the Issuer, the Insurer, Fitch and S&P a Monthly Servicing Report
in a form substantially like that attached as Exhibit D to this Indenture with
such additions as the Trustee may from time to time request and containing
information necessary to make payments and transfer funds as provided in
Sections 3.1 and 3.4

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of this Indenture. The Servicer shall deliver each such
Monthly Servicer Report to the Trustee on or before 3:00 p.m. New York City
time on the Determination Date. Each Monthly Servicing Report shall be
accompanied by a certificate of a Servicing Officer substantially in the form
of Exhibit D certifying the accuracy of such report and that no Event of
Default or event that with the giving of notice or lapse of time or both would
become an Event of Default has occurred, or if such event has occurred and is
continuing, specifying the event and its status. Such certificate shall state
whether or not a Rapid Amortization Event, Cash Accumulation Event or Servicer
Default has occurred and shall also identify which, if any, Pledged Loans have
been identified as Defective Loans or have become Defaulted Loans during the
preceding Due Period and if a Cash Accumulation Event has occurred.

Section 8.2     Other Data. In addition, the Servicer shall at the
reasonable request of the Trustee, the Issuer, the Insurer or a Rating Agency,
furnish to the Trustee, the Issuer, the Insurer or such Rating Agency such
underlying data as can be generated by the Servicer’s existing data processing
system without undue modification or expense; provided, however,
nothing in this Section 8.2 shall permit any of the Trustee, the Issuer, the
Insurer or any Rating Agency to materially change or modify the ongoing data
reporting requirements under this Article VIII.

Section 8.3     Annual Servicer’s Certificate. The Servicer will
deliver to the Issuer, the Trustee, the Insurer and each Rating Agency within
forty-five (45) days after the end of each fiscal year, beginning with the
fiscal year ending December 31, 2004, an Officer’s Certificate substantially in
the form of Exhibit E stating that (a) a review of the activities of the
Servicer during the preceding calendar year (or, in the case of the first such
Officer’s Certificate, the period since the Closing Date) and of its
performance under this Indenture during such period was made under the
supervision of the officer signing such certificate and (b) to the Servicer’s
knowledge, based on such review, the Servicer has fully performed all of its
obligations under this Indenture 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 8.4     Notices to FAC. In the event that FAC is not acting as
Servicer, any Successor Servicer appointed and acting pursuant to Section 12.2
shall deliver or make available to FAC each certificate and report required to
be prepared, forwarded or delivered thereafter pursuant to the provisions of
this Article VIII.

Section 8.5     Tax Reporting. The Trustee shall file or cause to be
filed with the Internal Revenue Service and furnish or cause to be furnished to
Noteholders Information
Reporting Forms 1099, together with such other information reports or
returns at the time or times and in the manner required by the Code consistent
with the treatment of the Notes as indebtedness of the Issuer for federal
income tax purposes.

ARTICLE IX

LOCKBOX ACCOUNTS

Section 9.1     Lockbox Accounts. The Issuer has established or has
caused to be established and shall maintain or cause to be maintained a system
of operations, accounts and

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

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

ARTICLE X

INDEMNITIES

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

Section 10.2     Tax Indemnification. The Issuer agrees to pay, and to
indemnify, defend and hold harmless the Trustee, the Noteholders, the Insurer
and the Swap Counterparty from, any taxes which may at any time be asserted
with respect to, and as of the date of, the Grant of the Pledged Loans to the
Collateral Agent for the benefit of the Trustee, the Noteholders, the Insurer
and the Swap Counterparty, including without limitation any sales, gross
receipts, general corporation, personal property, privilege or license taxes
(but not including any federal, state or other income or intangible asset taxes
arising out of the issuance of the Notes or distributions with respect thereto,
other than any such intangible asset taxes in respect of a jurisdiction in
which the indemnified person is not otherwise subject to tax on its intangible
assets) and costs, expenses and reasonable counsel fees in defending against
the same.

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

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

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

ARTICLE XI

EVENTS OF DEFAULT

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

(a)      Available Funds together with the Reserve Account Draw Amount are not
sufficient to pay in full interest due on the Notes on any Payment Date
(without regard to amounts paid pursuant to the Insurance Policy);

(b)      Available Funds together with the Reserve Account Draw Amount on the
Scheduled Final Maturity Date are not sufficient to reduce the Aggregate
Principal Amount of the Notes to zero;

(c)      a default in the observance or performance of any material covenant or
agreement of the Issuer made with respect to itself or the Servicer made with
respect to itself in this Indenture (other than a covenant or agreement, a
default in the observance or performance of which is elsewhere in this Section
11.1 specifically dealt with) or in the Insurance Agreement, or any
representation or warranty of the Issuer made as to itself or the Servicer made
with respect to itself in this Indenture or in the Insurance Agreement, or in
any certificate or other writing delivered pursuant hereto or thereto, or in
connection herewith or therewith, proving to have been incorrect in any
material respect as of the time when the same shall have been made, and such
default shall continue or not be cured, or the circumstance or condition in
respect of which such representation or warranty was incorrect shall not have
been eliminated or otherwise cured, for a period of thirty (30) days after the
earlier of actual knowledge or the receipt of written notice sent by registered
or certified mail, return receipt requested, to the Issuer, if the Issuer is in
default, or by the Servicer, if the Servicer is in default, by the Trustee or
to the Issuer and the
Servicer, as applicable, and the Trustee by (A) the Insurer, if no Insurer
Default has occurred and is continuing or (B) during the continuation of an
Insurer Default, the Noteholders of at least 25% of the Aggregate Principal
Amount of the Notes, specifying such default or incorrect representation or
warranty and requiring it to be remedied and stating that such notice is a
“Notice of Default” hereunder;

(d)     (1) the Issuer shall consent to the appointment of a conservator,
receiver or liquidator in any insolvency, adjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to the Issuer or
to all or substantially all of its property, as the case

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

(e)      the Issuer shall become or come under the control of an “investment
company” subject to registration under the Investment Company Act; or

(f)      failure on the part of FAC or Trendwest, if any, to (i) repurchase any
Defective Loan or provide a Qualified Substitute Loan if required to do so
under the terms of the applicable Purchase Agreement or (ii) maintain the
perfection and first priority status of the security interest granted to the
Depositor upon the sale of the Pledged Loans and such failure continues for a
period of thirty (30) days after actual knowledge of such failure or the
receipt of written notice sent by registered or certified mail, return receipt
requested, to the Issuer, and to FAC or Trendwest, as applicable, by the
Trustee or to the Issuer and FAC or Trendwest, as applicable, and the Trustee
by (a) the Insurer, if no Insurer Default has occurred and is continuing or (B)
during the continuation of an Insurer Default, the Holders of at least 25% of
the Aggregate Principal Amount of the Notes, specifying such failure and
requiring it to be remedied and stating that such notice is a “Notice of
Default” hereunder;

THEN, with respect to the event described in subparagraph (d), an Event of
Default shall automatically occur as of the date of such event and with respect
to each of the events described in subparagraphs (a), (b), (c), (e) and (f) an
Event of Default shall occur upon the occurrence of the event, the passage of
the applicable grace period, if any and the declaration that such event shall
constitute an Event of Default which declaration shall be made by the Trustee
or (A) the Insurer, if no Insurer Default has occurred and is continuing or (B)
during the continuation of an Insurer Default, the Holders of at least 25% of
the Aggregate Principal Amount of the Notes. If an Event of Default has
occurred, it shall continue unless waived in writing by (A) the Insurer, if no
Insurer Default has occurred and is continuing or (B) during the continuation
of an Insurer Default, the Holders of greater than 50% of the Aggregate
Principal Amount of the Notes.

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

Section 11.2     Acceleration of Maturity; Rescission and Annulment.

(a)     If any Event of Default occurs under subparagraph (d) of Section 11.1,
the principal of each Class of Notes, together with accrued and unpaid interest
thereon, will automatically be accelerated and become immediately due and
payable. If any other Event of Default occurs, (A) the Insurer, if no Insurer
Default has occurred and is continuing or (B) during the continuation of an
Insurer Default, the Majority Holders of the Notes may accelerate the

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Notes by
declaring the principal of each Class of Notes, together with accrued and
unpaid interest thereon to be immediately due and payable, by a notice in
writing to the Issuer, the Trustee, the Insurer and the Swap Counterparty and
upon any such declaration such principal and interest shall become immediately
due and payable.

(b)      At any time after such an acceleration or declaration of acceleration
of the Notes has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as provided in this Indenture, such
acceleration may be rescinded by (A) the Insurer, if no Insurer Default has
occurred and is continuing or (B) during the continuation of an Insurer
Default, the Holders of greater than 50% of the Aggregate Principal Amount of
the Notes by written notice to the Issuer, the Trustee and the Swap
Counterparty. No such rescission shall affect any subsequent Event of Default
or impair any right consequent thereon.

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

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

Until such demand is made by the Trustee, the Issuer shall pay the
principal of and interest on the Notes to the Trustee for the benefit of the
registered Holders to be applied as provided in this Indenture, 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, the Insurer and the Swap
Counterparty and as trustee of an express trust, may, with the prior written
consent of or shall at the direction of (A) the Insurer, if no Insurer Default
has occurred and is continuing or (B) during the continuation of an Insurer
Default, the Holders of greater than 50% of the Aggregate Principal Amount of
the Notes, 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

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Collateral wherever situated. In the event a Proceeding shall involve the
liquidation of Collateral, the Trustee shall pay all costs and expenses for
such Proceeding and shall be reimbursed for such costs and expenses from the
resulting liquidation proceeds. In the event that the Trustee determines that
liquidation proceeds will not be sufficient to fully reimburse the Trustee, the
Trustee shall receive indemnity satisfactory to it against such costs and
expenses from the Noteholders (which indemnity may include, at the Trustee’s
option, consent by each Noteholder authorizing the Trustee to be reimbursed
from amounts available in the Collection Account) or if the Trustee is acting
at the direction of the Insurer, from the Insurer in which case an unsecured
indemnity from the Insurer shall be sufficient.

If an Event of Default occurs and is continuing, the Trustee may, with the
prior written consent of or shall at the direction of (A) the Insurer, if no
Insurer Default has occurred and is continuing or (B) during the continuation
of an Insurer Default, the Holders of greater than 50% of the Aggregate
Principal Amount of the Notes, proceed to protect and enforce its rights and
the rights of the Noteholders and the Insurer hereunder and under the Notes, by
such appropriate Proceedings as are necessary to effectuate, protect and
enforce any such rights, whether for the specific enforcement of any covenant,
agreement, obligation or indemnity in this Indenture or in aid of the exercise
of any power granted herein, or to enforce any other proper remedy.

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

(a)      to file a proof of claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes and other amounts owing under
the Insurance Agreement 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), the Insurer and of the Noteholders
allowed in such Proceeding, and

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

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

Nothing contained herein shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder or the
Insurer any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof

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or the Insurer, or to
authorize the Trustee to vote in respect of the claim of any Noteholder or the
Insurer in any such Proceeding.

Section 11.5     Remedies.

(a)      If an Event of Default shall have occurred and be continuing, the
Trustee and the Collateral Agent (upon direction by the Trustee) may, with the
prior written consent of, or shall at the direction of (A) the Insurer, if no
Insurer Default has occurred and is continuing or (B) during the continuation
of an Insurer Default, the Holders of greater than 50% of the Aggregate
Principal Amount of the Notes, do one or more of the following (subject to
Section 11.6):

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

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

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

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

(5)     exercise any rights or remedies under this Agreement, the First
Guaranty Agreement, the Performance Guaranty or any Transaction Document;

provided, however, that neither the Trustee nor the Collateral
Agent may sell or otherwise liquidate the Collateral which constitutes Pledged
Loans and Pledged Assets following an Event of Default other than an Event of
Default described in this Agreement resulting from an Insolvency Event, unless
either (i) (A) the Insurer, if no Insurer Default has occurred and is
continuing, or (B) during the continuation of an Insurer Default, the Holders
of 100% of the Aggregate Principal Amount of the Notes then outstanding,
consents thereto, (ii) the
proceeds of such sale or liquidation are sufficient to discharge in full the
amounts then due and unpaid upon the Notes for principal and Accrued Interest
and the fees and all other amounts required to be paid pursuant to Section 11.7
or (iii) (A) the Control Party directs and the Trustee, only if the Insurer is
not the Control Party, determines that the Collateral will not continue to
provide sufficient funds for the payment of principal of, and interest on, the
Notes as they would have become due if such Notes would not have been declared
due and payable. If an Event of Default has occurred and is continuing and (A)
the Insurer, if no Insurer Default has occurred and is continuing, or (B)
during the continuation of an Insurer Default, the Holders of 100% of the

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Aggregate Principal Amount of the Notes then outstanding directs the Trustee to
sell or otherwise liquidate the Collateral, the Trustee will dispose of the
Collateral as directed.

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

For purposes of this Section 11.5, the Trustee agrees to take all actions
requested or directed by (A) the Insurer, if no Insurer Default has occurred
and is continuing, or (B) during the continuation of an Insurer Default, the
Holders of 100% of the Aggregate Principal Amount of the Notes then outstanding
as provided for in this Section 11.5.

(b)      In addition to the remedies provided in Section 11.5(a), the Trustee
may with the consent of and shall at the direction of (A) the Insurer, if no
Insurer Default has occurred and is continuing or (B) during the continuation
of an Insurer Default, the Holders of greater than 50% of the Aggregate
Principal Amount of the Notes 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 shall enforce any equitable decree or order arising from such
Proceeding.

Section 11.6     Optional Preservation of Collateral. If the Notes
have been accelerated following an Event of Default and such acceleration and
its consequences have not been rescinded and annulled, to the extent permitted
by law, the Trustee at the request of the Control Party shall retain the
Collateral securing the Notes intact for the benefit of the Holders of the
Notes, the Insurer and the Swap Counterparty and in such event it shall deposit
all funds received with respect to the Collateral into the Collection Account
and apply such funds in accordance with the payment priorities set forth in
this Indenture, as if there had not been such an acceleration. So long as the
Trustee retains the Collateral, the Trustee shall continue to apply all
distributions received on such Collateral in accordance with this Agreement.

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

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

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

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

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

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

SIXTH, as long as no Insurer Default has occurred and is continuing,
to the Insurer, any accrued and unpaid Insurer Premium;

SEVENTH, to the holders of the Class A-1 Notes, Accrued Interest on
the Class A-1 Notes, and to the holders of the Class A-2 Notes, Accrued
Interest on the Class A-2 Notes (to the extent that there are
insufficient funds, pro rata in proportion to their respective Class
Percentages);

EIGHTH, to the Insurer, any Reimbursement Amounts then due and owing
to the Insurer;

NINTH, (i) to the holders of the Class A-1 Notes the lesser of (a)
the amount allocated to the Class A-1 Notes when all Available Funds are
allocated pro rata between the Class A-1 Notes and the Class A-2 Notes in
proportion to their respective Principal Amounts and (b) the Principal
Amount of the Class A-1 Notes; and (ii) to the holders of the Class A-2
Notes and the Swap Counterparty, the amount allocated to the Class A-2
Notes when all Available Funds are allocated pro rata between the Class
A-1 Notes and the Class A-2 Notes in proportion to their respective
Principal Amounts, pro rata in proportion to the Principal Amount of the
Class A-2 Notes and the unpaid Senior Priority Swap Termination Amount,
respectively, until such amounts are reduced to zero;

TENTH, (i) first, to the Insurer, any other amounts due to the
Insurer pursuant to the Insurance Agreement and (ii) second, to the
Trustee, any other amounts due to the Trustee under this Indenture;

ELEVENTH, to the Swap Counterparty, any amounts owing to the Swap
Counterparty in respect of a termination of the Interest Rate Swap; and

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TWELFTH, to Issuer, any remaining amounts free and clear of the Lien
of this Indenture.

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

(a)      an Insurer Default shall have occurred and be continuing;

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

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

(d)      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

(e)      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 Indenture to affect, disturb or prejudice the rights of any other
Noteholders or the Insurer or to obtain or to seek to obtain priority or
preference over any other Holders or the Insurer or to enforce any right under
this Indenture, except in the manner herein provided.

Section 11.9     Unconditional Rights of Noteholders to Receive Principal
and Interest. Notwithstanding any other provision in this Indenture, 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
Indenture and to institute suit for the enforcement of any such payment, and
such right shall not be impaired without the consent of such Noteholder;
provided, however, that the Insurer will be subrogated to the
rights of each Noteholder to receive payments of principal and interest, as
applicable, with respect to distributions on the Notes to the extent of any
payment by the Insurer under the Insurance Policy and the Insurer will be
reimbursed therefor, together with interest thereon as provided in the
Insurance Agreement in accordance with Sections 3.1 and 11.7

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

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Section 11.11     Waiver of Event of Default. Prior to the Trustee’s
acquisition of a money judgment or decree for payment, in either case for the
payment of all amounts owing by the Issuer in connection with this Indenture
and the Notes issued thereunder (A) the Insurer, if no Insurer Default has
occurred and is continuing or (B) during the continuation of an Insurer
Default, the Holders of 50% or more of the Aggregate Principal Amount of Notes
have the right to waive any Event of Default and its consequences.

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

Section 11.12     Waiver of Stay or Extension Laws. The Issuer
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which may affect the covenants or the performance
of this Indenture; 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 11.13     Sale of Collateral.

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

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

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

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Section 11.15     Control by the Insurer or the Noteholders. If an
Event of Default has occurred and is continuing, (A) the Insurer, if no Insurer
Default has occurred and is continuing or (B) during the continuation of an
Insurer Default, the Holders of greater than 50% of the Aggregate Principal
Amount of the Notes shall have the right to direct the time, method and place
of conducting any Proceeding for any remedy available to the Trustee with
respect to the Notes or exercising any trust or power conferred on the Trustee;
provided that

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

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

(iii)     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 13.1, the
Trustee need not take any action that it determines might involve it in
liability unless it has been provided with reasonable indemnity against
such liability, it being agreed that an unsecured indemnity from the
Insurer shall constitute sufficient indemnity;

ARTICLE XII

SERVICER DEFAULTS

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

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

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

(c)     any representation and warranty made by the Servicer in this Indenture
shall prove to have been incorrect in any material respect when made and has a
material and adverse impact on the Trustee’s interest in the Pledged Loans and
other Pledged Assets and the Servicer is not in compliance with such
representation or warranty within 30 Business Days after the

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earlier of the
date on which the Servicer has actual knowledge of such breach and the date on
which written notice of such breach requiring that such breach be remedied,
shall have been given to the Servicer by the Trustee or to the Servicer and the
Trustee by the Insurer or the Holders of 25% or more of the Aggregate Principal
Amount of the Notes;

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

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

THEN, so long as such Servicer Default shall be continuing, the Control Party
by notice then given in writing to the Servicer, the Swap Counterparty, the
Issuer, the Trustee, the Insurer and each Rating Agency (a “Termination
Notice”), may terminate all of the rights and obligations of the Servicer
as Servicer under this Indenture (such termination being herein called a
“Service Transfer”). After receipt by the Servicer and the Trustee of
such Termination Notice and subject to the terms of Section 12.2(a), the
Trustee shall automatically assume the responsibilities of the Servicer
hereunder until the date that a Successor Servicer shall have been appointed
pursuant to Section 12.2 and all authority and power of the Servicer under this
Indenture shall pass to and be vested in the Trustee or such Successor
Servicer, as the case may be, without further action on the part of any Person,
and, without limitation, the Trustee at the direction of the Control Party
(which authorization is coupled with an interest and is irrevocable) is hereby
authorized and empowered (upon the failure of the Servicer to cooperate) to
execute and deliver, on behalf of the Servicer, as attorney-in-fact or
otherwise, all documents and other instruments upon the failure of the Servicer
to execute or deliver such documents or instruments, and to do and accomplish
all other acts or things necessary or appropriate to effect the purposes of
such transfer of servicing rights.

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

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order for preliminary, temporary or permanent injunctive relief by any court of
competent jurisdiction, to ensure compliance by the Servicer with the
provisions of this paragraph.

Section 12.2     Appointment of Successor.

(a)      Appointment. On and after the receipt by the Servicer of a
Termination Notice pursuant to Section 12.1, or any permitted resignation of
the Servicer pursuant to Section 7.12, the Servicer shall continue to perform
all servicing functions under this Indenture until the date specified in the
Termination Notice or otherwise specified by (A) the Insurer, if no Insurer
Default has occurred and is continuing or (B) during the continuation of an
Insurer Default, the Trustee or until a date mutually agreed upon by the
Servicer and (A) the Insurer, if no Insurer Default has occurred and is
continuing or (B) during the continuation of an Insurer Default, the Trustee.
Upon receipt by the Servicer of a Termination Notice, (A) the Insurer, if no
Insurer Default has occurred and is continuing or (B) during the continuation
of an Insurer Default, the Trustee shall as promptly as possible after the
giving of a Termination Notice appoint a successor servicer (in any case, the
“Successor Servicer”) and such Successor Servicer shall accept its
appointment by a written assumption in a form acceptable to the Trustee and, so
long as no Insurer Default has occurred and is continuing, the Insurer;
provided that such appointment shall be subject to satisfaction of the
Rating Agency Condition. In the event a Successor Servicer has not been
appointed and accepted the appointment by the date of termination stated in the
Termination Notice the Trustee shall automatically assume responsibility for
performing the servicing functions under this Indenture on the date of such
termination. In the event that a Successor Servicer has not been appointed and
has not accepted its appointment and the Trustee is legally unable or otherwise
not capable of assuming responsibility for performing the servicing functions
under this Indenture, the Trustee shall petition a court of competent
jurisdiction to appoint any established financial institution having a net
worth of not less than $100,000,000 and whose regular business includes the
servicing of receivables similar to the Pledged Loans or other consumer finance
receivables; provided, however, pending the appointment of a
Successor Servicer, the Trustee will act as the Successor Servicer.

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

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

Section 12.3     Notification to Noteholders. Upon the occurrence of
any Servicer Default or any event which, with the giving of notice or passage
of time or both, would become a Servicer Default, the Servicer shall give
prompt written notice thereof to the Trustee and the Issuer and the Trustee
shall give notice to the Noteholders at their respective addresses appearing

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

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

Section 12.5     Termination of Servicer’s Authority. All authority
and power granted to the Servicer under this Indenture shall automatically
cease and terminate upon termination of this Indenture pursuant to Section
14.1, and shall pass to and be vested in the Issuer and without limitation the
Issuer is hereby authorized and empowered to execute and deliver, on behalf of
the Servicer, as attorney-in-fact or otherwise, all documents and other
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such transfer of servicing rights upon
termination of this Indenture. The Servicer shall cooperate with the Issuer in
effecting the termination of the responsibilities and rights of the Servicer to
conduct servicing on the Pledged Loans. The Servicer shall transfer its
electronic records relating to the Pledged Loans to the Issuer in such
electronic form as Issuer may reasonably request and shall transfer all other
records, correspondence and documents relating to the Pledged Loans to the
Issuer in the manner and at such times as the Issuer shall reasonably request.
To the extent that compliance with this Section 12.5 shall require the Servicer
to disclose information of any kind which the Servicer deems to be
confidential, the Issuer shall be required to enter into such customary
licensing and confidentiality agreements as the Servicer shall deem necessary
to protect its interests and as shall be reasonably satisfactory in form and
substance to the Issuer.

Section 12.6     Matters Related to Successor Servicer.

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

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

The Successor Servicer shall have no responsibility and shall not be in
default hereunder nor incur any liability for any failure, error, malfunction
or any delay in carrying out any of its

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duties under this Indenture if any such
failure or delay results from the Successor Servicer acting in accordance with
information prepared or supplied by a Person other than the Successor Servicer
or the failure of any such Person to prepare or provide such information. The
Successor Servicer shall have no responsibility, shall not be in default and
shall incur no liability (i) for any act or failure to act by any third party,
including the Servicer, the Issuer or the Trustee or for any inaccuracy or
omission in a notice or communication received by the Successor Servicer from
any third party or (ii) which is due to or results from the invalidity,
unenforceability of any Pledged Loan under applicable law or the breach or the
inaccuracy of any representation or warranty made with respect to any Pledged
Loan.

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

ARTICLE XIII

THE TRUSTEE; THE COLLATERAL AGENT; THE CUSTODIAN

Section 13.1     Duties of Trustee.

(a)      The Trustee, prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee shall have actual knowledge and after the
curing of all such Events of Default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Indenture. 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 Indenture, and use the same degree of care and skill in their exercise,
as a prudent institutional trustee would exercise or use under the
circumstances in the conduct of such institution’s own affairs. The Trustee is
hereby authorized and empowered to make the withdrawals and payments from the
Accounts in accordance with the instructions set forth in this Indenture until
the termination of this Indenture in accordance with Section 14.1 unless this
appointment is earlier terminated pursuant to the terms hereof.

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

(c)      Subject to Section 13.1(a), no provision of this Indenture 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:

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(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 Indenture or at the direction of (A) the Insurer, if
no Insurer Default has occurred and is continuing or (B) during the
continuation of an Insurer Default, the Holders of greater than 50% of
the Aggregate Principal Amount of the Notes 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 Indenture;

(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, Rapid Amortization Event, Cash
Accumulation Event 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 Servicer,
the Issuer, the Insurer 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, Rapid Amortization
Event, Cash Accumulation Event 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 Indenture, the
Trustee shall not be liable except for the performance of such duties and
obligations as are specifically set forth in this Indenture, no implied
covenants or obligations shall be read into this Indenture against the
Trustee and, in the absence of bad faith, willful misconduct or
negligence on the part of the Trustee, the Trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture.

(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 (A) the Insurer, if no Insurer Default has
occurred and is continuing or (B) during the continuation of an Insurer
Default, the Holders of greater than 50% of the Aggregate Principal Amount of
the Notes authorizing the Trustee to be reimbursed for any funds from amounts
available in the Collection Account), and none of the provisions contained in
this Indenture shall in any event require the Trustee to perform, or be
responsible for the manner of performance of, any of the obligations of the
Servicer under this Indenture except during such time, if any, as the Trustee
shall be the

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successor to, and be vested with the rights, duties, powers and
privileges of, the Servicer in accordance with the terms of this Indenture.

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

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

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

(h)      The Trustee shall have no duty to (A) see to any recording, filing or
depositing of this Indenture 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 Collateral other than from
funds available in the Collection Account, or (D) confirm or verify the
contents of any reports or certificates of the Servicer delivered to the
Trustee pursuant to this Indenture believed by the Trustee to be genuine and to
have been signed or presented by the proper party or parties.

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

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

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

(c)     the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture, 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
Indenture, 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

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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 Indenture, 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 Indenture, 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 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 (A) the Insurer, if no Insurer Default has occurred and is continuing or (B)
during the continuation of an Insurer Default, the Holders of more than 50% of
the Aggregate Principal Amount of the Notes; 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 Indenture, 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 Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent, attorney or custodian
appointed with due care by it hereunder;

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

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

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

Section 13.3     Trustee Not Liable for Recitals in Notes or Use of
Proceeds of Notes. The Trustee assumes no responsibility for the
correctness of the recitals contained herein and in the Notes (other than the
certificate of authentication on the Notes) or for any statements,
representations or warranties made herein by any Person other than the Trustee
(except as

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expressly set forth herein). Except as set forth in Section 13.14,
the Trustee makes no representations as to the validity, enforceability or
sufficiency of this Indenture or of the Notes (other than the certificate of
authentication on the Notes) or of any Pledged Loan or related document. The
Trustee shall not be accountable for the use or application of funds properly
withdrawn from any Account on the instructions of the Servicer or for the use
or application by the Issuer of the proceeds of any of the Notes, or for the
use or application of any funds paid to the Issuer in respect of the Pledged
Loans. The Trustee shall not be responsible for the legality or validity of
this Indenture 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 Indenture.

Section 13.4     Trustee May Own Notes; Trustee in its Individual
Capacity. Wachovia Bank, National Association, in its individual or any
other capacity, may become the owner or pledgee of Notes with the same rights
as it would have if it were not the Trustee. Wachovia Bank, National
Association and its Affiliates may generally engage in any kind of business
with the Issuer or the Servicer as though Wachovia Bank, National Association
were not acting in such capacity hereunder and without any duty to account
therefor. Nothing contained in this Indenture 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
Indenture.

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

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the
termination of this Indenture, the resignation or removal of the Trustee and
all amounts payable on account of the Notes.

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

Section 13.6     Eligibility Requirements for Trustee. The Trustee
hereunder (if other than Wachovia Bank, National Association) shall at all
times be an Eligible Institution and a corporation or banking association
organized and doing business under the laws of the United States of America or
any state thereof authorized under such laws to exercise corporate trust
powers, and such Trustee (including Wachovia Bank, National Association) shall
have a combined capital and surplus of at least $25,000,000 (or, in the case of
a successor to the initial Trustee, $100,000,000) and subject to supervision or
examination by federal or state authority. If such corporation or banking
association publishes reports of condition at least annually, pursuant to law
or to the requirements of federal or state supervising or examining authority,
then for the purpose of this Section 13.6, the combined capital and surplus of
such corporation or banking association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 13.6, the Trustee shall resign
immediately in the manner and with the effect specified in Section 13.7.

Section 13.7     Resignation or Removal of Trustee.

(a)      The Trustee may at any time resign and be discharged from the trust
hereby created by giving 60 days prior written notice thereof to the Issuer,
the Swap Counterparty, the Servicer, the Noteholders, the Insurer and each
Rating Agency. Upon receiving such notice of resignation, the Issuer shall
promptly arrange to appoint a successor trustee meeting the requirements of
Section 13.6 and the Servicer shall notify the Trustee, the Insurer, the Swap
Counterparty and each Rating Agency of such appointment by written instrument,
one copy of which instrument shall be delivered to the resigning Trustee and
one copy to the successor Trustee. If no successor Trustee shall have been so
appointed and have accepted within 30 days after the giving of such notice of
resignation, a successor Trustee shall be appointed by (A) the Insurer, if no
Insurer Default has occurred and is continuing or (B) during the continuation
of an
Insurer Default, the Majority Holders (with notice to the Swap
Counterparty). The successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the Trustee. If no successor Trustee
shall have been so appointed and shall have accepted appointment in the manner
hereinafter provided, any Noteholder, on behalf of itself and all others
similarly situated, or the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.

(b)     If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 13.6 and shall fail to resign after written
request therefor by the Issuer or the Servicer, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent,
or a receiver of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or of its property
or affairs for the

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purpose of rehabilitation, conservation or liquidation, then
the Issuer (with the consent of the Insurer, which consent shall not be
unreasonably withheld) 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 (A) the Insurer, if no Insurer Default has occurred and is
continuing or (B) during the continuation of an Insurer Default, the Majority
Holders may remove the Trustee and promptly appoint a successor Trustee by
written instrument, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor Trustee.

(d)      Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 13.7 shall
not become effective until acceptance of appointment by the successor Trustee
as provided in Section 13.8.

Section 13.8     Successor Trustee.

(a)      Any successor Trustee, appointed as provided in Section 13.7, shall
execute, acknowledge and deliver to the Issuer, the Servicer and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee herein. The predecessor Trustee shall deliver to the
successor Trustee all money, documents and other property held by it hereunder;
and Issuer and the predecessor Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully
and certainly vesting and confirming in the successor Trustee all such rights,
power, duties and obligations.

(b)      No successor Trustee shall accept appointment as provided in this
Section 13.8 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 13.6.

(c)      Upon acceptance of appointment by a successor Trustee as provided in
this Section 13.8, such successor Trustee shall mail notice of such succession
hereunder to the Trustee, the Issuer, the Insurer, the Swap Counterparty, the
Servicer and all Noteholders at their addresses as shown in the Note Register.

Section 13.9     Merger or Consolidation of Trustee. Any Person into
which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding
to the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided, such corporation shall be eligible under
the provisions of Section 13.6, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding.

Section 13.10     Appointment of Co-Trustee or Separate Trustee.

(a)     Notwithstanding any other provisions of this Indenture, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Collateral

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may at the time be located, the Trustee shall have
the power and may execute and deliver all instruments to appoint one or more
Persons to act as a co-trustee or co-trustees, or separate trustee or separate
trustees, of all or any part of the Collateral and to vest in such Person or
Persons, in such capacity and for the benefit of the Noteholders, the Insurer
and the Swap Counterparty, such title to the Collateral, or any part thereof,
and subject to the other provisions of this Section 13.10, such powers, duties,
obligations, rights and trusts as the Trustee may consider necessary or
desirable. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 13.6 and no
notice to the Noteholders of the appointment of any co-trustee or separate
trustee shall be required under Section 13.8.

(b)      Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and
conditions:

(i)     all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any laws of any jurisdiction in which any
particular act or acts are to be performed, the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Collateral, or any portion thereof in any such jurisdiction)
shall be exercised and performed singly by such separate trustee or
co-trustee, but solely at the direction of the Trustee;

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

(iii)     the Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.

(c)      Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article XIII. Each separate trustee and co-trustee,
upon its
acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Trustee. Every such instrument shall be filed with the
Trustee and a copy thereof given to the Servicer.

(d)     Any separate trustee or co-trustee may at any time constitute the
Trustee as 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
Indenture 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,

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properties, rights, remedies and trusts shall vest in and be exercised
by the Trustee, to the extent permitted by law, without the appointment of a
new or a successor trustee.

Section 13.11     Trustee May Enforce Claims Without Possession of
Notes. All rights of action and claims under this Indenture 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 and the Insurer in
respect of which such judgment has been obtained.

Section 13.12     Suits for Enforcement. If an Event of Default or a
Servicer Default shall occur and be continuing, the Trustee, in its discretion
may or at the direction of the Control Party shall subject to the provisions of
Article XI and Section 12.1, proceed to protect and enforce its rights and the
rights of the Noteholders and the Insurer under this Indenture 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 Indenture or in aid
of the execution of any power granted in this Indenture 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, the Noteholders or the Insurer.

Section 13.13     Rights of the Insurer or the Noteholders to Direct the
Trustee. The (A) Insurer, if no Insurer Default has occurred and is
continuing or (B) during the continuation of an Insurer Default, Majority
Holders shall have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee; provided,
however, that, subject to Section 13.1, the Trustee shall have the right
to decline to follow any such direction if the Trustee being advised by counsel
determines that the action so directed may not lawfully be taken, or if the
Trustee in good faith shall, by a Responsible Officer or Responsible Officers
of the Trustee, determine that the proceedings so directed would be illegal or
involve it in personal liability or be unduly prejudicial to the rights of
Noteholders not parties to such direction, or if the Trustee has not been
offered reasonable security or indemnity (it being agreed that an unsecured
indemnity from the Insurer shall constitute sufficient indemnity), as
contemplated by Section 13.2, by (A) the Insurer, if no Insurer Default has
occurred and is continuing or (B) during the continuation of an Insurer
Default, the Holders of greater than 50%
of the Aggregate Principal Amount of the Notes; and provided
further, that nothing in this Indenture 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.

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Section 13.14     Representations and Warranties of the Trustee. The
Trustee represents and warrants that:

(a)      the Trustee is a national banking association with trust powers
organized, validly existing and in good standing under the laws of the United
States;

(b)      the Trustee has full power, authority and right to execute, deliver
and perform this Indenture and has taken all necessary action to authorize the
execution, delivery and performance by it of this Indenture; and

(c)      this Indenture has been duly executed and delivered by the Trustee and
constitutes the legal, valid and binding agreement of the Trustee enforceable
against the Trustee in accordance with its terms, except as such enforceability
may be limited by Debtor Relief Laws and except as such enforceability may be
limited by general principles of equity (whether considered in a suit at law or
in equity).

Section 13.15     Maintenance of Office or Agency. The Trustee will
maintain at its expense in The City of New York, State of New York, an office
or offices or agency or agencies where notices and demands to or upon the
Trustee in respect of the Notes and this Indenture may be served. The Trustee
will give prompt written notice to the Issuer, the Insurer, the Swap
Counterparty, the Servicer and the Noteholders of any change in the location of
any such office or agency.

Section 13.16     No Assessment. Wachovia Bank, National Association’s
agreement to act as Trustee hereunder shall not constitute or be construed as
Wachovia Bank, National Association’s assessment of the Issuer’s or any
Obligor’s creditworthiness or a credit analysis of any Loans.

Section 13.17     UCC Filings and Title Certificates. (a) 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 Indenture in order to perfect the security
interest in the Collateral, and such listing will not affect in any way the
respective status of the other secured parties under the Collateral Agency
Agreement as the holders of their respective interests in other collateral. In
addition, such listing shall impose no duties on the Collateral Agent other
than those expressly and specifically undertaken in accordance with this
Indenture and the Collateral Agency Agreement.

(b)      The Trustee shall file such financing statements covering the
Collateral as the Control Party shall request in writing.

(c)      The Trustee hereby agrees that it will promptly after its receipt
forward to the Insurer a copy of each notice and report which it receives under
or with respect to this Indenture or other Transaction Documents (unless it is
clear from the face of such notice or report that the Insurer has already
received a copy of the same).

Section 13.18     Replacement of the Custodian. Each of the Issuer and
the Servicer agree not to replace the Custodian then acting as custodian of the
Pledged Loans and related assets unless the Insurer has given its prior written
consent to such action (which consent shall not be

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unreasonably withheld) and
the Rating Agency Condition has been satisfied with respect to such
replacement.

ARTICLE XIV

TERMINATION

Section 14.1     Termination of Agreement. The respective obligations
and responsibilities of the Issuer, the Servicer and the Trustee created hereby
(other than the obligation of the Trustee to make payments to Noteholders and
the Insurer as hereafter set forth) shall terminate (the “Termination
Date”) on the day after the Payment Date following the date on which funds
shall have been deposited in the Collection Account sufficient to pay the
Aggregate Principal Amount of all Notes plus all interest accrued on the Notes
through the day preceding such Payment Date and all other amounts owed to the
Insurer pursuant to this Agreement and the Insurance Agreement; provided
that, all amounts required to be paid on such Payment Date pursuant to this
Indenture shall have been paid.

Section 14.2     Final Payment.

(a)      Written notice of any termination shall be given (subject to at least
two Business Days’ prior notice from the Servicer to the Trustee) by the
Trustee to the Noteholders, the Insurer, the Swap Counterparty and each Rating
Agency then rating any Notes mailed not later than the fifth day of the month
of such final payment specifying (a) the Payment Date and (b) the amount of any
such final payment. The Trustee shall give such notice to the Note Registrar
at the time such notice is given to the Noteholders.

(b)      On or after the final Payment Date, upon written request of the
Trustee, the Noteholders shall surrender their Notes to the office specified in
such request. If presentation or surrender of a Definitive Note is not made
within six years of notice of final distribution, no claim may be made in
respect of such Definitive Note.

(c)      The Trustee shall surrender the Insurance Policy to the Insurer on the
date which is one year and one day following the earlier of (i) the Rated Final
Maturity Date and (ii) the date on which this Indenture has been terminated in
accordance with its terms and all obligations hereunder have been satisfied and
discharged; provided, that if an Insolvency Proceeding by or against the Issuer
is existing during such one year and one day period, then the Insurance Policy
shall not be surrendered until the later of (x) the date of the conclusion or
dismissal of such Insolvency Proceeding without continuing jurisdiction by the
court in such Insolvency Proceeding, and (y) if any Noteholder is required to
return any Preference Amount as a result of such Insolvency Proceeding, the
date on which the Insurer has made all payments required to be made under the
terms of the Insurance Policy in respect of all such Preference Amounts.

Section 14.3     [Reserved].

Section 14.4     Release of Collateral. Upon the termination of this
Indenture pursuant to Section 14.1, the Trustee shall release all liens and
assign to the Issuer (without recourse, representation or warranty) all right,
title and interest of the Trustee in and to the Collateral and all proceeds
thereof. The Trustee shall execute and deliver such instruments of assignment,
in

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each case without recourse, representation or warranty, as shall be
reasonably requested by the Issuer to release the security interest of the
Trustee in the Collateral.

Section 14.5     Release of Defaulted Loans.

(a)      Issuer May Obtain Release. If any Pledged Loan becomes a
Defaulted Loan during any Due Period, the Issuer may, subject to the limitation
set forth in Section 14.5(d), obtain a release of such Pledged Loan from the
Lien of this Indenture on any Payment Date thereafter. To obtain such release
the Issuer shall be required either to (i) pay the Release Price of such
Defaulted Loan to the Trustee for deposit into the Collection Account or (ii)
deliver to the Trustee one or more Qualified Substitute Loans in substitution
for such Defaulted Loan and pay the applicable Substitution Adjustment Amount
to the Trustee for deposit into the Collection Account. The Issuer shall
provide written notice to the Trustee, the Insurer and the Collateral Agent of
any release pursuant to this Section 14.5 not less than two Business Days prior
to the Payment Date on which such release is to be effected, specifying the
Defaulted Loan and the Release Price therefor. The Issuer shall (i) pay the
Release Price to the Trustee for deposit into the Collection Account not later
than 12:00 noon, New York City time, on the Payment Date on which such release
is made or (ii) deliver the Qualified Substitute Loan or Qualified Substitute
Loans by 12:00 noon, New York City time, on the Payment Date on which such
release is made and pay any Substitution Adjustment Amount to the Trustee for
deposit into the Collection Account not later than 12:00 noon, New York City
time, on such Release Date.

(b)      Substitution. If a Seller delivers to the Issuer a Qualified
Substitute Loan or Qualified Substitute Loans in lieu of payment for the
repurchase of a Defaulted Loan, the Issuer shall execute a Supplemental Grant
in substantially the form of Exhibit G hereto and deliver such Supplemental
Grant to the Trustee and the Collateral Agent. Payments due with respect to
Qualified Substitute Loans on or prior to the Calculation Date next preceding
the date of substitution shall not be property of the Issuer, but, to the
extent received by the Servicer, will be retained by the Servicer and remitted
by the Servicer to the Seller on the next succeeding Payment Date. Payments
due with respect to the Qualified Substitute Loans after the Calculation Date
next preceding the date of substitution shall be property of the Issuer. The
Issuer shall cause the Servicer to electronically deliver a schedule of any
Defaulted Loans so removed and Qualified Substitute Loans so substituted to the
Trustee and such schedule shall be an amendment to the Loan Schedule. Upon
such substitution, the Qualified Substitute Loan or Qualified Substitute Loans
shall be subject to the terms of this Indenture in all respects, the Issuer
shall be deemed to have made the representations, and warranties with respect
to each Qualified Substitute Loan set forth in Section 5.1 and 5.2 of this
Indenture, in each case as of the date of substitution, and the Issuer shall be
deemed to have made a representation and warranty that each Loan so substituted
is a Qualified Substitute Loan as of the date of substitution. The provisions
of Section 5.4(a) shall apply to any Qualified Substitute Loan as to which the
Issuer has breached the Issuer’s representations and warranties in Section 5.1
and 5.2 to the same extent as for any other Pledged Loan. In connection with
the substitution of one or more Qualified Substitute Loans for one or more
Defaulted Loans, the Servicer shall determine the Substitution
Adjustment Amount. Such Substitution Adjustment Amount shall be paid to
the Trustee and treated as if it were a portion of the Release Price for the
Defaulted Loan and included in Available Funds as such.

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(c)      Release of Defaulted Loans. Upon each release of a Pledged
Loan under this Section 14.5, the Collateral Agent and the Trustee shall
automatically and without further action release, sell, transfer, assign, set
over and otherwise convey to the Issuer, without recourse, representation or
warranty, all of the Collateral Agent’s and Trustee’s right, title and interest
in and to such Defaulted Loan and the Transferred Assets related to such
Defaulted Loan free and clear of the Lien of this Indenture. The Collateral
Agent and the Trustee shall execute such documents, releases and instruments of
transfer or assignment and take such other actions as shall reasonably be
requested by the Issuer to effect the release of such Defaulted Loans and the
related Transferred Assets pursuant to this Section 14.5. Promptly after the
occurrence of a Release Date and after the payment for or substitution for and
release of a Defaulted Loan, in respect to which the Release Price has been
paid or Qualified Substitute Loans have been provided, the Issuer shall direct
the Servicer to delete such Defaulted Loans from the Loan Schedule.

(d)      Limitations on Purchase of Defaulted Loans. The amount of
Defaulted Loans for which the Issuer is permitted to obtain a release and
transfer to a Seller is limited as provided in the Fairfield Master Loan
Purchase Agreement and the Trendwest Master Loan Purchase Agreement and as
follows:

(i)     The Loan Balance of Pledged Loans which become Defaulted Loans
and which are released and transferred to FAC, as Seller, shall not
exceed in the aggregate 10.5% of the Loan Balance of the Pledged Loans as
of the Cut-Off Date which were Fairfield Loans; for such purposes, the
Loan Balance of a Pledged Loan shall be calculated on the day prior to
the day the Pledged Loan became a Defaulted Loan; and

(ii)     The Loan Balance of Pledged Loans which become Defaulted Loans
and which are released and transferred to Trendwest, as Seller, shall not
exceed in the aggregate 16.0% of the Loan Balance of the Pledged Loans as
of the Cut-Off Date which were Trendwest Loans; for such purposes, the
Loan Balance of a Pledged Loan shall be calculated on the day prior to
the day the Pledged Loan became a Defaulted Loan.

Section 14.6     Release of Trendwest Timeshare Upgrades. If a
Trendwest Loan becomes a Trendwest Timeshare Upgrade, the Issuer, upon the
written request of the Depositor and the receipt by the Issuer or the Trustee
of the Release Price from or on behalf of the Depositor, shall obtain a release
of such Pledged Loan from the Lien of this Indenture and upon such Release,
shall transfer the Trendwest Loan to the Depositor. To obtain such release the
Issuer shall be required to pay or cause to be paid to the Trustee the Release
Price of such Trendwest Loan. Upon receipt of such Release Price, the Trustee
shall deposit the Release Price into the Collection Account. The Issuer shall
provide written notice to the Trustee and the Collateral Agent of any release
pursuant to this Section 14.6 not less than two Business Days prior to the date
on which such release is to be effected, specifying the Trendwest Loan which
has become a Trendwest Timeshare Upgrade and the Release Price therefor. The
Issuer shall
pay the Release Price to the Trustee for deposit into the Collection
Account not later than 12:00 noon, New York City time, on the day on which such
release is made.

Upon each release of a Pledged Loan under this Section 14.6, the
Collateral Agent and the Trustee shall automatically and without further action
release, sell, transfer, assign, set over

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and otherwise convey to the
Depositor, without recourse, representation or warranty, all of the Collateral
Agent’s and Trustee’s right, title and interest in and to such Trendwest Loan
and the Pledged Assets related thereto, all monies due or to become due with
respect thereto and all Collections with respect thereto free and clear of the
Lien of this Indenture. The Collateral Agent and the Trustee shall execute
such documents, releases and instruments of transfer or assignment and take
such other actions as shall reasonably be requested by the Issuer to effect the
release of such Trendwest Loans and the related Pledged Assets pursuant to this
Section 14.6. Promptly after the occurrence of a Release Date and after the
payment for and release of a Trendwest Loan, in respect to which the Release
Price has been paid the Issuer shall direct the Servicer to delete such
Trendwest Loan from the Loan Schedule.

Section 14.7     Release Upon Payment in Full. At such time as the
Notes have been paid in full, all fees and expenses of the Trustee and the
Collateral Agent with respect to the Notes have been paid in full, all
obligations relating to this Indenture have been paid in full and all amounts
owed to the Insurer pursuant to the Insurance Agreement have been paid in full,
then, the Collateral Agent shall, upon the written request of the Issuer,
release all liens and assign to Issuer (without recourse, representation or
warranty) all right, title and interest of the Collateral Agent in and to the
Collateral, and all proceeds thereof. The Collateral Agent and the Trustee
shall execute and deliver such instruments of assignment, in each case without
recourse, representation or warranty, as shall be reasonably requested by the
Issuer to release the security interest of the Collateral Agent in the
Collateral.

ARTICLE XV

MISCELLANEOUS PROVISIONS

Section 15.1     Amendment.

(a)      Supplemental Indentures and Amendments Without Consent of the
Noteholders. The Issuer, the Trustee, the Collateral Agent and the
Servicer, at any time and from time to time, with the consent of the Insurer
and without the consent of any of the Noteholders, may enter into one or more
amendments or indentures supplemental to this Indenture in form satisfactory to
the Trustee for any of the following purposes:

(i)     to add to the covenants of the Issuer for the benefit of the
Noteholders, the Insurer and the Swap Counterparty or to surrender any
right or power conferred upon the Issuer;

(ii)     to Grant any additional property to the Trustee or the
Collateral Agent or to be held by the Custodian, in each case, for the
benefit of the Trustee and the Holders of the Notes and the Insurer and
the Swap Counterparty;

(iii)     to correct or amplify the description of any property at any
time subject to the Lien of this Indenture, or to better assure, convey
and confirm unto the Trustee or the Collateral Agent or deliver to the
Custodian, in each case for the benefit of the Trustee and the
Noteholders and the Insurer and the Swap Counterparty, any property
subject to the Lien of this Indenture;

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(iv)     to cure any ambiguity, correct, modify or supplement any
provision which is defective or inconsistent with any other provision
herein; provided that, such correction, modification or supplement
shall not alter in any material respect, the amount or timing of payments
to or other rights of the Noteholders;

(v)     to modify transfer restrictions on the Notes, so long as any
such modifications comply with the Securities Act and the Investment
Company Act; or

(vi)     make any other changes which do not, individually or in the
aggregate, materially and adversely affect the rights of any Noteholders.

provided that, (x) in each case, the Issuer shall have satisfied the
Rating Agency Condition with respect to such corrections, amendments,
modifications or clarifications and (y), with respect to any changes described
in subsection (vi), the Issuer shall have delivered to the Trustee an Officer’s
Certificate of the Issuer and an Officer’s Certificate of the Servicer both to
the effect that such change will not adversely affect the rights of any
Noteholders.

Subject to Section 15.1(c), the Trustee is hereby authorized to join in
the execution of any such amendment or supplemental indenture and to make any
further appropriate agreements and stipulations that may be therein contained.
So long as any of the Notes are outstanding, at the cost of the Issuer, the
Trustee shall provide to the Insurer and 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 Servicer, the Trustee and the Collateral Agent of
any such amendment or supplemental indenture, provide to the Insurer and 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 (A) the Insurer, if no Insurer Default
has occurred and is continuing or (B) during the continuation of an Insurer
Default the Majority Holders and upon satisfaction of the Rating Agency
Condition, the Issuer, the Servicer 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
Indenture, or modifying in any manner the rights of the Holders of the Notes
under this Indenture; provided that, so long as the Interest Rate Swap
is in effect, no such amendment or supplemental indenture shall be entered into
without the prior written consent of the Swap Counterparty if the effect of
such amendment or supplement would be to adversely affect the Swap
Counterparty’s ability or right to receive payment under the terms of the
Interest Rate Swap, or if the amendment or supplemental indenture would modify
the obligations of or impair the ability of the Issuer to fully perform any of
its payment obligations under the Interest Rate Swap.

No such amendment or supplemental indenture shall, without the consent of
the Insurer, each affected Noteholder and the Swap Counterparty, to the extent
such amendment or supplemental indenture would adversely affect any of the Swap
Counterparty’s rights or obligations, or impair the ability of the Issuer to
fully perform any of its obligations, under the Interest Rate Swap for so long
as the Interest Rate Swap has not been terminated:

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(i)     reduce in any manner the amount of, or change the timing of,
principal, interest and other payments required to be made on any Note;

(ii)     change the application of proceeds of any Collateral to the
payment of Notes of such Series;

(iii)     reduce the percentage of Noteholders required to take or
approve any action under this Indenture; or

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

It shall not be necessary in connection with any consent of the
Noteholders under this Section 15.1(b) for the Noteholders to approve the
specific form of any proposed amendment or supplemental indenture, but it shall
be sufficient if such consent shall approve the substance thereof. The Trustee
will not be permitted to enter into any such supplemental indenture or unless
the Rating Agency Condition is met.

Promptly after the execution by the Issuer, the Trustee, the Collateral
Agent and the Servicer of any amendment or supplemental indenture pursuant to
this Section 15.1(b), the Trustee, at the expense of the Issuer shall mail to
the Noteholders, the Insurer, the Luxembourg Stock Exchange (if and for so long
as any Class of Notes is listed thereon) and each Rating Agency rating any of
the Notes, a copy thereof.

(c)      Execution of Amendments and Supplemental Indentures. In
executing or accepting the additional trusts created by any amendment or
supplemental indenture permitted by this Section 15.1 or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and (subject to Sections 13.1 and 13.2) shall be fully protected in
relying in good faith upon, an Opinion of Counsel stating that the execution of
such amendment or supplemental indenture is authorized or permitted by this
Indenture and that all conditions precedent applicable thereto under this
Indenture 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 Indenture or otherwise.

(d)     
Effect of Amendments and Supplemental Indentures. Upon the
execution of any amendment or supplemental indenture under this Section 15.1,
this Indenture shall be modified in accordance therewith, and such amendment or
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of a Note theretofore and thereafter authenticated and
delivered hereunder shall be bound thereby.

(e)     
Reference in Notes to Amendments and Supplemental Indentures.
Notes executed, authenticated and delivered after the execution of any
amendment or supplemental indenture pursuant to this Section 15.1 may, and if
required by the Trustee shall, bear a notation in form approved by the Trustee
as to any matter provided for in such amendment or supplemental indenture. If
the Issuer shall so determine, new Notes, so modified as to conform in the
opinion of the Trustee and the Issuer to any such amendment or supplemental
indenture,

116

 

may be prepared and executed by the Issuer and authenticated and
delivered by the Trustee or the Authentication Agent in exchange for
outstanding Notes.

(f)      In determining whether the requisite percentage of Noteholders have
concurred in any direction, waiver or consent, Notes owned by the Issuer or an
Affiliate of the Issuer shall be considered as though they are not outstanding,
except that for the purposes of determining whether the Trustee shall be
protected in making such determination or relying on any such direction, waiver
or consent, only Notes which a Responsible Officer of the Trustee knows
pursuant to written notice (or in the case of the Issuer, by reference to the
Note Register if the Trustee is also the Note Registrar) are so owned shall be
so disregarded.

Section 15.2     Discretion with Respect to Derivative Financial
Instruments. The parties to this Indenture recognize and agree that, in
the course of managing its assets and obligations, the Issuer may, from time to
time, find it useful and prudent to enter into, or to terminate or modify,
derivative financial instruments for the purpose of hedging its interest rate
risk, and the parties hereby agree that, (a) in addition to the Interest Rate
Swap, the Issuer may, from time to time, enter into derivative financial
instruments for the purpose of hedging the Issuer’s interest rate risk and (b)
the Issuer may, in its discretion, terminate, or modify, any such derivative
financial instrument; provided that the Issuer shall not terminate or
modify the Interest Rate Swap except as provided in this Indenture and solely
in accordance with the appropriate mechanism(s) as set forth in the Interest
Rate Swap, and, with respect to any derivative financial instruments, other
than the Interest Rate Swap, the Issuer shall not enter into any such
instruments unless the Rating Agency Condition has been satisfied with respect
to such derivative financial instrument; provided further,
however, that, so long as the Interest Rate Swap is in effect, (x) no
instrument shall be entered into pursuant to clause (a) above and (y) no
termination (or modification) shall be effected pursuant to clause (b) above,
without the prior written consent of the Swap Counterparty if the effect of
such instrument, termination (or modification) would be to adversely affect the
Swap Counterparty’s ability or right to receive payment under the terms of the
Interest Rate Swap, or if the instrument, termination (or modification) would
modify the obligations of or impair the ability of the Issuer to fully perform
any of its payment obligations under the Interest Rate Swap; and
provided further, however, that any termination,
modification or replacement with respect to the Interest Rate Swap effected
otherwise in accordance with this Indenture and the appropriate mechanism(s) as
set forth in the Interest Rate Swap shall not be subject to the provisions of
this Section 15.2.

Section 15.3     Limitation on Rights of the Noteholders.

(a)      The death or incapacity of any Noteholder shall not operate to
terminate this Indenture, nor shall such death or incapacity entitle such
Noteholder’s legal representatives or heirs to claim an accounting or to take
any action or commence any proceeding in any court for a partition or winding
up of the Collateral, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.

(b)      Nothing herein set forth, or contained in the terms of the Notes,
shall be construed so as to constitute the Noteholders from time to time as
partners or members of an association; nor shall any Noteholder be under any
liability to any third person by reason of any action taken by the parties to
this Indenture pursuant to any provision hereof.

117

 

Section 15.4     Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING §
5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES.

Section 15.5     Waiver of Jury Trial. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO AND THEIR ASSIGNEES WAIVES ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE BETWEEN THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN ANY OF THEM IN CONNECTION
WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. INSTEAD, ANY SUCH
DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

Section 15.6     Notices. All communications and notices hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered to, or transmitted by overnight courier, or transmitted by telex or
telecopy and confirmed by a mailed writing:

	 	 	 	If to the Issuer:

	 
	 	 	 	CENDANT TIMESHARE 2004-1 RECEIVABLES FUNDING, LLC

10750 West Charleston Boulevard

Suite 130, Mail Stop 2066

Las Vegas, Nevada 89135

Attention: President

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

	 
	 	 	 	If to the Servicer:

	 
	 	 	 	FAIRFIELD ACCEPTANCE CORPORATION-NEVADA

10750 West Charleston Boulevard

Suite 130

Las Vegas, Nevada 89135

Fax number: 702-227-3114

Attention: President, Treasurer and Controller

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

118

 

	 	 	 	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 2004-1 Receivables Funding, LLC

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

	 
	 	 	 	If to the Collateral Agent:

	 
	 	 	 	WACHOVIA BANK, NATIONAL ASSOCIATION

269 Technology Way

Building B, Unit 3

Rocklin, CA 95765

Fax number: 916-626-3152

Attention: Structured Finance Trust Services

          Re: Cendant Timeshare 2004-1 Receivables Funding, LLC

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

	 
	 	 	 	If to each Rating Agency:

	 
	 	 	 	Fitch, Inc.

Attn: Asset-Backed Securities — Timeshare

55 East Monroe

Suite 3500

Chicago, IL 60610

Fax number: 312-368-2069

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

	 
	 	 	 	Moody’s Investors Service, Inc.

99 Church Street

New York, New York 10007

Fax number: 212-553-4392

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

119

 

	 	 	 	Standard & Poor’s Ratings Group

55 Water Street

New York, New York 10041

Fax number: 212-438-2655

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

	 
	 	 	 	If to the Swap Counterparty:

	 
	 	 	 	Bank of America, N.A.

Sears Tower

233 South Wacker Drive, Suite 2800

Chicago, Illinois 60606

Attention: Swap Operations

Telex N.: 49663210 Answerback: NATIONSBANK CHA

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

	 
	 	 	 	with a copy to:

	 
	 	 	 	Bank of America, N.A.

100 N. Tryon St., NC1-007-13-01

Charlotte, North Carolina 28255

Attention: Capital Markets Documentation

(Telex No.: 9663210; Answerback: NATIONSBK CHA)

Facsimile No.: 704-386-4113

	 
	 	 	 	If to the Insurer:

	 
	 	 	 	MBIA Insurance Corporation

113 King Street

Armonk, NY 10504

Attention: Manager — Insured Portfolio Management — Structured Finance
(with regards to Policy #44032)

Telecopy No.: 914-765-3810

Confirmation: 914-273-4545

(in each case in which notice or other communication to the
Insurer refers to a Servicer Default, an Unmatured Servicer
Default, an Event of Default or an
Unmatured Event of Default, a claim on the Policy or with respect
to which failure on the part of the Insurer to respond shall be
deemed to constitute consent or acceptance, then a copy of such
notice or other communication should also be sent to the attention
of “general counsel” of the Insurer at the same address and shall
be marked to indicate “URGENT MATERIAL ENCLOSED.”)

120

 

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 Indenture shall be conclusively presumed to
have been duly given, whether or not the Noteholder receives such notice.

Section 15.7     Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Indenture 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 Indenture and shall in no way affect the validity
or enforceability of the other provisions of this Indenture or of the Notes or
rights of the Noteholders thereof.

Section 15.8     Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 12.2, this Indenture may not be
assigned by the Issuer or the Servicer without the prior consent of the
Majority Holders, the Insurer and the Swap Counterparty.

Section 15.9     Notes Non-assessable and Fully Paid. It is the
intention of the Issuer that the Noteholders shall not be personally liable for
obligations of the Issuer and that the indebtedness represented by the Notes
shall be non-assessable for any losses or expenses of the Issuer or for any
reason whatsoever.

Section 15.10     Further Assurances. Each of the Issuer, the Servicer
and the Collateral Agent agree to do and perform, from time to time, any and
all acts and to execute any and all further instruments required or reasonably
requested by the Trustee more fully to effect the purposes of this Indenture,
including without limitation the authorization of any financing statements,
amendments thereto, or continuation statements relating to the Pledged Loans
for filing under the provisions of the UCC of any applicable jurisdiction.

Section 15.11     No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Trustee or the
Noteholders, any right, remedy, power or privilege hereunder, shall operate as
a waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. No
waiver of any provision hereof shall be effective unless made in writing. The
rights, remedies, powers and privileges therein provided are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.

Section 15.12     Counterparts. This Indenture may be executed in two
or more counterparts (and by different parties on separate counterparts), each
of which shall be an original, but all of which together shall constitute one
and the same instrument.

Section 15.13     Third-Party Beneficiaries. This Indenture will inure
to the benefit of and be binding upon the parties hereto, the Swap
Counterparty, the Insurer, the Noteholders and their respective successors and
permitted assigns. Except as otherwise provided in this Article XV, no other
person will have any right or obligation hereunder.

121

 

Section 15.14     Actions by the Noteholders.

(a)      Wherever in this Indenture 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
Indenture, written notification of the substance thereof shall be furnished to
all Noteholders.

(b)      Any request, demand, authorization, direction, consent, waiver or
other act by a Noteholder binds such Noteholder and every subsequent holder of
such Note issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done or omitted to be done
by the Trustee, the Issuer or the Servicer in reliance thereon, whether or not
notation of such action is made upon such Note.

Section 15.15     Merger and Integration. Except as set forth in the
Trustee Fee Letter, and except as specifically stated otherwise herein,
this Indenture and the other Transaction Documents set forth the entire
understanding of the parties relating to the subject matter hereof, and, except
as set forth in such Trustee Fee Letter, all prior understandings, written or
oral, are superseded by this Indenture and the other Transaction Documents.
This Indenture may not be modified, amended, waived or supplemented except as
provided herein.

Section 15.16     No Bankruptcy Petition. The Trustee, the Insurer,
the Servicer, the Collateral Agent and each Noteholder, by accepting a Note,
hereby covenant and agree that they will not at any time institute against the
Issuer or the Depositor, or join in instituting against the Issuer or the
Depositor, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any Debtor Relief Law until
one year and one day after such time as both the Issuer and the Depositor have
paid in full all indebtedness owed by such Person. The provisions of this
Section 15.16 will survive any termination of this Agreement.

Section 15.17     Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.

122

 

IN WITNESS WHEREOF, the Issuer, the Servicer, the Trustee and the
Collateral Agent have caused this Indenture to be duly executed by their
respective officers as of the day and year first above written.

	 	 	 	 	 
	 	CENDANT TIMESHARE 2004-1 RECEIVABLES

FUNDING, LLC,

as Issuer

 	 
	 	By:  	/s/ Kim Vukanovich
 	 
	 	 	Name:  	Kim Vukanovich 	 
	 	 	Title:  	President, Treasurer and
Controller 	 
	 
	 	FAIRFIELD ACCEPTANCE CORPORATION-NEVADA,

as Servicer

 	 
	 	By:  	/s/ Kim Vukanovich
 	 
	 	 	Name:  	Kim Vukanovich 	 
	 	 	Title:  	President, Treasurer and
Controller 	 
	 
	 	WACHOVIA BANK, NATIONAL ASSOCIATION,

as Trustee

 	 
	 	By:  	/s/ Gregory J. Yanok
 	 
	 	 	Name:  	Gregory J. Yanok 	 
	 	 	Title:  	Vice President 	 
	 
	 	WACHOVIA BANK, NATIONAL ASSOCIATION,

as Collateral Agent

 	 
	 	By:  	/s/ Cheryl Whitehead
 	 
	 	 	Name:  	Cheryl Whitehaed 	 
	 	 	Title:  	Vice President 	 
	 

[Signature page for Indenture and Servicing Agreement]AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

Exhibit 10.4

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Employment Agreement dated as of June 2, 2001 by and between Cendant
Corporation, a Delaware corporation (“Cendant”) and Richard A. Smith (the
“Executive”) is hereby amended and restated as of June 30, 2004.

WHEREAS, Cendant desires to continue to employ the Executive as Chairman
and Chief Executive Officer, Cendant Real Estate Division, and the Executive
desires to continue to serve Cendant in such capacity.

NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:

SECTION I

EMPLOYMENT

Cendant agrees to employ the Executive and the Executive agrees to be
employed by Cendant for the Period of Employment as provided in Section III
below and upon the terms and conditions provided in this Agreement.

SECTION II

POSITION AND RESPONSIBILITIES

During the Period of Employment, the Executive will serve as Chairman
and Chief Executive Officer, Cendant Real Estate Division, and subject to the
direction of the Chief Executive Officer of Cendant (the “CEO”), will perform
such duties and exercise such supervision with regard to the business of
Cendant as are associated with such position, as well as such additional
duties as may be prescribed from time to time by the Board of Directors of
Cendant (the “Board”) and/or the CEO. Cendant acknowledges that such
position is equivalent to the position of Vice Chairman of Cendant
Corporation for purposes of compensation, employee benefits, officer
perquisites and officer indemnification. The Executive will, during the
Period of Employment, devote substantially all of his time and attention
during normal business hours to the performance of services for Cendant. The
Executive will maintain a primary office and conduct his business in
Parsippany, New Jersey (the “Business Office”), except for normal and
reasonable business travel in connection with his duties hereunder.

1

 

SECTION III

PERIOD OF EMPLOYMENT

The period of the Executive’s employment under this Agreement (the “Period
of Employment”) will begin on June 30, 2004 and end on June 30, 2006, subject
to earlier termination as provided in this Agreement; provided,
however, that the Period of Employment will be automatically extended
for an additional one year period on June 30, 2005, and on each anniversary of
such date thereafter, unless written notice of non-extension is provided by
either party hereto to the other party hereto at least 30 days prior to any
such anniversary.

SECTION IV

COMPENSATION AND BENEFITS

	A.	 	Compensation.

For all services rendered by the Executive pursuant to this Agreement
during the Period of Employment, including services as an executive, officer,
director or committee member of Cendant or any subsidiary or affiliate of
Cendant, the Executive will be compensated as follows:

	 	i.	 	Base Salary.

Cendant will pay the Executive a fixed base salary (“Base Salary”) of not
less than $762,500, per annum, and thereafter will be eligible to receive
annual increases as the Board deems appropriate, in accordance with Cendant’s
customary procedures regarding the salaries of senior officers, but with due
consideration given to the published Consumer Price Index applicable to the New
York/New Jersey greater metropolitan area. Base Salary will be payable
according to the customary payroll practices of Cendant, but in no event less
frequently than once each month.

	 	ii.	 	Annual Incentive Awards

The Executive will be eligible for discretionary annual incentive
compensation awards; provided, that the Executive will be eligible to
receive an annual bonus for each fiscal year of Cendant during the Period of
Employment based upon a target bonus equal to not less than 100% of Base
Salary, subject to Cendant’s attainment of applicable performance targets
established and certified by the Compensation Committee of the Board (the
“Committee”). The parties acknowledge that it is currently contemplated that
such performance targets will be stated in terms of “earnings before interest
and taxes” of Cendant, however such targets may relate to

2

 

such other financial and business criteria of Cendant or any
of its subsidiaries or business units as determined by the Committee in its
sole discretion (each such annual bonus, an “Incentive Compensation Award”).

	 	iii.	 	Long-Term Incentive Awards

The Executive will be eligible for long term incentive awards, subject to
the sole discretion of the Committee.

	 	iv.	 	Additional Benefits

The Executive will be entitled to participate in all other compensation
and employee benefit plans or programs and receive all benefits and perquisites
for which salaried employees of Cendant generally are eligible under any plan
or program now in effect, or later established by Cendant, on the same basis as
similarly situated senior executives of Cendant with comparable duties and
responsibilities. The Executive will participate to the extent permissible
under the terms and provisions of such plans or programs, and in accordance
with the terms of such plans and program.

Pursuant to prior agreement by letter dated May 2, 2003, the Executive
agrees that Cendant may terminate the Executive’s existing split dollar
insurance policy and that the Executive will transfer, immediately upon request
by Cendant, all of his rights pursuant to such policy (including rights to the
cash surrender value) to Cendant. The Executive will execute such documents
necessary to effectuate the foregoing.

The Executive was previously designated a participant in the Cendant
Corporation Senior Executive Officer Supplemental Life Insurance Program,
subject to the terms and conditions of such program.

	 	v.	 	Further Consideration

Cendant acknowledges and agrees that in connection with its prior
commitments to the Executive, the Executive has become entitled to the
following benefits, subject to the following conditions. Upon the Executive’s
termination of employment from Cendant and its subsidiaries and affiliates, the
Executive and each person who is his covered dependent at such time under each
applicable plan sponsored by Cendant, shall remain eligible to continue to
participate in the following plans: Executive Physical Exams, Medical Expense
Reimbursement Plan (MERP), Medical Insurance, Dental Insurance, Group Life
Insurance (up to $1 million cover-

3

 

age on Executive’s life), Vision Service Plan (collectively, the
“Post-Employment Plans”), but that coverage under such Post-Employment Plans
shall be subject to the Executive and/or such dependents, as applicable,
continuing to pay the applicable employee portion of any premiums, co-payments,
deductibles and similar costs, until the end of the plan year in which the
Executive reaches, or would have reached, age sixty-two (62). Solely with
respect to the Executive’s dependents, such coverage shall terminate upon such
earlier date if and when they become ineligible for any such benefits under the
terms of such plans. Such benefits shall be provided in the event of the
Executive’s termination of employment for any reason. Notwithstanding the
foregoing, Cendant may meet any of its foregoing obligations under the
Post-Employment Plans by paying for, or providing for the payment of, such
benefits directly or through alternative plans or individual policies which are
no less favorable in all material respects (with respect to both coverage and
cost to the Executive) to the Post-Employment Plans.

SECTION V

BUSINESS EXPENSES

Cendant will reimburse the Executive for all reasonable travel and other
expenses incurred by the Executive in connection with the performance of his
duties and obligations under this Agreement. The Executive will comply with
such limitations and reporting requirements with respect to expenses as may be
established by Cendant from time to time and will promptly provide all
appropriate and requested documentation in connection with such expenses.

SECTION VI

DISABILITY

A.      If the Executive becomes Disabled, as defined below, during the Period
of Employment, the Period of Employment may be terminated at the option of the
Executive upon notice of resignation to Cendant, or at the option of Cendant
upon notice of termination to the Executive. Cendant’s obligation to make
payments to the Executive under this Agreement will cease as of such date of
termination, except for Base Salary and any Incentive Compensation Awards
earned but unpaid as of the date of such termination. In such event (i) each
of the Executive’s then outstanding options to purchase shares of Cendant
common stock which was granted on or after September 3, 1998 will become
immediately and fully vested and exercisable and, notwithstanding any term or
provision relating to such option to the contrary, shall remain exercisable
until the first to occur of the fifth (5th) anniversary of the Executive’s
termination of employment by reason of his becoming Disabled, and the original
expiration date of such option and (ii) the Executive and each of his depend-

4

 

ents then covered under the Post-Employment Plans at the time of the
Executive’s termination of employment shall remain eligible to continue to
participate in such Post-Employment Plans (subject to the Executive or such
dependents continuing to pay the applicable employee portion of any premiums,
co-payments, deductibles and similar costs) until the end of the plan year in
which the Executive reaches, or would have reached, age seventy-five (75), or
until such dependents would otherwise have become ineligible for such benefits
under the terms of such plans, whichever is earlier. Notwithstanding the
foregoing, Cendant may meet any of its foregoing obligations under the
Post-Employment Plans by paying for, or providing for the payment of, such
benefits directly or through alternative plans or individual policies which are
no less favorable in all material respects (with respect to both coverage and
cost to the Executive and his dependents) to the Post-Employment Plans. For
purposes of this Agreement, “Disabled” means the Executive’s inability to
perform his duties hereunder as a result of serious physical or mental illness
or injury for a period of no less than 180 days, together with a determination
by an independent medical authority that (i) the Executive is currently unable
to perform such duties and (ii) in all reasonable likelihood such disability
will continue for a period in excess of an additional 90 days. Such medical
authority shall be mutually and reasonably agreed upon by Cendant and the
Executive and such opinion shall be binding on Cendant and the Executive.

SECTION VII

DEATH

In the event of the death of the Executive during the Period of
Employment, the Period of Employment will end and Cendant’s obligation to make
payments under this Agreement will cease as of the date of death, except for
Base Salary and any Incentive Compensation Awards earned but unpaid as of the
date of death, which will be paid to the Executive’s surviving spouse, estate
or personal representative, as applicable. In addition, in such event (i) each
of the Executive’s then outstanding options to purchase shares of Cendant
common stock which was granted on or after September 3, 1998 will become
immediately and fully vested and exercisable and, notwithstanding any term or
provision relating to such options to the contrary, shall remain exercisable
(by the Executive’s beneficiary or estate, as provided in any applicable option
plan or agreement) until the first to occur of the fifth
(5th) anniversary of
the Executive’s death, and the original expiration date of such option and (ii)
each of the Executive’s dependents then covered under the Post-Employment Plans
at the time of the Executive’s death shall remain eligible to continue to
participate in such plans (subject to such dependents continuing to pay the
applicable employee portion of any premiums, co-payments, deductibles and
similar costs) until the end of the plan year in which the Executive would have
reached age

5

 

seventy-five (75), or until such dependents would otherwise have become
ineligible for such benefits under the terms of such plans, whichever is
earlier. Notwithstanding the foregoing, Cendant may meet any of its foregoing
obligations under the Post-Employment Plans by paying for, or providing for the
payment of, such benefits directly or through alternative plans or individual
policies which are no less favorable in all material respects (with respect to
both coverage and cost to the Executive and his dependents) to the
Post-Employment Plans.

SECTION VIII

EFFECT OF TERMINATION OF EMPLOYMENT

A.      Without Cause Termination and Constructive Discharge. If the
Executive’s employment terminates during the Period of Employment due to either
(i) a Without Cause Termination or (ii) a Constructive Discharge (each such
capitalized term as defined below): (a) Cendant will pay the Executive (or his
surviving spouse, estate or personal representative, as applicable) a lump sum
amount equal to 300% multiplied by the sum of (1) the Executive’s then current
Base Salary, plus (2) the Executive’s then current target Incentive
Compensation Award (for purposes of multiplying 300% times the sum of base
salary plus target Incentive Compensation Award, the target Incentive
Compensation Award will be deemed to equal 100% of then current base salary);
(b) each of the Executive’s then outstanding options to purchase shares of
Cendant common stock which were granted on or after June 1, 2001 will become
immediately and fully vested and exercisable and, notwithstanding any term or
provision relating to such options to the contrary, shall remain exercisable
until the first to occur of the fifth (5th) anniversary of the Executive’s
termination of employment and the original expiration date of such option; and
(c) the Executive and each of his dependents then covered under applicable
Post-Employment Plans at the time of the Executive’s termination of employment
shall remain eligible to continue to participate in such plans (subject to the
Executive or such dependents continuing to pay the applicable employee portion
of any premiums, co-payments, deductibles and similar costs) until the end of
the plan year in which the Executive reaches, or would have reached, age
seventy-five (75), or until such dependents would otherwise have become
ineligible for such benefits under the terms of such plans, whichever is
earlier; provided, however, that once the Executive or his
dependents become eligible for Medicare or any other government-sponsored
medical insurance plan, the Executive or his dependents shall utilize such
government plan, and Cendant’s insurance obligations hereunder shall become
secondary to such government plan, and; further, provided, that
Cendant’s obligation to provide such benefits shall terminate in the event the
Executive shall accept employment with any entity which is in competition with
Cendant’s Real Estate Division. Notwithstanding the foregoing, Cendant may meet any of its foregoing obligations under the Post-

6

 

Employment Plans by paying for, or providing for the payment of, such benefits directly or
through alternative plans or individual policies which are no less favorable in
all material respects (with respect to both coverage and cost to the Executive
and his dependents) to the Post-Employment Plans.

Further, if the Executive’s employment terminates by reason of (i) Without
Cause Termination or Constructive Discharge during the Period of Employment or
(ii) a Resignation at any time during or after the expiration of the Period of
Employment, each of the Executive’s then outstanding options to purchase shares
of Cendant common stock which were granted on or after September 3, 1998 and
prior to December 31, 2000, notwithstanding any term or provision relating to
such options to the contrary, shall remain exercisable until the first to occur
of the fifth (5th) anniversary of the Executive’s termination of employment and
the original expiration date of such option.

B.      Termination for Cause; Resignation. If the Executive’s
employment terminates due to a Termination for Cause or a Resignation, Base
Salary and any Incentive Compensation Awards earned but unpaid as of the date
of such termination will be paid to the Executive in a lump sum. Each
outstanding stock options held by the Executive as of the date of termination
will be treated in accordance with its terms (except as provided in the
preceding paragraph). In addition, in the event that the Executive’s
employment terminates due to a Resignation which occurs within 6 months
following the expiration of the Period of Employment, as extended from time to
time, Cendant shall pay the Executive a lump sum severance payment equal to the
then current Base Salary. Except as provided in this paragraph, Cendant will
have no further obligations to the Executive hereunder.

C.      For purposes of this Agreement, the following terms have the following
meanings:

i.      “Termination for Cause” means (i) the Executive’s willful failure to
substantially perform his duties as an employee of Cendant or any subsidiary
(other than any such failure resulting from incapacity due to physical or
mental illness), (ii) any act of fraud, misappropriation, dishonesty,
embezzlement or similar conduct against Cendant or any subsidiary, (iii) the
Executive’s conviction of a felony or any crime involving moral turpitude
(which conviction, due to the passage of time or otherwise, is not subject to
further appeal), (iv) the Executive’s gross negligence in the performance of
his duties or (v) the Executive purposefully or negligently makes (or has been
found to have made) a false certification to Cendant pertaining to its
financial statements.

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ii.      “Constructive Discharge” means (i) any material failure of Cendant to
fulfill its obligations under this Agreement (including without limitation any
reduction of the Base Salary, as the same may be increased during the Period of
Employment, or other element of compensation), (ii) the Business Office is
relocated to any location which is more than 30 miles from the city limits of
Parsippany, New Jersey or (iii) the Executive no longer reports directly to the
CEO. The Executive will provide Cendant a written notice which describes the
circumstances being relied on for the termination with respect to this
Agreement within thirty (30) days after the event giving rise to the notice.
Cendant will have thirty (30) days after receipt of such notice to remedy the
situation prior to the termination for Constructive Discharge.

iii.      “Without Cause Termination” or “Terminated Without Cause” means
termination of the Executive’s employment by Cendant other than due to death,
disability, or Termination for Cause.

iv.      “Resignation” means a termination of the Executive’s employment by the
Executive, other than in connection with a Constructive Discharge.

D.      Conditions to Payment and Acceleration. All payments due to the
Executive under this Section VIII shall be made as soon as practicable;
provided, however, that such payments, as well as the
modification of the terms of any Cendant options provided under this Section
VIII, shall be subject to, and contingent upon, the execution by the Executive
(or his beneficiary or estate) of a release of claims against Cendant and its
affiliates in such reasonable form determined by Cendant in its sole
discretion. The payments due to the Executive under this Section VIII shall be
in lieu of any other severance benefits otherwise payable to the Executive
under any severance plan of Cendant or its affiliates. To the extent any term
or condition of any option to purchase Cendant common stock conflicts with any
term or condition of this Agreement applicable to such option, the term or
condition set forth in this Agreement shall govern.

SECTION IX

OTHER DUTIES OF THE EXECUTIVE

DURING AND AFTER THE PERIOD OF EMPLOYMENT

A.      The Executive will, with reasonable notice during or after the Period
of Employment, furnish information as may be in his possession and fully
cooperate with Cendant and its affiliates as may be requested in connection
with any claims or legal action in which Cendant or any of its affiliates is or
may become a party. After the Period of Employment, the Executive will
cooperate as reasonably
requested with Cendant and its affiliates in connection with any claims or
legal ac-

8

 

tions in which Cendant or any of its affiliates is or may become a
party. Cendant agrees to reimburse the Executive for any reasonable
out-of-pocket expenses incurred by Executive by reason of such cooperation,
including any loss of salary, and Cendant will make reasonable efforts to
minimize interruption of the Executive’s life in connection with his
cooperation in such matters as provided for in this paragraph.

B.      The Executive recognizes and acknowledges that all information
pertaining to this Agreement or to the affairs; business; results of
operations; accounting methods, practices and procedures; members; acquisition
candidates; financial condition; clients; customers or other relationships of
Cendant or any of its affiliates (“Information”) is confidential and is a
unique and valuable asset of Cendant or any of its affiliates. Access to and
knowledge of certain of the Information is essential to the performance of the
Executive’s duties under this Agreement. The Executive will not during the
Period of Employment or thereafter, except to the extent reasonably necessary
in performance of his duties under this Agreement, give to any person, firm,
association, corporation, or governmental agency any Information, except as may
be required by law. The Executive will not make use of the Information for his
own purposes or for the benefit of any person or organization other than
Cendant or any of its affiliates. The Executive will also use his best efforts
to prevent the disclosure of this Information by others. All records,
memoranda, etc. relating to the business of Cendant or its affiliates, whether
made by the Executive or otherwise coming into his possession, are confidential
and will remain the property of Cendant or its affiliates.

C.      i.      During the Period of Employment and for a two (2) year period
thereafter (the “Restricted Period”), irrespective of the cause, manner or time
of any termination, the Executive will not use his status with Cendant or any
of its affiliates to obtain loans, goods or services from another organization
on terms that would not be available to him in the absence of his relationship
to Cendant or any of its affiliates.

ii.      During the Restricted Period, the Executive will not make any
statements or perform any acts intended to or which may have the effect of
advancing the interest of any existing or prospective competitors of Cendant or
any of its affiliates or in any way injuring the interests of Cendant or any of
its affiliates. During the Restricted Period, the Executive, without prior
express written approval by the Board, will not engage in, or directly or
indirectly (whether for compensation or otherwise) own or hold proprietary
interest in, manage, operate, or control, or join or participate in the
ownership, management, operation or control of, or furnish any capital to or be
connected in any manner with, any party which competes in any way
or manner with the business of Cendant or any of its affiliates, as such
business or

9

 

businesses may be conducted from time to time, either as a general
or limited partner, proprietor, common or preferred shareholder, officer,
director, agent, employee, consultant, trustee, affiliate, or otherwise. The
Executive acknowledges that Cendant’s and its affiliates’ businesses are
conducted nationally and internationally and agrees that the provisions in the
foregoing sentence will operate throughout the United States and the world.

iii.      During the Restricted Period, the Executive, without express prior
written approval from the Board, will not solicit any members or the
then-current clients of Cendant or any of its affiliates for any existing
business of Cendant or any of its affiliates or discuss with any employee of
Cendant or any of its affiliates information or operation of any business
intended to compete with Cendant or any of its affiliates.

iv.      During the Restricted Period, the Executive will not interfere with
the employees or affairs of Cendant or any of its affiliates or solicit or
induce any person who is an employee of Cendant or any of its affiliates to
terminate any relationship such person may have with Cendant or any of its
affiliates, nor will the Executive during such period directly or indirectly
engage, employ or compensate, or cause or permit any person with which the
Executive may be affiliated, to engage, employ or compensate, any employee of
Cendant or any of its affiliates. The Executive hereby represents and warrants
that the Executive has not entered into any agreement, understanding or
arrangement with any employee of Cendant or any of its affiliates pertaining to
any business in which the Executive has participated or plans to participate,
or to the employment, engagement or compensation of any such employee.

v.      For the purposes of this Agreement, proprietary interest means legal or
equitable ownership, whether through stock holding or otherwise, of an equity
interest in a business, firm or entity or ownership of more than 5% of any
class of equity interest in a publicly-held company and the term “affiliate”
will include without limitation all subsidiaries and licensees of Cendant.

D.      The Executive hereby acknowledges that damages at law may be an
insufficient remedy to Cendant if the Executive violates the terms of this
Agreement and that Cendant will be entitled, upon making the requisite showing,
to preliminary and/or permanent injunctive relief in any court of competent
jurisdiction to restrain the breach of or otherwise to specifically enforce any
of the covenants contained in this Section IX without the necessity of showing
any actual damage or that monetary damages would not provide an adequate
remedy. Such right to an injunction will be in addition to, and not in
limitation of, any other rights or remedies
Cendant may have. Without limiting the generality of the foregoing,
neither party

10

 

will oppose any motion the other party may make for any expedited
discovery or hearing in connection with any alleged breach of this Section IX.

E.      The period of time during which the provisions of this Section IX will
be in effect will be extended by the length of time during which the Executive
is in breach of the terms hereof as determined by any court of competent
jurisdiction on Cendant’s application for injunctive relief.

F.      The Executive agrees that the restrictions contained in this Section IX
are an essential element of the compensation the Executive is granted hereunder
and but for the Executive’s agreement to comply with such restrictions, Cendant
would not have entered into this Agreement.

SECTION X

INDEMNIFICATION

Cendant will indemnify the Executive to the fullest extent permitted by
the laws of the state of Cendant’s incorporation in effect at that time, or the
certificate of incorporation and by-laws of Cendant, whichever affords the
greater protection to the Executive.

SECTION XI

CERTAIN TAXES

Anything in this Agreement or in any other plan, program or agreement to
the contrary notwithstanding and except as set forth below, in the event that
(i) the Executive becomes entitled to any benefits or payments under Paragraph
A of Section VIII hereof and (ii) it shall be determined that any payment or
distribution by Cendant to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments required
under this Section XI) (a “Payment”) would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended, or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties,
hereinafter collectively referred to as the “Excise Tax”), then the Executive
shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an
amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Pay-

11

 

ments. Notwithstanding the foregoing provisions of this Section XI, if it
shall be determined that the Executive is entitled to a Gross-Up Payment, but
that the Payments do not exceed 110% of the greatest amount (the “Reduced
Amount”) that could be paid to the Executive such that the receipt of Payments
would not give rise to any Excise Tax, then no Gross-Up Payment shall be made
to the Executive and the Payments, in the aggregate, shall be reduced to the
Reduced Amount. All determinations required to be made under this Section XI,
including whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by Deloitte & Touche LLP or such other certified
public accounting firm as may be designated by Cendant.

SECTION XII

MITIGATION

The Executive will not be required to mitigate the amount of any payment
provided for hereunder by seeking other employment or otherwise, nor will the
amount of any such payment be reduced by any compensation earned by the
Executive as the result of employment by another employer after the date the
Executive’s employment hereunder terminates.

SECTION XIII

WITHHOLDING TAXES

The Executive acknowledges and agrees that Cendant may directly or
indirectly withhold from any payments under this Agreement all federal, state,
city or other taxes that will be required pursuant to any law or governmental
regulation.

12

 

SECTION XIV

EFFECT OF PRIOR AGREEMENTS

This Agreement will supersede any prior employment agreement between
Cendant and the Executive hereof, and any such prior employment agreement will
be deemed terminated without any remaining obligations of either party
thereunder.

SECTION XV

CONSOLIDATION, MERGER OR SALE OF ASSETS

Nothing in this Agreement will preclude Cendant from consolidating or
merging into or with, or transferring all or substantially all of its assets
to, another corporation which assumes this Agreement and all obligations and
undertakings of Cendant hereunder. Upon such a consolidation, merger or sale
of assets the term “Cendant” will mean the other corporation and this Agreement
will continue in full force and effect.

SECTION XVI

MODIFICATION

This Agreement may not be modified or amended except in writing signed by
the parties. No term or condition of this Agreement will be deemed to have
been waived except in writing by the party charged with waiver. A waiver will
operate only as to the specific term or condition waived and will not
constitute a waiver for the future or act on anything other than that which is
specifically waived.

SECTION XVII

GOVERNING LAW

This Agreement has been executed and delivered in the State of New Jersey
and its validity, interpretation, performance and enforcement will be governed
by the internal laws of that state.

SECTION XVIII

ARBITRATION

A.      Any controversy, dispute or claim arising out of or relating to this
Agreement or the breach hereof which cannot be settled by mutual agreement
(other than with respect to the matters covered by Section IX for which Cendant

13

 

may, but will not be required to, seek injunctive relief) will be finally
settled by binding arbitration in accordance with the Federal Arbitration Act
(or if not applicable, the applicable state arbitration law) as follows: Any
party who is aggrieved will deliver a notice to the other party setting forth
the specific points in dispute. Any points remaining in dispute twenty (20)
days after the giving of such notice may be submitted to arbitration in New
York, New York, to the American Arbitration Association, before a single
arbitrator appointed in accordance with the arbitration rules of the American
Arbitration Association, modified only as herein expressly provided. After the
aforesaid twenty (20) days, either party, upon ten (10) days notice to the
other, may so submit the points in dispute to arbitration. The arbitrator may
enter a default decision against any party who fails to participate in the
arbitration proceedings.

B.      The decision of the arbitrator on the points in dispute will be final,
unappealable and binding, and judgment on the award may be entered in any court
having jurisdiction thereof.

C.      Except as otherwise provided in this Agreement, the arbitrator will be
authorized to apportion its fees and expenses and the reasonable attorneys’
fees and expenses of any such party as the arbitrator deems appropriate. In
the absence of any such apportionment, the fees and expenses of the arbitrator
will be borne equally by each party, and each party will bear the fees and
expenses of its own attorney.

D.      The parties agree that this Section XVIII has been included to rapidly
and inexpensively resolve any disputes between them with respect to this
Agreement, and that this Section XVIII will be grounds for dismissal of any
court action commenced by either party with respect to this Agreement, other
than post-arbitration actions seeking to enforce an arbitration award. In the
event that any court determines that this arbitration procedure is not binding,
or otherwise allows any litigation regarding a dispute, claim, or controversy
covered by this Agreement to proceed, the parties hereto hereby waive any and
all right to a trial by jury in or with respect to such litigation.

E.      The parties will keep confidential, and will not disclose to any
person, except as may be required by law, the existence of any controversy
hereunder, the referral of any such controversy to arbitration or the status or
resolution thereof.

14

 

SECTION XIX

SURVIVAL

Sections IX, X, XI, XII, XIII and XVIII will continue in full force in
accordance with their respective terms notwithstanding any termination of the
Period of Employment.

SECTION XX

SEPARABILITY

All provisions of this Agreement are intended to be severable. In the
event any provision or restriction contained herein is held to be invalid or
unenforceable in any respect, in whole or in part, such finding will in no way
affect the validity or enforceability of any other provision of this Agreement.
The parties hereto further agree that any such invalid or unenforceable
provision will be deemed modified so that it will be enforced to the greatest
extent permissible under law, and to the extent that any court of competent
jurisdiction determines any restriction herein to be unreasonable in any
respect, such court may limit this Agreement to render it reasonable in the
light of the circumstances in which it was entered into and specifically
enforce this Agreement as limited.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.

	 	 	 	 	 	 	 
	 	 	CENDANT CORPORATION	 	 
	 

	 	 	 	 	 	 
	 	 	/s/Terry Conley	 	 
	 	 	 	 	 
	

	 	By:
	 	Terry Conley	 	 
	

	 	Title:
	 	Executive Vice President	 	 
	 

	 	 	 	 	 	 
	 	 	RICHARD A. SMITH	 	 
	 

	 	 	 	 	 	 
	 	 	/s/ Richard A. Smith	 	 
	 	 	 	 	 

15

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