PLEDGE AND SERVICING AGREEMENT
Dated as of July 31, 1998
among
FAIRFIELD FUNDING CORPORATION, II,
(Issuer)
FAIRFIELD ACCEPTANCE CORPORATION - NEVADA,
(Servicer)
FAIRFIELD COMMUNITIES, INC.,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
(Trustee)
and
BANKBOSTON, N.A.
(Collateral Agent)
relating to
VACATION OWNERSHIP INTEREST CONTRACT
PAY-THROUGH NOTES
SERIES 1998-A (6.75%)
This instrument constitutes a security agreement for the purpose of
Article 9 of the Uniform Commercial Code. Information concerning the
security interest may be obtained from the secured party, BankBoston,
N.A. , as Collateral Agent, at the address set forth in Section 16.5
hereof and the address of the Issuer, Fairfield Funding Corporation,
II, is also set forth in said Section.
This instrument was prepared by: ▇▇▇▇▇ ▇▇▇▇
Suite 1100
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
PLEDGE AND SERVICING AGREEMENT
THIS PLEDGE AND SERVICING AGREEMENT (this "Agreement"), dated as of
July 31, 1998, is by and among FAIRFIELD FUNDING CORPORATION, II ("Issuer"),
FAIRFIELD ACCEPTANCE CORPORATION - NEVADA ("Servicer" or "FAC"), FAIRFIELD
COMMUNITIES, INC., ("FCI") FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Trustee
("Trustee") and BANKBOSTON, N.A., as Collateral Agent ("Collateral Agent"). This
Agreement provides for and secures a debt of Issuer consisting of Vacation
Ownership Interval Contract Pay-Through Notes, Series 1998-A.
RECITALS
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A. Issuer desires to Grant to the Collateral Agent for the benefit of
the Trustee and Noteholders from time to time the Collateral (capitalized terms
used herein are defined as provided in Article I), including Contracts with a
principal amount outstanding thereunder as determined on each Cut-Off Date, and
the Collateral Agent is willing to accept such Grants from time to time in
accordance with and subject to the terms of this Agreement.
B. On the Closing Date, Issuer will execute and the Trustee will
authenticate Notes in an aggregate original principal amount of $49,848,474.90,
which Notes shall be secured by Contracts aggregating not less than
$60,058,403.50 in outstanding principal amount and such other Collateral as
described in this Agreement.
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:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Whenever used in this Agreement, the following
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words and phrases shall have the following meanings:
"Account" means each of the Collection Account, the Reinvestment Account
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and the Reserve Account.
"Administrative Services Agreement" means that certain Administrative
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Services and Lease Agreement, dated as of July 31, 1998 by and between FAC and
Issuer, as the same may be amended, supplemented or otherwise modified from time
in accordance herewith.
"Advance" means amounts required to be advanced by the Servicer
-------
pursuant to Section 5.14 equal to delinquent Payments on any Delinquent
Contracts.
"Affiliate" of any specified Person means any other person controlling
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or controlled by or under common control with such specified 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.
"Agreement" means this Pledge and Servicing Agreement and all
---------
amendments hereof and supplements hereto.
"Aggregate Note Principal Balance" means, as of any date, an amount
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equal to (a) $49,848,474.90 (the principal balance of Notes issued on the
Closing Date), minus (b) the aggregate amount of principal paid to the
Noteholders pursuant to Section 7.3 prior to such date.
"Allocation Percentage" during the periods indicated means the following
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percentage:
1. Reinvestment Period: 0%
2. Amortization Commencement Date and thereafter, if
at any time the Aggregate Note Principal Balance is
greater than 70% of the Contract Pool Principal Balance: 100%
3. Amortization Commencement Date and thereafter, if
at any time the Aggregate Note Principal Balance is less
than or equal to 70% of the Contract Pool Principal Balance: 70%
"Amortization Commencement Date" means the first Payment Date following
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the earlier of (a) March 1, 2000, or (b) the occurrence of an Early Amortization
Event.
"Amortization Period" means the period from and including the
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Amortization Commencement Date to and including the date of termination of this
Agreement pursuant to Section 15.1.
"Assessments" means any assessments, including but not limited to, real
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estate taxes, recreation fees, community club or property owners association
dues, water and sewer improvement district assessments or other similar
assessments, made with respect to a VOI, the nonpayment of which would result in
the imposition of a lien or other encumbrance upon the VOI.
"Assignment of Mortgages" means any assignment (including any
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collateral assignment) of any Mortgage.
"Authorized Representatives" means the representatives specified as
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provided in Section 2.2(c)(i).
"Available VOI Units" means VOI units which:
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(1) are contained in completed buildings that have become
subject to a POA;
(2) have been registered for sale pursuant to applicable
state law; and
(3) have been made available for sale by an Originator.
"Available Contracts" has the meaning specified in Section 2.4(a) hereto.
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"Balance" means as to any Account an amount equal to (a) cash in such
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Account, plus (b) the aggregate face amount of all Permitted Investments in such
account plus only the accreted value of commercial paper or other Permitted
Investments commonly purchased at a discount to face value, less (c) any
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defaulted Permitted Investments.
"Balance Sheet Date" means December 31, 1997.
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"BKB" means BankBoston N.A., a national banking association, and any
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successor thereof.
"BSI" means BancBoston Securities, Inc., as placement agent for Issuer
---
and FAC.
"Business Day" means any day other than a Saturday, a Sunday or a day
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on which banking institutions in New York, New York, Las Vegas, Nevada, or Salt
Lake City Utah are authorized or obligated by law or executive order to be
closed.
"Calculation Period" means each period commencing on the day next
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succeeding a Determination Date and ending on (and including) the day of the
next succeeding Determination Date.
"Cancelled Contract" means a Contract with respect to which
--------------------
cancellation or foreclosure actions have been commenced in accordance with
Customary Practices and/or Credit Standards and Collection Policies by reason of
(a) uncollectability in whole or in part, (b) relinquishment by the Obligor of
its rights in and to the related VOI, or (c) termination in connection with
origination of a new Contract.
"Carrying Costs" means with respect to any Calculation Period, the
---------------
aggregate amount of (i) all accrued and unpaid fees and other expenses owing by
the Issuer (including, without limitation, all fees owed to BSI, the Collateral
Agent Fee or audit fees and expenses, the Monthly Servicing Fee, and the
compensation owing to any Successor Servicer pursuant to Section 13.2) during
such Calculation Period plus (ii) all ordinary course operating expenses
----
incurred by the Issuer during such Calculation Period (including rent, salaries,
professional fees and expenses incurred in connection therewith); provided that
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in the event that any such expenses are the subject of allocations made pursuant
to the Administrative Services Agreement, "Carrying Costs" shall include such
expenses only to the extent allocated to the account of the Issuer thereunder,
and provided further that, for the avoidance of doubt, "Carrying Costs" shall
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not include any taxes payable by or on behalf of the Issuer, or any payments in
respect of imputed taxes payable by the
Issuer pursuant to the terms of any agreement between the Issuer and any of its
Affiliates (including, without limitation, the Tax Sharing Agreement).
"Closing Date" means August 26, 1998.
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"Collateral" means any and all right, title and interest of Issuer in,
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to or under:
(a) the Pledged Contracts, together with all other Transferred
Assets;
(b) the Receivables Purchase Agreement, the Administrative
Services Agreement and the Remarketing Agreement, including, without
limitation, all monies due and to become due to the Issuer from the
Seller or FCI under or in connection therewith (including, without
limitation, all interest and finance charges for late payments accrued
thereon and proceeds of any liquidation or sale of Pledged Contracts
or resale of VOIs and all other Collections on the Pledged Contracts);
(c) all computer software, tapes, disks and other electronic
media, books, records and documents relating to the Pledged Contracts;
including, without limitation, any such software, electronic media,
books, records and documents used
(i) to account for and service the Transferred Assets
(ii) in the management of any VOI Regimes, and the
VOIs located within such VOI Regimes,
(iii) in the monitoring of accounts receivables and
third party contracts relating to the management of properties
located within any VOI Regime, and
(iv) in managing and operating the FairShare Plus
Program and the Reservation System,
and all relevant licenses, sublicenses, contracts (including, without
limitation, service and maintenance contracts), warranties and
guaranties relating to any such software, electronic media, books,
records and documents, as the case may be (including, without
limitation, all such rights arising under such software, electronic
media, books, records and documents, and any related licenses,
sublicenses, contracts, warranties and guaranties transferred by FAC to
the Issuer pursuant to the Receivables Purchase Agreement);
(d) the Collection Account, the Reserve Account, the
Reinvestment Account and all other bank and similar accounts
established by the Issuer, in whole or in part, for the benefit of any
of the Issuer, the Collateral Agent, and/or the Trustee on behalf of
the Noteholders, all funds held therein or in such other accounts, all
financial assets, investment property and other investments from time
to time on deposit, or made with proceeds, in any such accounts, and
all income arising from such funds held in any such accounts or from
such financial assets, investment property and other investments;
(e) all Lock-Box Accounts, and all other bank and similar
accounts into which Collections in respect of the Pledged Contracts are
or are intended to be deposited, and all funds held therein or in such
other accounts;
(f) all certificates and instruments if any, from time to time
representing or evidencing any of the foregoing property described in
clauses (a) through (e) above;
(g) any accounts, inventory, machinery, equipment, fixtures,
general intangibles, chattel paper, contract rights, financial assets
and other investment property, instruments and documents, to the extent
not described in any of clauses (a) through (f) above;
(h) all proceeds of the foregoing property described in
clauses (a) through (g) 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 any of the Collateral Agent or 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
(i) all other monies or property of the Issuer coming into the
actual possession, custody or control of the Collateral Agent, the
Trustee or the Noteholders (whether for safekeeping, deposit, custody,
pledge, transmission, collection or otherwise).
"Collateral Agent" means BKB in its capacity as Collateral Agent under
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the Collateral Agency Agreement.
"Collateral Agency Agreement" means that certain Collateral Agency
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Agreement dated as of January 15, 1998 among BKB, BancBoston Securities, Inc.,
EagleFunding Capital Corporation, FAC and each Originator, as amended by that
certain First Amendment thereto among the foregoing parties and the Trustee, as
the same may be amended, supplemented or otherwise modified from time to time in
accordance herewith.
"Collateral Agent Fee" means the monthly fee in an aggregate amount equal
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to $1,667.00 payable by Issuer to BKB for its services as Collateral Agent under
the Collateral Agency Agreement.
"Collateral Substitution Date" means each date specified in Section 2.4(a).
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"Collection Account" means the account established pursuant to Section
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7.1(a).
"Collections" means, with respect to any Pledged Contract, all funds, cash
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collections and other cash proceeds of such Pledged Contract, including, without
limitation, (i) all 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 Lock-Box
Accounts or received by the Issuer or the Servicer in respect of such Pledged
Contract, (ii) all amounts received by the Issuer, the Servicer, the Collateral
Agent or the Trustee in respect of any Insurance Proceeds relating to such
Pledged Contract, or the related VOI, (iii) all amounts received by the Trustee,
or otherwise deposited into the Collection Account, as a result of the
remarketing of such Pledged Contract pursuant to Section 3.6 hereof, and (iv)
all amounts received by the Issuer, the Servicer or the Trustee of any proceeds
in respect of a condemnation of property in any Development relating to any of
the VOIs.
"Confidential Information" means, in relation to any Noteholder, any
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written information delivered or made available by or on behalf of the Issuer,
FAC or FCI in connection with or pursuant to this Agreement which is proprietary
in nature and clearly marked or labeled as being confidential information, other
than information (a) which was publicly known, or otherwise known to such
Noteholder, at the time of disclosure (except pursuant to disclosure in
connection with this Agreement and due diligence and discussions conducted in
connection with the Noteholder's decision to invest in the Notes), (b) which
subsequently becomes publicly known through no act or omission by such
Noteholder, (c) which otherwise becomes known to such Noteholder other than
through disclosure by Issuer, FAC or FCI, or (d) which is financial data that
has been in the possession of such Noteholder for more than two years.
"Consolidated Tangible Net Worth" means the excess of Consolidated
---------------------------------
Total Assets over Consolidated Total Liabilities, less the sum of: (a) the total
book value of all assets of FAC and its Subsidiaries properly classified as
intangible assets under generally accepted accounting principles, including such
items as good will, the purchase price of acquired assets in excess of the fair
market value thereof, trademarks, trade names, service marks, brand names,
copyrights, patents and licenses, and rights with respect to the foregoing, plus
(b) all amounts representing any write-up in the book value of any assets of FAC
or its Subsidiaries resulting from a revaluation thereof subsequent to the
Balance Sheet Date.
"Consolidated Total Assets" means the sum of all assets ("consolidated
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balance sheet assets") of FAC and its Subsidiaries determined on a consolidated
basis in accordance with generally accepted accounting principles.
"Consolidated Total Liabilities" means all liabilities of FAC and its
--------------------------------
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles.
"Contract" means any installment contract or contract for deed or
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contracts or notes secured by a mortgage, deed of trust, vendor's lien or
retention of title relating to the sale of one or more VOIs to an Obligor.
"Contract Amortization Shortfall" means, as of any Payment Date, the
---------------------------------
amount, if any, by which the Gross Contract Amortization in respect of all prior
Payment Dates exceeds the amount transferred to the Reinvestment Account on such
prior Payment Dates pursuant to Section 7.3(j)(i).
"Contract Audit" shall have the meaning set forth in Section 4.1(c)(ii).
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"Contract Conveyance Documents" means, with respect to each Contract
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Granted by the Issuer to the Collateral Agent, the following documents:
(a) the Document of Sale and Assignment of Contracts and
Assignment of Mortgages in the form of Exhibit "A" to this Agreement
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assigning all of FAC's right, title and interest in and to the Pledged
Contracts, the related VOIs, any related Mortgages and certain other
property to the Issuer;
(b) the Document of Pledge and Assignment of Contracts in the
form of Exhibit "B" to this Agreement collaterally assigning all of the
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Issuer's right, title and interest in and to Pledged Contracts, the
related VOIs, any related Mortgages and certain other property to the
Collateral Agent; and
(c) any such other releases, documents, instruments or
agreements as may be required by the Collateral Agent, Trustee or
Noteholders in order to more fully effect the Grant (any prior
assignments) of such Contract and any related Collateral.
"Contract Documents" means the Contract and all papers and documents
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related to a Contract, including the original of all applicable promissory
notes, stamped as required by the Custodial Agreement, the original of any
related recorded, or to the extent authorized by this Agreement, unrecorded
Mortgage (or a copy of such recorded Mortgage if the original of the recorded
Mortgage is not available) and a copy of any recorded, or to the extent
authorized by this Agreement, unrecorded warranty deed transferring legal title
to the related VOI to the Obligor, tax receipts, insurance policies, insurance
premium receipts, ledger sheets, payment records, insurance claim files and
correspondence, repossession files and correspondence, the original of any
related assignment, modification or assumption agreement or, if such original is
unavailable, a copy thereof, current and historical computerized data files, and
all other papers and records of whatever kind or description, whether developed
or originated by FAC, any Originator or another Person, required to document,
service or enforce a Contract.
"Contract File" means the Contract Documents pertaining to a particular
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Pledged Contract and any additional amendments, supplements, extensions,
modifications or waiver agreements required to be added to the Contract File
pursuant to this Agreement, the Credit Standards and Collection Policies and/or
Customary Practices.
"Contract Grant Date" means the Closing Date and each Payment Date
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occurring during the Reinvestment Period on which the Issuer determines to Grant
Substitute Contracts to the Collateral Agent pursuant to Section 2.4 hereof.
"Contract Pool" means all Contracts Granted to the Collateral Agent by
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the Issuer for the benefit of the Trustee and Noteholders pursuant to this
Agreement, the Collateral Agency Agreement and the Contract Conveyance Documents
and identified in the Contract Schedule, which shall have a Contract Pool
Principal Balance as of the Closing Date of not less than $60,058,403.50.
"Contract Pool Principal Balance" means, as of any date of
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determination, the aggregate unpaid principal balance of the Contract Pool.
"Contract Principal Prepayment" means (i) a prepayment under any
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Pledged Contract with respect to which payment is made by the Obligor of all or
part of the outstanding principal balance of such Contract, together with all
accrued and unpaid interest thereon, which is received in advance of its
scheduled payment date, is applied to reduce the principal balance of such
Contract, and (ii) any other unscheduled receipt of principal in respect of such
Pledged Contract, other than Insurance Proceeds or the Release Price of such
Pledged Contract.
"Contract Rate" means the annual rate at which interest accrues on any
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Pledged Contract, as modified from time to time in accordance with the terms of
PAC (if applicable).
"Contract Schedule" means the list of Pledged Contracts, attached
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hereto as Schedule 1, as amended from time to time on each Collateral
Substitution Date, Defective Contract Release Date, Defaulted Contract Release
Date or Overconcentration Contract Release Date as provided in Sections 2.4 and
3.5, which list shall set forth the following information with respect to each
Contract therein as of the applicable date:
(a) the Contract number;
(b) the Obligor's name, and the home address and telephone
number for such Obligor set forth in the Contract;
(c) the Development in which the related VOI is located;
(d) as to Fixed Weeks, the building, unit and week
thereof, as to UDIs, the phase number thereof, and as
to all VOIs, the number of Points issued pursuant to
the FairShare Plus Program (if applicable), for which
occupancy rights in such VOI may be redeemed and
represented thereby;
(e) the Contract Rate;
(f) whether the Obligor has elected PAC with respect to
the Contract;
(g) the original term of the Contract;
(h) the original and outstanding (as of the applicable
Cut-Off Date) Contract principal balance;
(i) the date of execution of the Contract;
(j) the amount of the Payment on the Contract;
(k) the original Sales Price and Equity Percentage; and
(l) whether the related VOI has been deeded to the Obligor.
The Contract Schedule shall also set forth the total of the amounts
described under (h) above for the Pledged Contracts. The Contract Schedule may
be in the form of more than one list, collectively setting forth all of the
information required.
"Corporate Trust Office" means the office of the Trustee at which at
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any particular time its corporate trust business is administered, which office
at the date of the execution of this Agreement is located at ▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇.
"Credit Card Account" means an arrangement whereby an Obligor makes
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Payments under a Contract via pre-authorized debit to a Major Credit Card.
"Credit Standards and Collection Policies" means the Credit Standards
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and Collection Policies of FAC and FCI, a copy of which is attached to this
Agreement as Exhibit "C" as the same may be amended from time to time in
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accordance with the provisions of Section 4.2(c) of this Agreement.
"Custodial Agreement" means the Amended and Restated Custodial
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Agreement, dated as of July 31, 1998, among FAC, each Originator, FRC, the
Issuer, the Collateral Agent, First Security Trust Company of Nevada, as
"Custodian" and the other parties therein and the Bailment Agreement (attached
thereto as an exhibit) by and between FAC and the Custodian, as executed and in
effect on the Closing Date, as the same may be amended, supplemented or
otherwise modified from time to time thereafter in accordance with the terms
hereof.
"Custodian" means, at any time, the "Custodian" under the Custodial
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Agreement at such time.
"Customary Practices" means the Servicer's practices with respect to
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the servicing and administration of Contracts as in effect from time to time,
which practices shall be consistent with the practices employed by prudent
lending institutions which originate and service instruments similar to the
Contracts or other timeshare loans in the jurisdictions in which the
Developments are located, so long as such practices are in the best interests of
the Noteholders. In no event shall Customary Practices include any deferral of
Payments due under any Pledged Contract except for Permitted Deferrals.
"Cut-Off Date" means (a) with respect to the Closing Date, July 31,
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1998, and (b) with respect to each Collateral Substitution Date, the last day of
the month preceding the month in which the related substitution occurs.
"Cut-Off Date Pool Principal Balance" means the aggregate of the
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Cut-Off Date Principal Balances of the Pledged Contracts.
"Cut-Off Date Principal Balance" means, as to any Pledged Contract, the
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unpaid principal balance thereof at the applicable Cut-Off Date after giving
effect to all installments of principal received prior thereto.
"Debt" of any Person means (a) indebtedness of such Person for borrowed
----
money, (b) obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, (c) obligations of such Person to pay the deferred
purchase price of property or services, (d) obligations of such Person as lessee
under leases which have been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases, (e) obligations secured by
any lien or other charge upon property or assets owned by such Person, even
though such Person has not assumed or become liable for the payment of such
obligations, (f) obligations of such Person under direct or indirect guaranties
in respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clauses (a)
through (e) above, and (g) liabilities in respect of unfunded vested benefits
under plans covered by Title IV of the Employee Retirement Income Security Act
of 1974, as amended.
"Debtor Relief Laws" means the Bankruptcy Code of the United States of
------------------
America and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
of payments, or similar debtor relief laws from time to time in effect affecting
the rights of creditors generally.
"Default Percentage" means, for any Calculation Period, a fraction
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(stated as a percentage) equal to (i) the aggregate outstanding Principal
Balance of all Pledged Contracts which became Defaulted Contracts during such
Calculation Period, divided by (ii) the Contract Pool Principal Balance
outstanding on the last day of the first Calculation Period next preceding such
Calculation Period.
"Defaulted Contract" means any Pledged Contract (a) with any Payment
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delinquent more than 119 days (regardless of any Permitted Deferrals), (b) with
respect to which the Servicer shall have determined in good faith that the
Obligor will not resume making Payments, (c) which has become a Defective
Contract and as to which the Issuer has failed to pay the Release Price pursuant
to Section 3.5, or (d) which has become a Cancelled Contract pursuant to clauses
(a) or (b) of such definition.
"Defaulted Contract Release Date" has the meaning specified in Section
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3.5(b) hereof.
"Defective Contract" means any Pledged Contract which constitutes a
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"Defective Contract" within the meaning of Section 3.5(a).
"Defective Contract Release Date" has the meaning specified in Section
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3.5(a) hereof.
"Delinquent Contract" means a Pledged Contract with any Payment
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delinquent more than 30 and less than or equal to 119 days, other than any
Pledged Contract which is a Defaulted Contract.
"Delinquency Percentage" means, for any Calculation Period, a fraction
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(stated as a percentage) equal to (i) the aggregate outstanding Principal
Balance of all Pledged Contracts which became Delinquent Contracts during such
Calculation Period, divided by (ii) the Contract Pool Principal Balance
outstanding on the last day of the first Calculation Period next preceding such
Calculation Period.
"Determination Date" means the last day of the month immediately
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preceding the month in which the related Payment Date occurs.
"Developments" means each resort or development listed on Schedule 2
------------ ----------
hereto (as such Schedule 2 may be amended from time to time with the written
----------
consent of the Majority Holders in the exercise of their sole discretion and
subject to a Rating Confirmation Letter, in connection with proposed Grants of
Contracts relating to resort developments with respect to which Contracts have
not previously been Granted under this Agreement).
"Duff & ▇▇▇▇▇▇" means Duff & ▇▇▇▇▇▇ Credit Rating Co.
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"Early Amortization Event" means any Determination Date, where:
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(a) The fraction, stated as a percentage, of (i) the sum
of the Default Percentages for the three most
recently concluded Calculation Periods divided by
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(ii) three, exceeds 4.0%;
(b) The fraction, stated as a percentage, of (i) the sum
of the Delinquency Percentages for the three most
recently concluded Calculation Periods divided by
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(ii) three, exceeds 5.0%;
(c) FAC fails to meet any one of the Liquidity Requirements;
or
(d) An Event of Default has occurred and is continuing.
"Early Collections" means, with respect to any Payment Date, the sum of
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(a) all Contract Principal Prepayments and Insurance Proceeds received in the
month of such Payment Date (other than Contract Principal Prepayments or
Insurance Proceeds with respect to (x) Defective Contracts as to which the
Release Price was paid on such Payment Date and (y) Defaulted Contracts as to
which the Release Price was required to be paid on such Payment Date) and (b)
all scheduled Payments received with respect to any Calculation Period
subsequent to the preceding Determination Date.
"Eligible Contract" means, except as otherwise approved by the Majority
-----------------
Holders with prior written notice to the Rating Agency, a Pledged Contract:
(a) (i) Where the related VOI is located in an Eligible
Development, (ii) where the related VOI has been purchased
by the Obligor, (iii) where a certificate of occupancy for
the related VOI has been issued, (iv) where the unit for a
related VOI is complete and ready for occupancy and is not
in need of maintenance or repair, except for ordinary,
routine maintenance and repairs which are not substantial in
nature or cost and where such unit contains no structural
defects materially affecting its value and is in good
condition, (v) where the related VOI Regime is contiguous to
a dedicated public (or private, if subject to an easement
running in favor of all owners of the VOIs constituting such
VOI Regime, and their invitees, affording access to a public
street), physically-open, all-weather street, which allows
for appropriate ingress, egress and parking and is
adequately serviced by public (or private if complying with
all material and applicable local laws, regulations and
ordinances) water and sewer systems and utilities, (vi)
where the related VOI Regime is not in need of maintenance
or repair, except for ordinary, routine maintenance and
repairs which are not substantial in nature or cost and
where such VOI Regime contains no structural defects
materially affecting its value, and (vii) where there is no
legal, judicial or administrative proceeding pending or
threatened for the total or partial condemnation of any VOI
Regime which would have a material adverse effect on the
value of the related VOI Regime or unit;
(b) Where the rights of the Obligor thereunder are subject to
declarations, covenants and restrictions of record affecting
the Development (for the avoidance of doubt, the term
"Eligible Contract" shall not exclude a Contract where the
------------------
rights of the Obligor thereunder have been subjected to the
FairShare Plus Program, solely as a result of having been so
subjected to the FairShare Plus Program);
(c) As to which the Issuer has a valid ownership interest in an
underlying VOI subject only to Permitted Encumbrances and
except as provided in paragraph (d) below;
(d) Where (i) if the related VOI has been deeded to the Obligor
of the related Contract, on the date on which such Contract
was Granted to the Collateral Agent (or, in the event that
the VOI is required to be deeded to such Obligor after the
Contract Grant Date relating to such Contract, within such
number of days after the deed is delivered to such Obligor
as may be required by applicable law or such shorter amount
of time as may be reasonable in the circumstances, but in no
event more than 180 days thereafter): (A) the Issuer has a
valid and enforceable first lien Mortgage on such VOI, (B)
such Mortgage shall be assigned to the Collateral Agent for
the benefit of the Trustee and the Noteholders, pursuant to
the Contract Conveyance Documents, (C) such Mortgage shall
be in the custody of the Custodian in accordance with the
provisions of Section 3.2(v), and (D) if any Mortgage
relating to such Contract 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 VOI has not
been deeded to the Obligor of the related Contract, on the
date on which such Contract was Granted to the Collateral
Agent, the Nominee has legal title to such VOI and the
Issuer has an equitable interest in such VOI underlying the
related Contract, which equitable interest shall be assigned
to the Collateral Agent for the benefit of the Trustee and
the Noteholders pursuant to the Contract Conveyance
Documents;
(e) That was issued in a transaction which complied, and is in
compliance in all material respects, with all requirements
of applicable federal, state and local laws, including those
relating to usury, truth-in-lending, land sales, vacation
time share sales, consumer credit and disclosure laws;
(f) That requires the Obligor to pay the unpaid principal
balance over an original term of not greater than the lesser
of (i) six months prior to the Note Maturity Date and (ii)
120 months;
(g) [reserved];
(h) Where Payments are denominated and payable in United States
dollars and are due from an Obligor either (i) with a U.S.
mailing address, (ii) who is a participant in PAC with a
U.S. Bank or (iii) through a Credit Card Account;
(i) Which is not a Defective Contract or a Defaulted Contract;
(j) Which (i) is not a Delinquent Contract as of the Cut-Off
Date with respect to each Contract Grant Date with respect
to such
Contract and (ii) with respect to any Substitute Contract,
no Payment required to be made thereunder was, (A) more than
once during the 18 month period preceding the Contract Grant
Date with respect to such Substitute Contract, delinquent
for more than 30 days past its due date, or (B) at any time
during such 18 month period, delinquent for more than 60
days; provided that with respect to Substitute Contracts
originated by a VB Subsidiary, for purposes of each
determination pursuant to this subclause (ii) the period
prior to and ending on January 31, 1998 shall be disregarded
(each such determination under this clause (j) being made
without giving effect to the grant of any extension of the
due date of any such payment; including, without limitation,
any Permitted Deferral);
(k) That does not finance the purchase of credit life insurance;
(l) As to which no Payment due dates thereunder occurring after
the Contract Grant Date relating to such Contract shall have
been deferred, except for the grant of an extension which
constitutes a Permitted Deferral;
(m) The underlying ownership interest which is the subject of
such Contract (A) either (i) consists of a Fixed Week, or
(ii) a UDI and (B) in the case of a Fixed Week which has
been converted into an undivided fee simple interest, or
which has become subject to the FairShare Plus Program,
which conversion or other modification does not give rise to
the extension of the maturity of any Payments under such
Contract;
(n) Which has been transferred (w) by FCI to FAC pursuant to the
Operating Agreement, (x) by FAC to the Issuer pursuant to
the Receivables Purchase Agreement, (y) in the case of any
Contract originated by an Originator other than FCI, by such
Originator to FCI, in each case pursuant to the Operating
Agreement and (z) in the case of any Contract owned by FRC
immediately prior to the Contract Grant Date therefor, by
FRC to FAC pursuant to an FRC Document of Assignment; and in
the case of clauses (w), (x) and (y), such transfers
occurring in the ordinary course of business and in the case
of each of clauses (w)-(z), such transfers occurring in
transactions constituting "true sales."
(o) Which was originated by an Originator and is being
consistently serviced (unless otherwise permitted or
directed by the Majority Holders) by FAC, in the ordinary
course of its business, and in accordance with Customary
Practices and Credit Standards and Collection Policies;
(p) Which has not been specifically reserved against by FAC, FCI
or the Issuer and has not been classified by FAC, FCI or the
Issuer as uncollectible or charged off;
(q) As to which the payment obligation of the Obligor is not
subject to any material dispute between the Obligor and any
of the Issuer, the Servicer, FAC and/or FCI;
(r) Which arises from transactions in a jurisdiction where FCI,
and each Subsidiary of FCI which conducts business in such
jurisdiction, is duly qualified to do business in such
jurisdiction, except where the failure to so qualify will
not adversely affect or impair the legality, validity,
binding effect and enforceability of such Pledged Contract;
(s) [reserved]
(t) Which have not been cancelled or terminated by the Obligor
(regardless of whether the Obligor thereof is legally
entitled to do so) or declared ineligible by any of the
Issuer, the Servicer, FAC or FCI, and constitute legal,
valid, binding and enforceable obligations of the Obligors
thereof;
(u) [reserved]
(v) Where the Obligor is not an Affiliate of any FCI, FAC or the
Issuer;
(w) That is fully amortizing pursuant to a required set of
regular monthly payments of principal and interest;
(x) With respect to which a minimum of three Payments have
been made;
(y) That is not an obligation of an Obligor that is bankrupt or
otherwise subject to an Insolvency Proceeding; and
(z) That had an Equity Percentage of 10% (or, in the case of
Contracts the downpayment for which was financed, 15%) or
more at the time of the sale of the related VOI to the
relevant Obligor (including in such total any cash
downpayments and Payments made on any other Contract which
has been "traded in" in connection with the origination of
such Contract and downpayments under such Contract financed
over a period not exceeding six months from the date of
origination of such Contract which have actually been paid
within such six month period).
"Eligible Institution" any depository institution the short term
---------------------
unsecured senior indebtedness of which is rated at least D-1 by the Rating
Agency, if so rated by the Rating Agency, and at least A-1 by S&P and P-1 by
Moody's, and the long term unsecured indebtedness rating of which is rated at
least A by the Rating Agency, if so rated by the Rating Agency, and least A by
S&P and A2 by Moody's.
"Eligible Development" means a Development:
--------------------
(a) Which is set forth on Schedule 2 hereto; and
----------
(b) With respect to which greater than 10% of all Available VOI
Units have been sold to Persons other than FCI or any
Affiliate of FCI.
"Environmental Laws" shall have the meaning specified in Section 3.2(t).
------------------
"Event of Default" means one or more of the events described in Section
----------------
12.1.
"Excess Concentration Reserve" means on any day, an amount equal to the
----------------------------
sum of:
(a) the amount by which the aggregate Principal Balance
of all Eligible Contracts which have an original term
greater than 84 months exceeds 10% of the Contract
Pool Principal Balance on such day;
(b) the amount by which the aggregate Principal Balance
of all Eligible Contracts as to which any Payment due
date relating to such Contract shall then be subject
to a Permitted Deferral exceeds 5% of the Contract
Pool Principal Balance on such day;
(c) the amount by which the aggregate Principal Balance
of all Eligible Contracts for which any Obligor
either (1) is not a United States citizen or (2) does
not have a U.S mailing address exceeds 5% of the
Contract Pool Principal Balance on such day;
(d) the amount of aggregate Principal Balance of Eligible
Contracts, the inclusion of which in the Contract
Pool results in the weighted average of the Contract
Rates for all Eligible Contracts to be less than 14%;
(e) the amount of the aggregate Principal Balance of all
Eligible Contracts arising from a Development which
results in the Contract Pool Principal Balance
attributable to such Development exceeding 25% of the
Contract Pool Principal Balance on such day;
(f) the amount by which (1) the aggregate principal
balance of all Eligible Contracts for which the
Equity Percentage required by clause (z) of the
definition of Eligible Contracts was financed exceeds
(2) 5% of the Contract Pool Principal Balance on such
day;
(g) the aggregate amount for all Obligors with Contracts
related to VOIs by which (1) the Principal Balance on
all Contracts on which a particular Obligor is
obligated exceeds (2) $30,000; and
(h) the amount by which (1) the aggregate Principal
Balance of all Eligible Contracts for the 50 Obligors
with the highest Principal Balance on all Contracts
on which a particular Obligor is obligated exceeds
(2) 15% of the Eligible Contract Pool Principal
Balance on such day.
"Excess Reinvestment Account Amount" means, with respect to any Payment
----------------------------------
Date, the amount, if any, by which the Reinvestment Account Balance, after
giving effect to the transfer made on such Payment Date pursuant to Section
7.3(b) and any payment to be made on such date pursuant to Section 2.4(d),
exceeds $3,603,504.00.
"Equity Percentage" means, at any time, with respect to a Pledged
------------------
Contract, a fraction (stated as a percentage) equal to (i) the excess of (A) the
Sales Price thereof, over (B) the outstanding Principal Balance of such Contract
at such time, divided by (ii) the Sales Price thereof.
"FAC" means Fairfield Acceptance Corporation - Nevada, a Delaware
---
corporation and wholly-owned subsidiary of FCI.
"Facility Documents" means, collectively, this Agreement, the
--------------------
Receivables Purchase Agreement, the Purchase Agreements, the Notes, the
Custodial Agreement, the Lock-Box Agreements, the Title Clearing Agreements, the
Contract Conveyance Documents, the Collateral Agency Agreement, the Remarketing
Agreement, the Administrative Services Agreement, the Tax Sharing Agreement, the
Financing Statements, and all other agreements, documents and instruments
delivered pursuant thereto or in connection therewith.
"FairShare Plus Agreement" means the Amended and Restated FairShare
--------------------------
Vacation Plan Use Management Trust Agreement, effective as of January 1, 1996
among FCI, FMB, and such other subsidiaries and third party developers as may be
named by an amendment or addendum
thereto, as the same may be amended, restated, supplemented or otherwise
modified from time to time thereafter in accordance with the terms of this
Agreement.
"FairShare Plus Program" means the program pursuant to which the
------------------------
occupancy and use of a VOI is assigned to the trust created by the FairShare
Plus Agreement, in exchange for annual symbolic points which are to establish
the location, timing, length of stay and unit type of a vacation; including,
without limitation, systems relating to reservations, account and collection,
disbursement and enforcement of assessments in respect of contributed units.
"FCC" means Fairfield Capital Corporation, a wholly-owned
---
special-purpose finance subsidiary of FAC.
"FCI" means Fairfield Communities, Inc., a Delaware corporation and the
---
parent of FAC.
"FDIC" means the Federal Deposit Insurance Corporation and any
----
successor thereto.
"FFC I" means Fairfield Funding Corporation, a wholly-owned
------
special-purpose finance subsidiary of FAC.
"Financing Statements" means, collectively, the UCC-1 financing
---------------------
statements, and the UCC-2 and UCC-3 amendment, partial release, termination,
extension and assignment statements, to be executed and delivered in connection
with any of the transactions contemplated hereby or any of the other Facility
Documents (including, without limitation, the financing statements identified on
the List of Closing Documents attached as Exhibit "D" to this Agreement).
----------
"Fixed Week" means a VOI consisting of a fixed week in fee simple in a
----------
lodging unit at a Development.
"FMB" means Fairfield Myrtle Beach, Inc., a Delaware corporation.
---
"FRC" means Fairfield Receivables Corporation, a wholly-owned special
---
purpose finance subsidiary of FAC.
"FRC Document of Assignment" means the Document of Sale and Assignment
--------------------------
of Contracts and Assignment of Mortgages in the form attached hereto as Exhibit
-------
"E" transferring all of FRC's right title and interest in and to the Pledged
-
Contracts, the related VOIs, any related Mortgages and certain other property to
FAC.
"Grant" means, as to any asset or property, to pledge, assign and grant
-----
a security interest in such asset or property. A Grant of a Contract and the
related Contract File or any instrument, agreement, account or other 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 the Pledged Contracts, principal and
interest payments and receipts in respect of the Eligible Investments, Insurance
Proceeds, purchase prices and all other moneys payable thereunder
and all income, proceeds, products, rents and profits thereof, to give and
receive notices and other communications, to make waivers or other agreements,
to exercise all such rights and options, to bring proceedings in the name of the
Granting party or otherwise, and generally to do and receive anything which the
Granting party is or may be entitled to do or receive thereunder or with respect
thereto.
"Gross Contract Amortization" means, for any Payment Date, the sum of:
---------------------------
(a) aggregate scheduled principal payments on the Pledged
Contracts (whether or not received) for the applicable Calculation
Period;
(b) Contract Principal Prepayments and Insurance Proceeds
received on the Pledged Contracts during the applicable Calculation
Period;
(c) with respect to Defective Contracts, the aggregate Release
Price therefor (other than the portion thereof constituting accrued
interest and an amount equal to the scheduled principal payments,
whether or not received, included in clause (a) of this definition
with respect to any Payment Date) required to be paid on such Payment
Date and the amount of any principal shortfalls paid by Issuer
pursuant to Section 3.5(a) on such Payment Date; and
(d) with respect to Defaulted Contracts, the aggregate Release
Price therefor (other than the portion thereof constituting accrued
interest and an amount equal to scheduled principal payments, whether
or not received, included in clause (a) of this definition with
respect to any Payment Date) required to be paid on such Payment Date.
"Incumbency Certificate" has the meaning specified in Section 2.2(c).
----------------------
"Insolvency Event" means, with respect to a specified Person, (a) the
-----------------
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Debtor Relief Law now or hereafter in
effect, or the filing of a petition against such Person in an involuntary case
under any applicable Debtor Relief Law now or hereafter in effect, which case
remains unstayed and undismissed within 30 days of such filing, or the
appointing of a receiver, 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 of liquidation of such Person's business; or
(b) the commencement by such Person of a voluntary case under any applicable
Debtor Relief Law now or hereafter in effect, or the consent by such Person to
the entry of an order for relief in an involuntary case under any such Debtor
Relief Law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for such Person or for any substantial part of its property,
or the making by such Person of any general assignment for the benefit of
creditors, or the failure by such Person generally to pay its debts as such
debts become due or the admission by such Person of its inability to pay its
debts generally as they become due.
"Insolvency Proceeding" means any proceeding of the sort described in the
----------------------
definition of Insolvency Event.
"Institutional Investor" means an institutional investor which is a Holder
-----------------------
of Notes and which either (i) has a credit rating of "A" (or the equivalent) or
better by the Rating Agency, S&P or Moody's, (ii) has a net worth of at least
$25,000,000 or (iii) is a party to a Purchase Agreement.
"Insurance Policy" means any policy or contract of insurance.
----------------
"Insurance Proceeds" means proceeds of any Insurance Policy relating to any
------------------
Pledged Contract, or the related VOI, to the extent such proceeds are not either
to be applied to the restoration of any improvements on the related VOI or
released to the Obligor in accordance with Customary Practices, including any
refund of unearned premium.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
---------------------
from time to time.
"Issuer" means Fairfield Funding Corporation, II, a Delaware Corporation
------
and wholly-owned subsidiary of FAC.
"Lien" means any mortgage, 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 Uniform Commercial Code (other than any such
financing statement filed for informational purposes only) or comparable law of
any jurisdiction to evidence any of the foregoing.
"Liquidity Requirements" mean, as of a preceding quarter end, (a) a minimum
----------------------
Consolidated Tangible Net Worth of $47,600,000 and (b) a ratio of Consolidated
Total Liabilities to Consolidated Tangible Net Worth of not more than 4.0 to 1.
"Lockbox Account" means any of the accounts established pursuant to Section
---------------
7.2.
"Lock-Box Agreement" means the agreements, in substantially the form of
-------------------
Exhibit "F" hereto, among the Issuer, the Trustee and the applicable Lock-Box
----------
Bank which agreement sets forth the rights of the Issuer, Trustee and the
applicable Lock-Box Bank with respect to the disposition and application of the
Collections received into the applicable Lock-Box Account, including, without
limitation, the right of the Trustee to direct the Lock-Box Bank to remit all
Collections directly to the Trustee.
"Lock-Box Bank" means any of the commercial banks holding one or more
--------------
lock-box accounts for the purpose of receiving Collections. In each such case, a
"Lock-Box Bank" shall be
an "Eligible Institution," BKB, First Security Bank, National Association (or an
affiliate therof) or such other commercial bank as the Majority Holders may from
time to time consent to in writing.
"Major Credit Card" means any one of Visa, Mastercard or American Express.
-----------------
"Majority Holders" means the Holders of fifty-one percent (51%) or more of
-----------------
Aggregate Note Principal Balance.
"Material Adverse Effect" means, with respect to any event or circumstance,
-----------------------
a material adverse effect on
(a) the business, properties, operations, profits, prospects, or
condition (financial or otherwise) of any of FCI and its Subsidiaries
(taken as a whole), the Seller or the Issuer;
(b) the ability of any of the Servicer, the Issuer, the Seller or
any Originator to perform its respective obligations under any of the
Facility Documents to which it is a party;
(c) the validity or enforceability of, or collectibility of
amounts payable under, this Agreement, the Receivables Purchase
Agreement or any other Facility Document;
(d) the status, existence, perfection or priority of (i) the Lien
granted in favor of the Collateral Agent, (ii) the Issuer's interest
in and title to the Collateral, or (iii) the Seller's interest in the
Transferred Assets, taken as a whole, in each case free of any Lien
(other than the Lien of this Agreement and the Permitted
Encumbrances); or
(e) the value, validity, enforceability or collectibility of the
Notes, the Pledged Contracts, or any of the other Collateral (as
applicable).
"Monthly Excess Servicing Fee" means, in respect of any Calculation Period
----------------------------
(or portion thereof), an amount, if any, equal to (a) the reasonable costs and
expenses (other than legal costs and expenses) incurred by the Servicer during
the Calculation Period (or portion thereof) in carrying out its duties under
this Agreement in an amount up to but not exceeding 1/12th of the product of (i)
1.00% and (ii) the Contract Pool Principal Balance at the commencement of such
Calculation Period (or portion thereof) less (b) the Monthly Servicing Fee for
such Calculation Period (or portion thereof) plus (c) the reasonable legal costs
and expenses incurred by Servicer during the Calculation Period (or portion
thereof) in carrying out its duties under this Agreement.
"Monthly Interest" means, as of any Payment Date, the product of (a) the
-----------------
Note Rate and (b) the Aggregate Note Principal Balance immediately prior to such
Payment Date, for any unpaid period up to and including such Payment Date.
"Monthly Servicing Fee" means, in respect of any Calculation Period (or
----------------------
portion thereof), an amount equal to 1/12th of the product of (a) .75% and (b)
the Contract Pool Principal Balance at the commencement of such Calculation
Period (or portion thereof).
"Mortgage" means any mortgage, deed of trust, purchase money deed of trust
--------
or deed to secure debt granted by an Obligor to the Originator of the Contract
encumbering the related VOI to secure payments or other obligations under such
Contract.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc. and any successor thereto.
-------
"Nominee" means (a) Lawyer's Title Insurance Corporation under the Eighth
-------
Amended and Restated Title Clearing Agreement (Lawyer's), dated as of July 31,
1998, as amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof, by and among FCI, FAC, Issuer, FFC I, FCC,
the Trustee, the Collateral Agent, BKB, First Commercial Trust Company, N.A.,
Capital Markets Assurance Corporation and Lawyers Title Insurance Corporation;
(b) Colorado Land Title Company under the Sixth Amended and Restated Title
Clearing Agreement (Colorado), dated as of July 31, 1998, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, by and among FCI, FAC, Issuer, FFC I, FCC, the Trustee, the
Collateral Agent, BKB, First Commercial Trust Company, N.A., Capital Markets
Assurance Corporation and Colorado Land Title Company; (c) Lawyer's Title
Insurance Corporation under the Fourth Amended and Restated Title Clearing
Agreement (Westwinds), dated as of January 15, 1998, as amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof, by
and among FCI, FAC, FMB, the Collateral Agent, BKB, First Commercial Trust
Company, N.A., Capital Markets Assurance Corporation Resort Funding, Inc. and
Lawyer's Title Insurance Corporation, as amended by a First Amendment thereto,
dated as of July 31, 1998, which among other things adds the Trustee and FFC as
a party thereto; (d) Lawyer's Title Insurance Corporation under the Third
Amended and Restated Nashville Title Clearing Agreement dated as of July 31,
1998, as amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof, by and among FCI, FAC, Issuer, FFC I, FCC,
the Trustee, the Collateral Agent, BKB, Capital Markets Assurance Corporation
and Lawyer's Title Insurance Corporation; (e) Lawyer's Title Insurance
Corporation under the Third Amended and Restated Seawatch Plantation Title
Clearing Agreement, dated as of July 31, 1998, as amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof, by
and among FCI, FAC, FMB, Issuer, FFC I, FCC, the Trustee, the Collateral Agent,
BKB, Capital Markets Assurance Corporation and Lawyers' Title Insurance
Corporation; (f) First American Title Insurance Company under the Fifth Amended
and Restated Supplementary Trust Agreement (Arizona), dated as of July 31, 1998,
as amended, supplemented or otherwise modified from time to time in accordance
with the terms thereof, by and among FCI, FAC, Issuer, FFC I, FCC, the Trustee,
the Collateral Agent, BKB, First Commercial Trust Company, N.A., Capital Markets
Assurance Corporation and First American Title Insurance Company; and (g) such
other nominees as shall be approved in writing by the Collateral Agent pursuant
to the terms of other title clearing agreements (and similar documents,
instruments and agreements) which may be entered into from time to time by each
of FCI, FAC, Issuer and the Collateral Agent (among other Persons) in accordance
with the transactions contemplated by this Agreement and the other Facility
Documents, relating to Contracts and VOIs.
"Nonrecoverable Advance" means any portion of an Advance previously made in
----------------------
respect of a Pledged Contract which has not been previously reimbursed to the
Servicer and which, in the
reasonable good faith judgment of the Servicer, will not be ultimately
recoverable from Payments or other recoveries in respect of such Contract. The
determination by the Servicer that it has made a Nonrecoverable Advance shall be
evidenced by a certificate of a Servicing Officer delivered to the Trustee and
detailing the reasons for such determination.
"Note" means any of the Vacation Ownership Interval Contract Pay-Through
----
Notes, Series 1998-A (6.75%), issued pursuant to this Agreement and
authenticated and delivered by the Trustee, substantially in the form annexed
hereto as Exhibit "G."
----------
"Note Maturity Date" means September 20, 2010.
------------------
"Note Principal Payment" means, for any Payment Date, the Allocation
------------------------
Percentage times Gross Contract Amortization.
"Note Rate" means 6.75% per annum, calculated on the basis of a 360-day
----------
year and twelve 30-day months.
"Note Register" means the register maintained pursuant to Section 9.2,
--------------
providing for the registration of the Notes and transfers and exchanges thereof.
"Noteholder" or "Holder" means the Person in whose name a Note is
------------------------
registered in the Note Register.
"Notice Payment Date" shall have the meaning specified in Section 3.5(a).
-------------------
"Obligor" means, with respect to any Contract, the Person or Persons
-------
obligated to make Payments thereon.
"Officer's Certificate" means a certificate signed by the President, any
----------------------
Senior Vice President or the Treasurer of Issuer or Servicer, as the case may
be.
"Operating Agreement" means that certain Fifth Amended and Restated
--------------------
Operating Agreement, dated as of July 14, 1998, among FCI, FMB, the VB
Subsidiaries and FAC.
"Opinion of Counsel" means a written opinion of independent counsel, in
------------------
form and substance satisfactory to the Majority Holders, which independent
counsel may be regular outside counsel for Issuer, the Servicer or the Trustee.
"Originator" means FCI, FMB or a VB Subsidiary, as the case may be.
----------
"Overcollateralization Percentage" as of any Payment Date means the
---------------------------------
percentage determined by the following calculation: (a) an amount equal to (i)
the Contract Pool Principal Balance as of the opening of business on the first
day of the related Calculation Period, less (ii) the aggregate outstanding
principal balance of any Defaulted Contracts and Defective Contracts contained
in the Contract Pool as of the close of business on the Determination Date
relating to
such Payment Date, and plus (iii) the Reinvestment Account Balance (prior to
giving effect to any payments and transfers made on such date pursuant to
Article VII) divided by (b) an amount equal to (i) the Aggregate Note Principal
----------
Balance less (ii) 50% of the Balance of the Reserve Account (prior to giving
----
effect to any payments and transfers made on such date pursuant to Article VII).
"Overcollateralization Requirement" means an Overcollateralization
------------------------------------
Percentage of (a) 115% during the period between the Closing Date and six months
after termination of the Reinvestment Period, and (b) 120% thereafter.
"Overconcentration Contract" shall have the meaning specified in Section
---------------------------
3.5 (c).
"PAC" means the arrangement whereby an Obligor makes Payments under a
---
Contract via pre-authorized debit in exchange for a 1% per annum reduction in
the Contract interest rate.
"Payment" means the scheduled monthly payment of principal and interest on
-------
a Contract.
"Payment Date" means September 20, 1998 and the 20th day of each calendar
-------------
month thereafter, or, if such 20th day is not a Business Day, the next
succeeding Business Day.
"Permitted Deferral" means the grant of an extension of Payments on a
-------------------
Contract; provided, however, that a "Permitted Deferral shall not include any
-------- -------
extension of Payments
(a) for which the Obligor has been solicited,
(b) which is not a Customary Practice and made in accordance with
Credit Standards and Collections Policies, or
(c) under a Contract with respect to which, subsequent to its Grant to
the Collateral Agent, Payments have been extended (i) on two or more separate
occasions or (ii) for an aggregate period of more than 60 days.
"Permitted Encumbrances" means, with respect to a Contract, the following
-----------------------
Liens against the related VOI: (i) the interest therein of the Obligor and/or
the Nominee, as the case may be, (ii) the Lien of unbilled and unpaid
Assessments, (iii) covenants, conditions and restrictions, rights of way,
easements and other matters of public record, such exceptions appearing of
record being consistent with the normal business practices of FAC and FCI or
specifically disclosed in the applicable land sales registrations filed with the
applicable regulatory agencies, and (iv) other matters to which properties of
the same type as those underlying the Contracts are commonly subject which do
not materially interfere with the benefits of the security intended to be
provided by such Contract.
"Permitted Investments" means (i) securities issued or directly and fully
----------------------
guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities on or before the first Payment Date
after the date of acquisition; (ii) time deposits and certificates of deposit
having maturities on or before the first Payment Date after the date of
acquisition,
maintained with or issued by any commercial bank having capital and surplus in
excess of $500,000,000 and having a short term senior unsecured debt rating of
at least D-1 by the Rating Agency, if so rated by the Rating Agency and at least
A-1 by S&P and P-1 by Moody's; (iii) repurchase agreements having maturities on
or before the first Payment Date after the date of acquisition for underlying
securities of the types described in clauses (i) and (ii) above or clause (iv)
below with any institution having a short term senior unsecured debt rating of
at least D-1 by the Rating Agency, if so rated by the Rating Agency, and at
least A-1 by S&P, and P-1 by Moody's; (iv) commercial paper maturing on or
before the first Payment Date after the date of acquisition and having a short
term senior unsecured debt rating of at least D-1 by the Rating Agency, if so
rated by the Rating Agency and at least A-1 by S&P and P-1 by Moody's; and (v)
money market funds which invest solely in any of the foregoing, including any
such funds in which the Trustee or an Affiliate of the Trustee acts as an
investment advisor or provides other investment related services.
"Person" means any legal person, including any individual, corporation,
------
limited liability company, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, governmental entity or other entity
of similar nature.
"Plan" means an employee benefit plan defined in Section 3(3) of ERISA in
----
respect of which the Seller or any ERISA Affiliate is, or within the immediately
preceding six years was, an "employer" as defined in Section 3(5) of ERISA.
"Plan Insolvency" shall mean, with respect to any Multiemployer Plan, the
---------------
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.
"Pledged Contract" means any Contract in the Contract Pool.
----------------
"POA" means the property owners' association or similar time-share owner
---
body for each VOI Regime or Development or relevant portion of either thereof,
in each case established pursuant to the declarations, articles or similar
charter documents applicable to each such VOI Regime, Development or portion
thereof.
"Points" means, with respect to a VOI unit at any VOI Regime, the number of
------
points of symbolic value assigned to such unit pursuant to the FairShare Plus
Program.
"Post Office Box" means each post office box to which Obligors are directed
---------------
to mail payments in respect of the Pledged Contracts.
"Primary Custodial Documents" has the meaning specified in Section 4.1(n).
---------------------------
"Proceeding" has the meaning specified in Section 12.3.
----------
"Purchase" means a purchase (whether by means of cash payment, delivery of
--------
a note or capital contribution) of Pledged Contracts and related Collateral and
property by Issuer from Seller pursuant to the Receivables Purchase Agreement.
"Purchase Agreements" means the Purchase Agreements dated as of July 31,
--------------------
1998 by and among Issuer, FAC, and the respective initial purchasers of the
Notes.
"Rating Agency" means Duff & ▇▇▇▇▇▇ and its successors in interest.
-------------
"Rating Confirmation Letter" has the meaning specified in Section 5.18(iii)
--------------------------
hereof.
"Receivables Purchase Agreement" means the Receivables Purchase Agreement
-------------------------------
dated as of the date of this Agreement by and among the Originators, FAC and the
Issuer.
"Records" means all copies of Pledged Contracts (not including originals)
-------
and other documents, books, records and other information (including, without
limitation, computer programs, tapes, discs, punch cards, data processing
software and related property and rights) maintained by the Issuer or the
Servicer or any of their respective Affiliates (including, without limitation,
the Originators) with respect to Pledged Contracts, the related Collateral, and
the related Obligors.
"Redemption Date" means a Payment Date, prior to the final Payment Date, on
---------------
which Issuer may redeem the Notes pursuant to Section 15.2.
"Redemption Price" means an amount equal to the Aggregate Note Principal
-----------------
Balance, together with accrued interest thereon at the Note Rate to the
Redemption Date.
"Reinvestment Account" means the account established pursuant to Section
---------------------
7.1(c).
"Reinvestment Period" means the period of approximately 18 months
---------------------
commencing on the Closing Date and ending on the Amortization Commencement Date.
"Release Price" means, with respect to a Pledged Contract to be released
--------------
hereunder, an amount equal to the remaining principal amount outstanding on such
Pledged Contract as of the opening of business on the first day of the month in
which the release is required to be effected hereunder, together with accrued
and unpaid interest thereon at the Contract Rate from the earlier of the last
due date as to which the Obligor paid interest or such first day of the month to
the date on which such release is made.
"Remarketed Contract" means a Contract entered into by an Originator with
--------------------
an Obligor relating to a VOI subject to the terms of Section 3.6 hereof, which
has been remarketed by FCI pursuant to the terms of the Remarketing Agreement.
"Remarketing Agreement" means the Remarketing Agreement, dated as of July
----------------------
31, 1998, among FCI, FAC, the Issuer and the Trustee, in substantially the form
of Exhibit "H" to this Agreement, as the same may be amended, supplemented or
----------
otherwise modified from time to time in accordance with the terms of this
Agreement.
"Reorganization" means, with respect to any Multiemployer Plan, the
--------------
condition that such Plan is in reorganization within the meaning of Section 4241
of ERISA.
"Reportable Event" means any of the events described in Section 4043 of
-----------------
ERISA.
"Reservation System" means the system with respect to VOIs pursuant to
-------------------
which a reservation for a particular location, time, length of stay and unit
type is received, accepted, modified or canceled.
"Reserve Account" means the account established pursuant to Section 7.1(d).
---------------
"Reserve Account Requirement" means at any time, the greater of (i) five
----------------------------
percent (5%) of the Contract Pool Principal Balance, provided, that, if no Event
of Default has occurred and is continuing, the amount of this clause (i) shall
be reduced to three percent (3%) of the Contract Pool Principal Balance from and
after the first anniversary date of the Closing Date and (ii) $1,000,000.
"Responsible Officer" means an officer or employee of the Trustee assigned
--------------------
to and working in the corporate trust department with involvement in the
administration of the responsibilities of the Trustee hereunder.
"S&P" means Standard & Poor's Ratings Services and any successor thereto.
---
"Sales Price" means, with respect to any Pledged Contract, the total
------------
purchase price of the related VOI paid or to be paid by an Obligor.
"Seller" means FAC in its capacity as seller under the Receivables Purchase
------
Agreement.
"Service Transfer" means the transfer specified in Section 13.1.
----------------
"Servicer" means FAC until any Service Transfer hereunder, and thereafter
--------
means the new servicer appointed pursuant to Article XIII.
"Servicer Default" means the defaults specified in Section 13.1.
----------------
"Servicer's Daily Report" has the meaning specified in Section 6.1.
-----------------------
"Servicer's Monthly Report" means the information furnished by the Servicer
-------------------------
to the Trustee pursuant to Section 6.2.
"Servicing Officer" means any officer of the Servicer involved in, or
------------------
responsible for, the administration and servicing of the Contracts whose name
appears on a list of servicing officers furnished to the Trustee by the
Servicer, as such list may be amended from time to time.
"Settlement Statement" means the statement specified in Section 8.2.
--------------------
"Subsidiary" means, 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.
"Substitute Collateral" means as to any Substitute Contract substituted
----------------------
pursuant to Section 2.4, such Contract and the other items required to be
Granted to the Collateral Agent in connection therewith as described in Section
2.4(b), respectively.
"Substitute Contract" means Contracts substituted pursuant to Section 2.4.
-------------------
"Successor Servicer" means the servicer appointed pursuant to Section 13.2.
------------------
"Supplemental Grant" means, with respect to any Substitute Contracts
-------------------
Granted on a Collateral Substitution Date, a supplemental grant substantially in
the form of Exhibit "I" hereto which shall be accompanied by a supplement to the
Contract Schedule listing such Contracts and which shall be deemed to be
incorporated into and made a part of this Agreement.
"Tax Sharing Agreement" means the Tax Sharing Agreement, dated as of July
---------------------
31, 1998, among FAC and the Issuer, in substantially the form of Exhibit "J"
hereto, as the same may be amended, supplemented or otherwise modified from time
to time in accordance with the terms of this Agreement.
"Termination Date" shall have the meaning specified in Section 15.1.
----------------
"Termination Notice" shall have the meaning specified in Section 13.1.
------------------
"Title Clearing Agreement" means the Title Clearing Agreements described
-------------------------
under the definition of "Nominee," or any similar such agreement governing the
obligations of any successor Nominee.
"Transfer Agent and Registrar" means the parties with the responsibilities
----------------------------
specified in Section 9.2(a) and shall initially be the Trustee.
"Transferred Assets" means any and all right, title and interest in, to or
-------------------
under:
(a) the Contracts sold or otherwise transferred, or purported to be
sold or otherwise transferred, to the Issuer under the Receivable Purchase
Agreement, from time to time, including, without limitation, all Payments,
other Collections and other funds received with respect to such Contracts
on or after the applicable Cut-Off Date, and any other monies due or to
become due on or after the applicable Cut-Off Date in respect of any such
Contracts, and any security therefor;
(b) (i) the VOIs relating to such Contracts, and (ii) the
Title Clearing Agreements and the FairShare Plus Program (including,
without limitation, the FairShare Plus Agreement) insofar as they
relate to such VOIs;
(c) any Mortgages relating to such Contracts;
(d) any Insurance Policies relating to such Contracts;
(e) the Contract Files and other Records relating to such
Contracts;
(f) the Contract Conveyance Documents relating to such
Contracts; and
(g) all proceeds of the foregoing property described in
clauses (a) through (f) above, 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
or other disposition of, and or all of the then existing Transferred
Assets, and including all payments under Insurance Policies (whether or
not any of the Seller, any Originator, Issuer, Collateral Agent or
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 other Transferred Assets, and any security
granted or purported to be granted in respect of any of the other
Transferred Assets.
"Trustee" means First Security Bank, National Association, or its successor
-------
in interest, or any successor trustee appointed as herein provided.
"Trustee Fee" means the per annum fee payable to the Trustee pursuant to
------------
the Trustee Fee Letter.
"Trustee Fee Letter" means the schedule of fees attached as Schedule 6
-------------------
hereto, and all amendments thereof and supplements thereto.
"UCC" means the Uniform Commercial Code as amended from time to time, as in
---
effect in any specified jurisdiction.
"UDI" means 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 Development.
"Unpaid Interest" means, as of any Payment Date, the amount, if any, by
----------------
which Monthly Interest in respect of all prior Payment Dates exceeds the amount
paid to Noteholders on such prior Payment Dates pursuant to Section 7.3(g),
together with interest thereon until paid at the Note Rate.
"Unpaid Principal" means, with respect to any Payment Date the amount, if
-----------------
any, by which the sum of (a) the Note Principal Payment in respect of all prior
Payment Dates and (b) the Contract Amortization Shortfall on the Amortization
Commencement Date exceeds the amount paid to Noteholders on such prior Payment
Dates pursuant to Section 7.3(k)(i).
"VB" means Vacation Break U.S.A., Inc., a Florida corporation.
--
"VB Subsidiary" means any of the following Subsidiaries of VB: Sea Gardens
-------------
Beach and Tennis Resort, Inc., a Florida corporation; Vacation Break Resorts,
Inc., a Florida corporation; Vacation Break Resorts at Star Island, Inc., a
Florida corporation; Palm Vacation Group, a Florida general partnership; and
Ocean Ranch Vacation Group, a Florida general partnership.
"VOI" means the underlying ownership interest which is the subject of a
---
Contract, which ownership interest shall consist of (a) either a Fixed Week or
(b) a UDI.
"VOI Regime" means any of the various interval ownership regimes located at
----------
Developments (a list of which shall be provided to the Trustee or Noteholders
upon request), 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 VOIs therein, which VOIs shall in
each case constitute real property under the applicable local law of each of the
jurisdictions in which such regime is located.
SECTION 1.2. Other Definitional Provisions.
-----------------------------
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant thereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.1, and accounting terms partly defined in Section 1.1 to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles. To the extent that the definitions of accounting
terms herein are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained herein shall control.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; and Article, Section,
subsection, Schedule and Exhibit references contained in this Agreement are
references to Articles, Sections, subsections, Schedules and Exhibits in or to
this Agreement unless otherwise specified.
ARTICLE II
GRANT OF COLLATERAL
SECTION 2.1. Grant and Acceptance of Collateral.
----------------------------------
(a) Grant by Issuer. In order to secure the payment and performance in full
---------------
of all the Issuer's obligations to the Trustee and the Noteholders under this
Agreement, each Purchase Agreement, each Contract Conveyance Document and the
Notes, the Issuer hereby Grants to the Collateral Agent all the Issuer's rights,
title, interests, claims and remedies and all other benefits whatsoever now
existing or hereafter arising in, to, under or in respect of all of the
Collateral, to have and to hold all the Collateral unto the Collateral Agent for
the sole and exclusive benefit of the Trustee for the benefit of the Noteholders
absolutely and forever, subject, however, to the terms of this Agreement. The
Collateral Agent and Trustee are hereby specifically empowered to conduct any
business dealings concerning the Collateral with FAC on behalf of the Issuer.
(b) Acceptance by Trustee and Collateral Agent. On the Closing Date, the
-------------------------------------------
Collateral Agent shall deliver a certificate to Issuer substantially in the form
of Exhibit "K" hereto acknowledging the Grant of the Collateral pursuant to the
----------
preceding Section 2.1(a) for the sole and exclusive benefit of the Trustee for
the benefit of the Noteholders. The Trustee and Collateral Agent are directed to
enter into the Collateral Agency Agreement pursuant to which Collateral Agent
will act as agent for the benefit of the Trustee and the Noteholders for the
purpose of maintaining a security interest in the Collateral.
SECTION 2.2. Conditions to Closing.
---------------------
(a) General. On or before the Closing Date, Issuer shall deliver the
-------
following documents to the Trustee and each Noteholder:
(i) An Officer's Certificate of Issuer substantially in the form of
Exhibit "L" hereto.
-----------
(ii) Such opinions of counsel for Issuer and FAC, including opinions
from counsel in each jurisdiction in which Developments are located, as shall be
requested by the Rating Agency or the Noteholders.
(iii) (aa) Copies of resolutions of the Board of Directors of Issuer
approving the execution, delivery and performance of this Agreement, the Notes,
the Receivables Purchase Agreement, the Contract Conveyance Documents and the
transactions contemplated hereunder and thereunder, certified by the secretary
or any assistant secretary of Issuer, (bb) copies of resolutions of the Board of
Directors of FAC approving the execution, delivery and performance of this
Agreement, the Receivables Purchase Agreement and the transactions contemplated
hereunder and thereunder, certified by the secretary or any assistant secretary
of FAC, and (cc) copies of resolutions of the Board of Directors of FCI
approving the execution, delivery and performance of the Receivables Purchase
Agreement and the transactions contemplated thereunder, certified by the
secretary or any assistant secretary of FCI.
(iv) Officially certified recent evidence of due incorporation and
good standing of each of Issuer and the Servicer under the laws of the
jurisdiction of their
incorporation, and evidence of Issuer's and the Servicer's respective good
standing and authority to conduct business under the laws of Nevada.
(v) The documents, certificates, opinions, agreements and instruments
described on the List of Closing Documents attached as Exhibit "D" hereto
-----------
(including, without limitation, the Contract Schedule, giving effect to the
Grant of Contracts contemplated to correspond with the Closing Date each in form
and substance satisfactory to the Noteholders, and in each case where applicable
(x) duly executed by each of the parties thereto, (y) to the extent required in
Exhibit "D" duly filed with the appropriate filing officer or other governmental
----------
authority of the listed jurisdiction, as evidenced by an appropriate
acknowledgment evidencing that such filing is of record, and (z) dated and/or
certified (as applicable) as of a date reasonably acceptable to the Noteholders.
(vi) Evidence that all actions necessary to ensure the deposit in the
Collection Account of all funds received by Servicer from Obligors from and
after the Cut-off Date to the Closing Date have been taken.
(vii) Evidence of deposit in the Reserve Account of the Reserve
Account Requirement.
(viii) A letter from the Rating Agency confirming that the Notes have
been assigned a rating of "A."
(ix) An Officer's Certificate of the Servicer identifying Servicing
Officers in the form of Exhibit "M."
----------
(x) An Officer's Certificate of each of FAC and FCI in the form of
Exhibit "N" stating that each Pledged Contract sold by it has been properly
----------
identified as an asset of Issuer and each related Contract File is complete in
all material respects.
(xi) A certificate from the Custodian to the Issuer, Trustee and
Collateral Agent substantially in the form of Exhibit "O" hereto acknowledging
----------
its possession of the Contracts pursuant to the Custodial Agreement.
(xii) The Overcollateralization Requirement has been satisfied.
(xiii) With respect to all Development owned by FCI and its
Subsidiaries, not less than 70% of all Available VOI Units shall have been sold
to Person other than FCI or any Affiliate of FCI.
(xiv) Any other documents, certificates or opinions required pursuant
to Section 5 of any Purchase Agreement or that the Noteholder(s) may reasonably
request by written notice to Issuer (with a copy to the Trustee).
(b) Information to Trustee; Contract Schedule and Contract Files to
----------------------------------------------------------------------
Trustee. Not later than 12:00 noon, Las Vegas, Nevada time, on the day which is
-------
two Business Days prior to the Closing Date, Issuer or the Servicer shall (i)
transmit to the Trustee and the Noteholders data with respect to the Contracts
to be Granted to the Collateral Agent on the Closing Date in a form acceptable
to the Trustee to enable it to perform its duties hereunder and (ii) deliver or
cause to be delivered to the Trustee the Contract Schedule.
(c) Incumbency Certificates.
-----------------------
(i) Concurrently with the execution and delivery of this Agreement,
each of Issuer and the Servicer shall furnish to the Trustee, and from time to
time hereafter may furnish to the Trustee, a certificate (each an "Incumbency
Certificate") of the Secretary or an Assistant Secretary of such Person,
certifying the incumbency and specimen signatures of their respective officers
or employees (such officers and employees being hereinafter called "Authorized
Representatives") authorized to act, and to give and receive instructions and
notices, on behalf of such Person under this Agreement. Until the Trustee
receives a subsequent Incumbency Certificate from the Issuer or Servicer, the
Trustee shall be entitled to rely on the last such Incumbency Certificate
delivered to the Trustee by such Person for purposes of determining its
Authorized Representatives in the absence of actual knowledge by the Trustee
that such Persons are no longer authorized.
(ii) Concurrently with the execution and delivery of this Agreement,
and from time to time hereafter, the Trustee shall deliver to Issuer and the
Servicer a certificate of the Secretary or an Assistant Secretary certifying the
incumbency and specimen signatures of the officers and employees of the Trustee
authorized to act and to give and receive instructions or notices on behalf of
the Trustee under this Agreement (each such officer or employee being
hereinafter called "Trustee Designee"). Until the Issuer and the Servicer
receive a subsequent certificate, such person may rely on the last such
certificate delivered to it for the purposes of determining Trustee Designees in
the absence of actual knowledge by Issuer or the Servicer that such Persons are
no longer authorized.
(d) Within 30 days following the Closing Date, the Issuer or Servicer
shall deliver to the Nominees and Collateral Agent a notice identifying the
Contracts which have been sold to Issuer pursuant to the Receivables Purchase
Agreement and Granted to the Collateral Agent for the benefit of the Trustee and
Noteholders pursuant to this Agreement
SECTION 2.3. Reserved.
--------
SECTION 2.4. Substitute Contracts from Reinvestment Account.
----------------------------------------------
(a) At least five Business Days prior to each Payment Date during the
Reinvestment Period, the Issuer shall, to the maximum extent Eligible Contracts
are available to it, designate by written notice to the Trustee and Collateral
Agent additional Eligible Contracts having an aggregate unpaid principal balance
as of the preceding Determination Date equal to the aggregate amount then on
deposit in the Reinvestment Account to be substituted by the Issuer for cash in
the Reinvestment Account. Such Substitute Contracts shall be Granted to the
Collateral Agent on the Payment Date that follows the date of the Trustee's
receipt of such notice (each such date, a "Collateral Substitution Date"); The
first Collateral Substitution Date hereunder shall at the sole option of FAC
occur on the first or second succeeding Payment Date following the Closing Date.
Issuer agrees that not later than 12:00 noon, Las Vegas time, on the day that is
two Business Days prior to the Collateral Substitution Date in respect of such
Substitute Contracts, the Issuer or the Servicer shall have (i) transmitted to
the Trustee data with respect to such Substitute Contracts in a form acceptable
to the Trustee to enable it to perform its duties hereunder, (ii) delivered or
caused to be delivered to the Trustee the Contract Schedule and (iii) delivered
or caused to be delivered to the Custodian the Contracts being Granted on such
Collateral Substitution Date. For purposes of this Section 2.4(a), (i) Eligible
Contracts shall be deemed "available" to Issuer notwithstanding the fact that
such Eligible Contracts are owned by, or pledged to secure indebtedness of, FCI
or any of its Subsidiaries (excluding FCC, FFC I and FRC) ("Available
Contracts"), (ii) a Contract will be deemed to be an Eligible Contract if
immediately after giving effect to the transfer thereof by FAC to FFC, such
Contract would satisfy each of the eligibility criteria set forth in clauses
(a)-(z) of the definition of Eligible Contract and (iii) as of each
Determination Date, FAC shall select Available Contracts for sale to the Issuer
on the next succeeding Payment Date pursuant to the Receivables Purchase
Agreement prior to selecting Available Contracts for sale to FRC pursuant to the
terms of FRC's credit facility with EagleFunding Capital Corporation, and FAC
shall cause such Contracts so selected to be sold to Issuer on such Payment
Date.
(b) On each Collateral Substitution Date in respect of any such Substitute
Contracts, the Issuer shall Grant to the Collateral Agent all of the right,
title and interest of the Issuer in and under the Substitute Contracts and
related Transferred Assets.
(c) On or prior to the Collateral Substitution Date in respect of such
Substitute Collateral, the Issuer shall deliver to the Trustee, with a copy to
each requesting Noteholder, the following documents:
(i) a Supplemental Grant, dated as of the Collateral Substitution
Date, Granting the Substitute Collateral;
(ii) the applicable Contract Conveyance Documents with respect to such
Substitute Contracts and Substitute Collateral;
(iii) Evidence that all actions necessary to ensure the deposit in the
Collection Account of all funds received by Servicer from Obligors from and
after the Cut-off Date relating to the Collateral Substitution Date have been
taken;
(iv) Evidence of maintenance in the Reserve Account of the
Reserve Account Requirement;
(v) An Officer's Certificate of each of FAC and FCI in the form
of Exhibit "N" stating that each Pledged Contract sold by it has been properly
----------
identified as an asset of Issuer and each related Contract File is complete in
all material respects;
(vi) a certificate from the Custodian substantially in the form
of Exhibit "O" hereto acknowledging its possession of the Contracts and the
----------
Contract files pursuant to the Custodial Agreement; and
(vii) Such documents of release of security interest in the
Substitute Contract (including UCC partial releases of termination statements)
as may be necessary to allow the Issuer to comply with the representations
contained in Section 3.2(y) of this Agreement.
(viii) Any other documents, certificates or opinions required
pursuant to Section 5 of any Purchase Agreement or that the Noteholder(s) may
reasonably request by written notice to Issuer (with a copy to the Trustee).
(d) Following receipt of the foregoing documents by the Trustee, the
Trustee shall on such Collateral Substitution Date, withdraw funds from the
Reinvestment Account pursuant to Section 7.4 equal to 100% of the outstanding
principal balance of the Substitute Contracts on and as of the applicable
Cut-Off Date, which funds shall be delivered to the Issuer free and clear of the
lien of this Agreement.
(e) Within 30 days following each Collateral Substitution Date, the Issuer
or Servicer shall deliver to the Nominees, the Collateral Agent and the Trustee
a notice identifying the Substitute Contracts which have been sold to Issuer
pursuant to the Receivables Purchase Agreement and Granted to the Collateral
Agent for the benefit of the Trustee and Noteholders pursuant to this Agreement
SECTION 2.5. Authentication and Delivery of Notes. On the Closing Date, if
------------------------------------
the conditions set forth in Section 2.2 of this Agreement have been satisfied
(or have been waived by the Noteholders), Issuer shall execute and deliver to
the Trustee, and the Trustee shall authenticate and deliver to the Noteholders,
Notes in the aggregate principal amount of $49,848,474.90.
SECTION 2.6. Servicer's Record of Contracts. In connection with each Grant
------------------------------
of Contracts hereunder, the Servicer agrees on or prior to the Closing Date or
the relevant Collateral Substitution Date (i) to indicate in its computer files
that such Contract has been Granted by the Issuer pursuant to this Agreement for
the benefit of the Noteholders, and (ii) to deliver or cause to be delivered to
the Trustee the Contract Schedule, which Contract Schedule will be periodically
amended and updated upon the Grant of Substitute Contracts from time to time as
required by the terms of this Agreement. The Contract Schedule or supplement
thereto delivered on the Closing Date or any
Collateral Substitution Date shall be marked as Schedule "1" to this Agreement
and is hereby incorporated into and made a part of this Agreement.
SECTION 2.7. Confidentiality. The Trustee hereby agrees not to disclose to
---------------
any Person any of the names or addresses of the Obligor(s) under any Pledged
Contract or other information contained in the Contract Schedule or the data
transmitted to the Trustee hereunder, except as may be required by law, rule,
regulation or order applicable to it or in response to any subpoena or other
valid legal process or 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 or in connection with the
performance of its duties hereunder or to a Successor Servicer appointed
pursuant to Section 13.2. The Trustee agrees to take such measures as shall be
reasonably requested by Issuer of it to protect and maintain the security and
confidentiality of such information. The Trustee shall use reasonable efforts to
provide Issuer with written notice five days prior to any disclosure pursuant to
this Section 2.7.
SECTION 2.8. Confirmation of Representations and Warranties. Issuer and the
----------------------------------------------
Servicer each agrees that its participation in the transactions contemplated
herein on the Closing Date and on each Collateral Substitution Date shall
constitute, without further act, a confirmation that each of its respective
representations and warranties contained herein are true and correct on and as
of such date as though made on and as of such date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ISSUER
SECTION 3.1. Representations and Warranties Regarding Issuer. Issuer hereby
-----------------------------------------------
represents and warrants to the Trustee, the Collateral Agent and the Noteholders
as of the date of this Agreement and the date of issuance of the Notes as
follows:
(a) Due Incorporation and Good Standing. The Issuer 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
properties and conduct its business as such properties are presently owned and
such business is presently conducted, and to execute, deliver and perform its
obligations under each of the Facility Documents to which it is a party. The
Issuer is duly qualified to do business and is in good standing as a foreign
corporation, 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 Contract unenforceable by the Issuer or would
otherwise have a Material Adverse Effect.
(b) Due Authorization and No Conflict. The execution, delivery and
-------------------------------------
performance by the Issuer of each of the Facility Documents to which it is a
party, and the consummation of each of the transactions contemplated hereby and
thereby, including, without limitation, the acquisition of the Pledged Contracts
under the Receivables Purchase Agreement, and the making of the Grants
contemplated hereunder, have in all cases been duly authorized by the Issuer by
all
necessary corporate action, do not contravene (i) the Issuer's charter or
by-laws, (ii) any law, rule or regulation applicable to the Issuer, (iii) any
contractual restriction contained in any indenture, loan or credit agreement,
lease, mortgage, deed of trust, security agreement, bond, note, or other
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; and no transaction
contemplated hereby requires compliance with any bulk sales act or similar law.
Each of the other Facility Documents to which the Issuer is a party have been
duly executed and delivered on behalf of the Issuer.
(c) Governmental and Other Consents. All approvals, authorizations,
----------------------------------
consents, orders or other actions of, and all registration, qualification,
designation, declaration, notice to or filing with, any Person or of any
governmental body or official required in connection with the execution and
delivery of any of the Facility Documents to which the Issuer is a party, the
consummation of the transactions contemplated hereby or thereby, the performance
of and the compliance with the terms hereof or thereof, have been obtained,
except where the failure so to do would not have a Material Adverse Effect, and
each such required approval, authorization, consent, order, registration,
qualification, designation, declaration, notice or filing is listed on Schedule
--------
3 hereto (or in the case of any Grant on a Collateral Substitution Date
-
hereunder, as set forth in any addendum to such Schedule 3 hereto prepared by
----------
the Issuer and accepted by the Trustee, in the exercise of its sole discretion).
(d) Enforceability of Facility Documents. Each of the Facility Documents to
------------------------------------
which the Issuer is a party have been duly and validly executed and delivered by
the Issuer and constitute the legal, valid and binding obligation of the Issuer,
enforceable in accordance with their respective terms, except as enforceability
may be subject to or limited by Debtor Relief Laws or by general principles of
equity (whether considered in a suit at law or in equity).
(e) No Litigation. There are no proceedings or investigations pending or,
-------------
to the best knowledge of the Issuer, threatened against the Issuer before any
court, regulatory body, administrative agency, or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement or any of the
other Facility Documents, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any of the other Facility
Documents, (iii) seeking any determination or ruling that would adversely affect
the performance by the Issuer of its obligations under this Agreement or any of
the other Facility Documents, (iv) seeking any determination or ruling that
would adversely affect the validity or enforceability of this Agreement or any
of the other Facility Documents, or (v) seeking any determination or ruling
which would be reasonably likely to have a Material Adverse Effect.
(f) Use of Proceeds. All proceeds of the issuance of the Notes shall be
----------------
used by the Issuer exclusively to fund the Purchase from the Seller under the
Receivables Purchase Agreement, or to otherwise fund costs and expenses
permitted to be paid under the terms of the Facility Documents in connection
with the transactions contemplated to take place hereunder on or about the
Closing Date or on any Collateral Substitution Date occurring thereafter.
(g) Perfection of Security Interests in Collateral.
----------------------------------------------
(i) Payment of principal and interest on the Notes and the
prompt observance and performance by the Issuer of all of the terms and
provisions of this Agreement are secured by the Collateral. Upon the issuance of
the Notes, the Collateral Agent, on behalf of the Trustee and the Noteholders,
shall have a legal, valid, perfected and enforceable Lien upon and first
priority security interest in the Collateral, as security for the repayment of
the Notes, which Lien upon and security interest in the Collateral is free and
clear of all Liens (other than any Permitted Encumbrances on the related VOIs);
and
(ii) Upon the issuance of the Notes, the Issuer shall have a
legal, valid and perfected ownership interest in, and good title to, the
Collateral which interest in and title to the Collateral is free and clear of
all Liens (other than the Lien of this Agreement and any Permitted
Encumbrances).
(h) Accuracy of Information. All certificates, reports, financial
------------------------
statements and any other written information furnished by or on behalf of the
Issuer to the Noteholders, the Trustee or the Collateral Agent at any time
pursuant to any requirement of, or in response to any request of any such party
under this Agreement or any other Facility Document or any transaction
contemplated hereby or thereby, have been, and all such certificates, reports,
financial statements and any other written information hereafter furnished by
the Issuer to such parties will be, true and accurate in every respect material
to the transactions contemplated hereby on the date as of which any such
certificate, report, financial statement or similar writing was or will be
delivered, and shall not omit to state any material facts or any facts necessary
to make the statements contained therein not materially misleading.
(i) Governmental Regulations. The Issuer is not (1) an "investment
-------------------------
company" or a company controlled by an `investment company' registered or
required to be registered under or the Investment Company Act of 1940, as
amended, (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, or (3) otherwise subject to any other federal
or state statute or regulation limiting its ability to incur or pay
indebtedness.
(j) 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.
(k) Location of Chief Executive Office and Records. As of the date
-------------------------------------------------
hereof, the principal place of business and chief executive office of the Issuer
and the office of Servicer where the Servicer maintains all of its Records, is
located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, and
neither the Issuer nor Servicer operates its business or maintains the Records
at any other locations and there have been no other such locations outside the
city of Las Vegas, Nevada during the previous six months (except that a
predecessor Corporation which was merged into the Servicer maintained its
principal place of business in Pulaski County, Arkansas until July 13, 1998). At
any time after the Closing Date, upon 30 days' prior written notice to the
Trustee and the Collateral Agent, the Issuer may relocate its principal place of
business and chief executive office, and/or the office where the Issuer
maintains all of its Records, to such other locations within the United States
where all action required by Section 4.2(t) shall have been taken and completed.
(l) Lock-Box Accounts. Except in the case of any Lock-Box Account
------------------
pursuant to which only Collections subject to a PAC or Credit Card Account are
deposited, the Issuer has filed or has caused FAC or FCI to file a standing
delivery order with the United States Postal Service authorizing each Lock-Box
Bank to receive mail delivered to the related Post Office Box. The account
numbers of all Lock-Box Accounts, together with the names, addresses, ABA
numbers and names of contact persons of all the Lock-Box Banks maintaining such
Lock-Box Accounts and the related Post Office Boxes, are specified in Exhibit
-------
"F." From and after the Closing Date, none of FCI, the Seller or the Issuer have
-
any right, title and/or interest in or to any of the Lock-Box Accounts or the
Post-Office Boxes and maintain no lock-box accounts in their own names for the
collection of Payments in respect of Pledged Contracts. The Issuer has no other
lock-box accounts for the collection of Payments in respect of Pledged Contracts
except for the Lock-Box Accounts.
(m) No Trade Names. The Issuer has no trade names, fictitious names,
--------------
assumed names or "doing business as" names, and has not had any such names
during the past four months.
(n) Separate Identity. The Issuer is operated as an entity separate
------------------
from each of FAC, FCI and their respective other Affiliates and (i) has its own
board of directors, (ii) has at least one independent director, who is (A)
reasonably acceptable to the Noteholders, (B) not a direct, indirect or
beneficial stockholder, officer, director, employee, affiliate, associate,
customer or supplier of any of FAC, FCI or any of their respective Affiliates
(other than, in the case of the Issuer, directors thereof) or relatives of any
thereof, nor trustees in bankruptcy for any thereof and (C) an individual with
at least three years' prior experience in transactions involving the
securitization of financial assets, including prior experience as an independent
director for a corporation (other than the Issuer) whose charter documents
require the unanimous consent of all independent directors before such
corporation could file a bankruptcy proceeding or consent to the institution of
bankruptcy proceedings against it, (iii) maintains its assets in a manner which
facilitates their identification and segregation from those of its Affiliates,
and has a separate telephone number from that of each of FAC, FCI and any of
their respective Affiliates, (iv) has all office furniture, fixtures and
equipment necessary to operate its business and such furniture, fixtures and
equipment are either owned by the Issuer or leased pursuant to written leases,
(v) conducts all intercompany transactions with each of FAC, FCI and their
respective Affiliates (other than the Issuer) on terms which the Issuer
reasonably believes to be on an arm's-length basis, (vi) has not guaranteed any
obligation of any of FCI, FAC or any of their respective Affiliates, nor has it
had any of its obligations guaranteed by any such entities and has not held
itself out as responsible for debts of any such entity or for the decisions or
actions with respect to the business and affairs of any such entity, (vii) has
not permitted the commingling or pooling of its funds or other assets with the
assets of any of FCI, FAC or any of their respective Affiliates (other than in
respect of items of payment which are not material in the aggregate and which
have been mistakenly forwarded by an Obligor directly to any of FCI, FAC or any
of their respective Affiliates, or deposited into a lock-box account maintained
for the benefit of BKB under its various credit arrangements with FCI and/or
FAC), (viii) has separate deposit and other bank accounts to which none of FCI,
FAC or any of their respective Affiliates has any access and does not at any
time pool any of its funds with those of FCI, FAC or any of their respective
Affiliates, (ix) maintains financial records which are separate from those of
FCI, FAC or any of their respective Affiliates, (x) compensates all employees,
consultants and agents, or reimburses each of FCI or FAC, as the case may be,
from the Issuer's own funds, for services provided to the Issuer by such
employees, consultants and agents other than the services covered under the
terms of the Administrative Services Agreement, (xi) has agreed with each of FCI
and FAC pursuant to the terms of the Administrative Services Agreement to
allocate among themselves shared corporate operating services and expenses which
are not reflected in the Servicing Fee (including, without limitation, the
services of shared employees, consultants and agents, and reasonable legal and
auditing expenses) on the basis of actual use or the value of services rendered,
and otherwise on a basis reasonably related to actual use or the value of
services rendered, (xii) pays for its own account any incidental administrative
costs and expenses not covered under the terms of the Administrative Services
Agreement, (xiii) conducts all of its business (whether in writing or orally)
solely in its own name, (xiv) is not, directly or indirectly, named as a direct
or contingent beneficiary or loss payee on any insurance policy covering the
property of any of FCI, FAC, or any of their respective Affiliates and has
entered into no agreement to be named as such a beneficiary or payee, (xv)
acknowledges that the Noteholders, the Trustee and the Collateral Agent are
entering into the transactions contemplated by this Agreement and the other
Facility Documents in reliance on the Issuer's identity as a separate legal
entity from each of FCI, FAC and each of their respective Affiliates, and (xvi)
practices and adheres to corporate formalities such as complying with its
By-laws and corporate resolutions and the holding of regularly scheduled board
of directors meetings.
(o) 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. The Issuer does not and has not acted as the
agent for FCI, FAC or any of their Affiliates with respect to any matter.
(p) Facility Documents. The Receivables Purchase Agreement is the only
------------------
agreement pursuant to which the Issuer purchases Contracts, other Transferred
Assets or any other assets of a similar nature. The Issuer has furnished to each
of the Noteholders, the Trustee and the Collateral Agent, true, correct and
complete copies of each Facility Document to which the Issuer is a party, each
of which is in full force and effect. Neither the Issuer nor any Affiliate
thereof is in default of any of its obligations thereunder in any material
respect. Upon each Purchase pursuant to the Receivables Purchase Agreement, the
Issuer shall be the lawful owner of, and have good title to, each Pledged
Contract and all of the Collateral relating thereto, free and clear of any Liens
(other than the Lien of this Agreement and any Permitted Encumbrances on the
related VOIs). All such Pledged Contracts and other Collateral are purchased
without recourse to the Seller except as described in the Receivables Purchase
Agreement. The Purchases by the Issuer under the Receivables Purchase Agreement
constitute valid and true sales and transfers for consideration (and not merely
a pledge of assets for security purposes), enforceable against creditors of each
of FCI and FAC and no Pledged Contracts or related Collateral shall constitute
property of the Seller.
(q) Business. Since its incorporation, the Issuer has conducted no
--------
business other than the execution, delivery and performance of the Facility
Documents contemplated hereby, the Purchase of Eligible Contracts thereunder,
and such other activities as are incidental to the foregoing. The Issuer has
incurred no Debt except that expressly incurred hereunder and under the other
Facility Documents.
(r) Ownership of the Issuer. One hundred percent (100%) of the
--------------------------
outstanding capital stock of the Issuer is directly owned (both beneficially and
of record) by FAC. Such stock is validly issued, fully paid and nonassessable
and there are no options, warrants or other rights to acquire capital stock from
the Issuer.
(s) Taxes. The Issuer has timely filed or caused to be timely filed all
-----
federal, state and local tax returns which are required to be filed by it, and
has paid or caused to be paid all taxes shown to be due and payable on such
returns or on any assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good faith by
appropriate proceedings and with respect to which the Issuer has set aside
adequate reserves on its books in accordance with GAAP and which proceedings
have not given rise to any Lien.
(t) Solvency. The Issuer, both prior to and after giving effect to each
--------
Purchase, (including, without limitation, the Purchase contemplated to take
place in connection with the Closing Date) (i) is not "insolvent" (as such term
is defined in ss.101(32)(A) of 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.
(u) Reporting and Accounting Treatment. For tax and other reporting and
----------------------------------
accounting purposes, and in its books of account and records, the Issuer will
treat the Purchase of each Pledged Contract pursuant to the Receivables Purchase
Agreement as a purchase of, or absolute assignment of, the Seller's full right,
title and ownership interest in each such Pledged Contract, and the Issuer has
not in any other manner accounted for or treated the transactions.
(v) Reserved.
--------
(w) ERISA. There has been no (i) occurrence or expected occurrence of
-----
any Reportable Event with respect to any Plan of the Issuer or any ERISA
Affiliate, or any withdrawal from, or the termination, Reorganization or Plan
Insolvency of any Multiemployer Plan, or (ii) institution of proceedings or the
taking of any other action by PBGC or the Issuer or any ERISA Affiliates or any
such Multiemployer Plan with respect to the withdrawal from, or the termination,
Reorganization or Plan Insolvency of, any such Plan.
(y) No Adverse Selection. No selection procedures adverse to any of the
--------------------
Noteholders, the Trustee or Collateral Agent have been employed by any of the
Originators, the Seller or the Issuer in selecting (i) the Contracts for
inclusion in the Contract Pool on any Contract Grant Date, or (ii) Contracts
granted to the Collateral Agent pursuant to Section 3.5 as "Remarketed
Contracts".
(z) FairShare Plus Program.
----------------------
(i) On any date of determination, for each VOI Regime for
which the constituent VOIs are comprised primarily of UDIs, the ratio of (a) the
total number of Points actually allocated to a VOI Regime pursuant to the Fair
Share Plus Program at such time for the next succeeding twelve month period,
divided by (b) the total number of Points which are allocable to available
------- --
occupiable space in such VOI Regime over such twelve month period does not
exceed a ratio of 1.0 to 1.0.
(ii) On any date of determination, for each owner of a UDI who
is a member of the FairShare Plus Program, the ratio of (a) the number of Points
allocated to such owner in a VOI Regime in return for assigning his VOI to the
FairShare Plus Program trust divided by (b) the total number of Points assigned
------- --
to all UDI owners in such VOI Regime does not exceed the percentage of such
owner's undivided interest in such VOI Regime as described in such owner's
Contract (and related deed).
(aa) No Material Adverse Effect. No event or circumstance having a Material
--------------------------
Adverse Effect has occurred since the Balance Sheet Date.
(bb) Servicer Default. No Servicer Default has occurred and is continuing.
----------------
(cc) POA Reserves. The capital reserves and maintenance fee levels of the
------------
POAs related to each VOI Regime are adequate in light of the operating
requirements of such POAs.
The representations and warranties of the Issuer set forth in this
Section 3.1 shall be deemed to be remade, without further act by any Person, on
and as of each Contract Grant Date. The representations and warranties set forth
in this Section 3.1 shall survive the Grant of the Pledged Contracts by the
Issuer to the Collateral Agent.
SECTION 3.2. Representations and Warranties Regarding Each Pledged Contract
--------------------------------------------------------------
in the Contract Pool. The Issuer represents and warrants to each of the
----------------------
Noteholders, the Trustee and the Collateral Agent, as to each Pledged Contract,
that:
(a) Eligibility. Such Contract is an Eligible Contract.
-----------
(b) Contract Schedule. The information set forth in the Contract
------------------
Schedule is true and correct with respect to such Contract.
(c) No Waivers. The terms of such Contract have not been waived,
-----------
altered, modified, or extended in any respect, without the prior written consent
of the Majority Holders, other than (i) extensions which are Permitted
Deferrals, (ii) modifications entered into in accordance with Customary
Practices and Credit Standards and Collections Policies, which do not reduce the
amount or extend the maturity of required Payments and (iii) modifications in
the applicability of a PAC (which modification will, among other things, result
in a change in the relevant Contract Rate).
(d) Binding Obligation. Such Contract is the legal, valid and binding
-------------------
obligation of the Obligor thereunder and is enforceable against the Obligor in
accordance with its terms, except as such enforceability may be limited by
Debtor Relief Laws, or by general principles of equity (whether considered in a
suit at law or in equity).
(e) No Defenses. Such Contract is not subject to any right of
------------
rescission, setoff, counterclaim or defense, including, without limitation, the
defense of usury, the operations of any of the terms of such Contract or the
exercise of any right thereunder will not render such Contract unenforceable in
whole or in a manner materially affecting the value or collectibility of such
Contract, or subject to any right of rescission, setoff, counterclaim or
defense, including the defense of usury, and no such right of rescission,
setoff, counterclaim or defense has been asserted with respect thereto.
(f) No Excess Concentration Reserve. The inclusion of the Contract in
---------------------------------
the Contract Pool will not result in an Excess Concentration Reserve.
(g) Lawful Assignment. Such Contract was not originated in and is not
------------------
subject to the laws of any jurisdiction the laws of which would make the
transfer of the Contract under the Receivables Purchase Agreement or the Grant
of such Contract under this Agreement unlawful.
(h) Compliance with Law. The requirements of any federal, state or
--------------------
local law (including, without limitation, usury, truth in lending and equal
credit opportunity laws) applicable to such Contract have been complied with.
The VOI Regime related to such Contract is in compliance with any and all
applicable zoning and building laws and regulations and any other laws and
regulations relating to the use and occupancy of such VOI Regime, except where
such noncompliance would not have a Material Adverse Effect. None of the Issuer,
FAC or FCI has received notice of any material violation of any legal
requirements applicable to such VOI Regime, except where such noncompliance
would not have a Material Adverse Effect. The VOI Regime related to such
Contract complies with all applicable state statutes including, without
limitation, condominium statutes, time share statutes, HUD filings relating to
interstate land sales (if applicable), and the requirements of any governmental
authority or local authority having
jurisdiction and constitutes a valid and conforming condominium and time share
regime under the laws of the State where the related Development is located,
except where such noncompliance would not have a Material Adverse Effect.
(i) Contract in Force. Such Contract is in full force and effect and has
-----------------
not been satisfied in whole or in part, or rescinded.
(j) No Subordination. Such Contract has not been subordinated, satisfied or
----------------
rescinded in whole or in part.
(k) Capacity of Parties. All parties to such Contract had capacity to
--------------------
execute the Contract.
(l) Good Title. The Issuer has good and marketable title to such Contract
----------
free and clear of any Lien (other than the Lien of this Agreement). The Issuer
has not sold, assigned or pledged such Contract to any Person other than the
Collateral Agent. As to the related VOI, either, (i) a generally accepted form
of title insurance policy, insuring the fee estate ownership of the real
property subject to the VOI Regime by the Persons owning the respective
interests therein, and their successors and assigns was effective at the time an
Originator acquired the VOI at the time of registration of the VOI Regime, is
valid and remains in full force and effect, and was issued by a title insurer
qualified to do business in the applicable jurisdiction; or (ii) at the time an
Originator acquired the VOI or at the time of registration of the VOI Regime,
such fee estate ownership had been verified by an attorney's opinion of title,
the form and substance of which is of a type acceptable for purposes of
registration of sales of VOI, and which may be relied upon by Persons
subsequently owning the respective interests therein, and their successors and
assigns. The Issuer has not sold, assigned or pledged its interest in the
related VOI to any Person other than the Collateral Agent, and the Issuer's
right, title and interest therein is free of any Liens (other than any of the
Lien of this Agreement or any Permitted Encumbrances).
(m) No Defaults. As of the relevant Cut-Off Date, there is no default,
-----------
breach, violation or event permitting acceleration existing under the Contract
and no event which, with the giving of notice or the expiration of any grace or
cure period or both, would constitute such a default, breach, violation or event
permitting acceleration under such Contract (after giving effect to any
Permitted Deferrals). None of the Issuer, FAC or FCI has waived any such
default, breach, violation or event permitting acceleration without obtaining
the prior written consent of the Majority Holders.
(n) Equal Installments. Such Contract has a fixed rate of interest and
-------------------
provides for payments which fully amortize the loan over its term. Interest
accrues on such Contract on an actuarial (i.e., pre-computed) basis utilizing a
simple interest calculation.
(o) Original Contracts. All original executed copies of such Contract (or
-------------------
if the Contract and promissory note are contained in separate documents, an
original of the promissory note) are in the custody of the Custodian, except to
the extent otherwise permitted pursuant to Section 3.2(v) hereof.
(p) Reserved.
--------
(q) Contract Form/Governing Law. Such Contract was executed in
-------------------------------
substantially the form of one of the forms of Contract attached hereto as
Exhibit "Q" (as such Exhibit "Q" may be amended from time to time with the
----------- -----------
consent of the Majority Holders in the exercise of their reasonable discretion
in connection with the Grant of Contracts originated at a Development with
respect to which Contracts have not previously been Granted to the Collateral
Agent hereunder), except for changes required by applicable law and certain
other modifications which do not, individually or in the aggregate, affect the
enforceability or collectibility of such Contract. In addition, such Contract
was originated in and is governed by the laws of the State in which the related
Development is located, and each such State is a jurisdiction as to the law of
which the Issuer shall have, on or before the relevant Contract Grant Date,
delivered to the Trustee and the Noteholders an Opinion of Counsel regarding the
enforceability of the form or forms of Contract used in such jurisdiction and
such other matters as the Majority Holders shall reasonably request, and such
Contract is substantially in the form of one of the forms of Contract attached
as an exhibit to such opinion.
(r) No Event of Default. No Event of Default, or any event which, with the
-------------------
passage of time or the giving of notice, or both, will give rise to an Event of
Default, will occur as a result of the Grant of such Contract by the Issuer to
the Collateral Agent on the applicable date of Grant.
(s) Interest in Real Property. The VOI underlying such Contract is an
--------------------------
interest in real property consisting of either a Fixed Week or UDI and in each
case such VOI has been deeded to the Nominee pursuant to the terms of one of the
Title Clearing Agreements, or has been deeded to the relevant Obligor in
accordance with the requirements of the applicable Contract or applicable law.
(t) Environmental Compliance. Each VOI Regime related to a Pledged Contract
------------------------
is now, and at all times during FCI's (or any Affiliate of FCI's) ownership
thereof has been free of contamination from any substance, material or waste
identified as toxic or hazardous according to any federal, state or local law,
rule, regulation or order governing, imposing standards of conduct with respect
to, or regulating in any way the discharge, generation, removal, transportation,
storage or handling of toxic or hazardous substances, materials or waste or air
or water pollution (hereinafter referred to as "Environmental Laws"), including,
------------------
without limitation, any PCB, radioactive substance, methane, asbestos, volatile
hydrocarbons, petroleum products or wastes, industrial solvents or any other
material or substance which now or hereafter may cause or constitute a health,
safety or other environmental hazard to any person or property (any such
substance together with any substance, material or waste identified as toxic or
hazardous under any Environmental Law now in effect or hereinafter enacted shall
be referred to herein as "Contaminants"). Neither FCI nor any Affiliate of FCI
------------
has caused or suffered to occur any discharge, spill, uncontrolled loss or
seepage of any Contaminant onto any property comprising or adjoining any of the
VOI Regimes, and neither FCI nor any Affiliate of FCI nor any Obligor or
occupant of all or part of any of the VOI Regimes is now or has been involved in
operations at
any VOI Regime which could lead to liability for FCI, the Issuer, any other
Affiliate of FCI or any other owner of any VOI Regime or the imposition of a
lien on such VOI Regime under any Environmental Law. No practice, procedure or
policy employed by FCI (or any Affiliate of FCI) in the case of POAs in which
FCI acts as the manager, and to the best knowledge of Issuer, by the manager of
the POAs, in the case POAs managed by parties unaffiliated with FCI, violates
any Environmental Law which, if enforced, would reasonably be expected to (i)
have a material adverse effect on such POA or the ability of such POA to do
business, (b) have a material adverse effect on the financial condition of the
POA or (c) constitute grounds for the revocation of any license, charter, permit
or registration which is material to the conduct of the business of the POA.
Except as set forth on Schedule 5 hereto, all property owned, managed or
----------
controlled by FCI (or any Affiliate of FCI) and located within a Development is
now, and has at all times during FCI's (or any Affiliate of FCI's) ownership,
management or control thereof been free of contamination from any Contaminant.
Except as set forth on Schedule 5 hereto, neither FCI nor any Affiliate of FCI
----------
has caused or suffered to occur any discharge, spill, uncontrolled loss or
seepage of any Contaminant onto any property comprising or adjoining any of the
Developments, and neither FCI nor any Affiliate of FCI nor any Obligor or
occupant of all or part of any Development is now or has been involved in
operations at any Development which could lead to liability for FCI, the Issuer,
any other Affiliate of FCI or any other owner of any Development or the
imposition of a lien on such Development under any Environmental Law. None of
the matters set forth on Schedule 5 will have a Material Adverse Effect. Each
----------
Development, and the present use thereof, does not violate any Environmental
Law, so as to materially adversely affect the value or use of such Development
or the performance by the POAs of their respective obligations under their
applicable declarations, articles or similar charter documents. There is no
condition presently existing, and to the best knowledge of Issuer, no event has
occurred or failed to occur concerning the Development relating to any
Contaminants or compliance with any Environmental Laws which would reasonably be
expected to materially adversely affect the present use of such Development or
the financial condition or business operations of the Development or which would
have a Material Adverse Effect.
(u) Tax Liens. All taxes (including, without limitation, mortgage and
---------
transfer taxes) applicable to such Contract and the related VOI have been paid.
There are no delinquent tax liens in respect of the VOI underlying such
Contract.
(v) Contract Files. The related Contract File contains:
--------------
(i) other than in the case of Contracts described in clause (ii)
below, at least one original of each Pledged Contract (or if the Contract and
promissory note are contained in separate documents, an original of the
promissory note); except that this requirement shall not apply in the case of an
original Contract which has been removed from the Contract File for the
performance of collection services and other routine servicing requirements in
accordance with Section 4.1(n), and
(ii) in the case of any Contracts relating to VOIs located in
Developments in North Carolina or South Carolina, where two originals of a
Pledged Contract have been executed, one such original Contract, and the
original Contract not in the file contains the following legend (whether by
stamp or otherwise) on the face thereof;
"THIS COPY IS ONE OF TWO ORIGINALS, AND WAS EXECUTED SOLELY FOR
RECORDATION, TO THE EXTENT THAT POSSESSION OF THIS CONTRACT IS REQUIRED TO
TRANSFER OR PERFECT A TRANSFER OF ANY INTEREST IN OR TO THIS CONTRACT,
POSSESSION OF THE OTHER ORIGINAL HEREOF IS REQUIRED", and
(iii) in the case of any Contracts in respect of which the related VOI
has been deeded out to the relevant Obligor:
(A) a copy of the deed for the related VOI, and
(B) the original of any related recorded or unrecorded Mortgage (or a
copy of such recorded Mortgage, if the original of the recorded Mortgage is
unavailable) (other than in the case of any Contract with respect to which
the relevant Mortgage and/or deed is outside the Contract File for purposes
of recording such Mortgage in the relevant local real property recording
office, but only to the extent that: (x) such Mortgage and copy of deed
shall not have been outside of the relevant Contract File for such purposes
for more than (1) 180 days from the relevant Contract Grant Date (in the
case of Contracts relating to VOIs located in the State of Florida), and
(2) 180 days from the date on which the related VOI is required to be
deeded to an Obligor (in the case of Contracts relating to VOIs located in
any Development in any other State), and (y) unless and to the extent
waived by the Majority Holders in writing, the Servicer shall retain in its
files (and provide copies of same to the Trustee or Noteholders upon
request) certificates from FCI's applicable title agents in Florida to the
effect that the Mortgage in question has been delivered for purposes of
recordation to the appropriate local real property recording office (in the
case of Contracts relating to VOIs located in the State of Florida).
(w) Lock-Box Accounts. The Obligor of such Contract either
-----------------
(1) shall have been instructed, pursuant to the Servicer's routine
distribution of a periodic statement to such Obligor next succeeding
(A) the Closing Date or any Collateral Substitution Date (as
applicable), or
(B) the day on which a PAC or Credit Card Account ceased to apply to
such Contract, in the case of a Pledged Contract formerly subject to a PAC
or Credit Card Account,
but in no event later than the then next succeeding due date for Payment under
the related Pledged Contract, to remit Payments thereunder to a Post Office Box
for credit to a Lock-Box
Account, or directly to a Lock-Box Account, in each case maintained at a
Lock-Box Bank pursuant to the terms of a Lock-Box Agreement substantially in the
form of Exhibit "F" hereto, or
----------
(2) has entered into a PAC or Credit Card Account, pursuant to which a
deposit account of such Obligor is made subject to a pre-authorized debit in
respect of Payments as they become due and payable, and the Issuer has taken,
and has caused each of the Servicer, a Lock-Box 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 Lock-Box Account.
(x) [reserved]
(y) Perfection of Security Interest. On and after the relevant
----------------------------------
Contract Grant Date:
(i) The Issuer shall have a legal, valid and perfected ownership
interest in, and good and marketable title to, the Contract and the other
Transferred Assets, which interest in and title to the Contract is free and
clear of all Liens (other than the Lien in favor of the Collateral Agent and
Permitted Encumbrances); and
(ii) The Collateral Agent shall have a legal, valid, perfected
and enforceable Lien upon and first priority security interest in, to and under
such Contract and the other Transferred Assets, which Lien upon and security
interest in, to and under such Contract is free and clear of all Liens (other
than the Lien in favor of the Collateral Agent and Permitted Encumbrances).
(z) Recordation of Assignments. The Servicer has caused all
-----------------------------
Assignments of Mortgages relating to Mortgages Granted to the Collateral Agent
on each Contract Grant Date to be recorded or delivered for recordation in
accordance with Section 3.2(v), simultaneously with the related Mortgage to the
proper office in the State where the related VOI is located; provided that such
recordation of the Assignment of Mortgage shall only have occurred to the extent
that such VOI is located in Developments in a State other than Florida.
All of the representations and warranties of the Issuer set forth in
this Section 3.2 shall be deemed to be made, without further act by any Person,
on and as of the applicable Cut-Off Date with respect to each Contract Grant
Date (including, without limitation, the Contract Grant Date expected to
correspond to the Closing Date), with respect to each Contract Granted by the
Issuer on and as of each such date. In addition, each of the representations and
warranties of the Issuer set forth in the following subsections of this Section
3.2 shall be deemed to be remade, without further act by any Person, on and as
of each Business Day hereunder occurring prior to the Termination Date:
subsections (a) (but only with respect to the eligibility criteria set forth in
the definition of "Eligible Contract" at clauses (a), (b), (c), (d), (g), (h),
(l), (m), (o), (q), (r), (t), (v) and (w) thereof), (c), (d), (e), (h), (i),
(j), (l), (n), (o), (t), (u), (v), (w), (x), (y) and (z). All of the
representations and warranties set forth in this Section 3.2 shall survive the
Grant of the respective Contracts by the Issuer to the Collateral Agent.
SECTION 3.3 Representations and Warranties Regarding the Contract
----------------------------------------------------------
Files. The Issuer represents and warrants to each of the Collateral Agent, the
-----
Trustee and the Noteholders, as to each Pledged Contract, that:
(a) Possession. On or prior to each Contract Grant Date, the Custodian
----------
has possession of each original Pledged Contract (or if the Contract and
promissory note are contained in separate documents, an original of the
promissory note) and the related Contract File, and has acknowledged receipt of
such Pledged Contract, and its undertaking to act as bailee for purposes of
perfection of the Collateral Agent's interests in such original Pledged Contract
and the related Contract File (provided, however, that the fact that any of the
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Contracts not required to be in its respective Contract File pursuant to Section
4.02(v) hereof is not in the possession of the Custodian in its respective
Contract File does not constitute a breach of this representation).
(b) Marking Records. On or before each Contract Grant Date, both the
----------------
Issuer and FAC shall have caused the portions of the computer files relating to
the Pledged Contracts Granted on such date to the Collateral Agent to be clearly
and unambiguously marked to indicate that such Pledged Contracts constitute part
of the Collateral Granted by the Issuer in accordance with the terms of this
Agreement. In addition, prior to each such Grant, each such Pledged Contract
shall have been clearly and unambiguously stamped or marked as follows:
"This Contract is part of the Collateral under, and a first priority
security interest herein is held by BankBoston, N.A. ("BKB") as
collateral agent for each of the secured parties under, the Collateral
Agency Agreement dated as of January 15, 1998 among BKB and each of the
secured parties named therein."
The representations and warranties of the Issuer set forth in this
Section 3.3 shall be deemed to be remade, without further act by any Person, on
and as of each Contract Grant Date with respect to each Contract Granted by the
Issuer on and as of each such date. The representations and warranties set forth
in this Section 3.3 shall survive any Grant of the respective Contracts by the
Issuer.
SECTION 3.4. Rights of Obligors and Release of Contract Files.
------------------------------------------------
(a) Notwithstanding any other provision contained in this Agreement,
including the Collateral Agent's, Trustee's and Noteholders' remedies pursuant
hereto and pursuant to the Collateral Agency Agreement, the rights of any
Obligor to any VOI subject to a Pledged Contract shall, so long as such Obligor
is not in default thereunder, be superior to those of the Collateral Agent, the
Trustee and the Noteholders, and neither shall the Collateral Agent, the Trustee
nor the Noteholders, so long as such Obligor is not in default thereunder,
interfere with such Obligor's use and enjoyment of the VOI subject thereto.
(b) If pursuant to the terms of this Agreement, the Collateral Agent,
the Trustee or the Noteholders shall acquire through foreclosure the Issuer's
interest in any portion of the VOI subject to a Pledged Contract, the Collateral
Agent, the Trustee and the Noteholders hereby
specifically agree to release or cause to be released any VOI from any Lien of
the Collateral Agent, the Trustee and the Noteholders upon the request of the
Obligor (including such Obligor's heirs, successors and assigns) to the Pledged
Contract, 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 Contract, and each of the Collateral Agent, the Trustee and the
Noteholders hereby consent 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
Contract 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 Collateral Agent by a certificate substantially in the
form attached hereto as Exhibit R (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 it from the Custodian of the related Contract Files. Upon
receipt of such certificate and request or at such earlier time as is required
by applicable law, the Collateral Agent (a) shall be deemed, without the
necessity of taking any action, to have approved release by the Custodian of the
Contract 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 VOI 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 VOI subject to deeding (in the case of any Pledged Contract which has been
paid in full). If a deed has been delivered to an Obligor and such Obligor's
obligations and responsibilities are not fully discharged, the Servicer shall
cause such Obligor to execute a Mortgage in favor of FCI encumbering the related
VOI, each of FCI, FAC and the Issuer shall cause such Mortgage to be promptly
collaterally assigned to the Collateral Agent pursuant to one or more
Assignments of Mortgage (each such Mortgage constituting additional Collateral
granted by the Issuer hereunder), and the Servicer shall, promptly following the
execution of each such Assignment of Mortgage cause each such Assignment of
Mortgage to be recorded in all proper offices; provided that no such Assignment
of Mortgage shall be required to be filed with respect to VOIs located in
Developments in the State of Florida. The Servicer shall cause each Contract
File or any document therein so released which relates to a Pledged Contract 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 need
therefor by the Servicer no longer exists.
SECTION 3.5. Release of Defective Contracts, Defaulted Contracts and
---------------------------------------------------------
Overconcentration Contracts.
---------------------------
(a) Subject to Section 3.5(b), Issuer shall
(i) cause the release of any Pledged Contract from the Lien of
this Agreement by paying the Trustee the Release Price therefor on the first
Payment Date (the "Notice Payment Date") occurring in the month following the
month in which Issuer has become aware, or has
received written notice from the Trustee or any Noteholder, of any uncured
breach of a representation or warranty of Issuer in Sections 3.2 or 3.3 in
respect of such Pledged Contract (each such Pledged Contract, a "Defective
Contract" and each such date, a "Defective Contract Release Date"); and
(ii) cause either of FAC or FCI to, simultaneously with such
release, satisfy its corresponding repurchase obligations under the Receivables
Purchase Agreement in respect of such Defective Contract;
provided, however, that with respect to any Pledged Contract incorrectly
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described on the Contract Schedule only with respect to its Principal Balance as
of the initial Cut-Off Date, which the Issuer would otherwise be required to
effect the release of pursuant to this Section 3.5(a), the Issuer may, in lieu
of effecting the release of such Pledged Contract, deposit in the Collection
Account on the Business Day next preceding the Notice Payment Date, cash in an
amount sufficient to cure such deficiency or discrepancy. The following defects
with respect to documents in any Contract File, to the extent they do not impair
the validity or enforceability of the subject document under applicable law,
shall not be deemed to constitute a breach of the representations and warranties
contained in Section 3.2, misspellings of or omissions of initials in names;
name changes from divorce or marriage; discrepancies as to payment dates in a
Contract of no more than 30 days; discrepancies as to Payments of no more than
$5.00; discrepancies as to origination dates of not more than 30 days; inclusion
of additional parties other than the primary Obligor not listed in the
Servicer's records or in the Contract Schedule and non-substantive typographical
errors and other non-substantive minor errors of a clerical or administrative
nature.
(b) Subject to Section 3.5(d), in the event that any Pledged Contract
becomes a Defaulted Contract (other than by operation of clause (c) of the
definition of "Defaulted Contract) at any time after the Contract Grant Date for
such Contract, the Issuer shall, on the first Payment Date on which such Pledged
Contract shall constitute a Defaulted Contract, cause such Defaulted Contract to
be released from the Lien of this Agreement by paying the Trustee the Release
Price therefor on such Payment Date (a "Defaulted Contract Release Date").
-------------------------------
(c) Subject to Section 3.5(d), in the event that, as of any
--------------
Determination Date occurring during the Reinvestment Period, the Excess
Concentration Reserve is greater than zero, the Issuer shall either (i)(A) prior
to the next succeeding Payment Date, identify (by reference to the Contract
Schedule) or cause the Servicer to identify to the Trustee and Collateral Agent,
in writing, Pledged Contracts of a type or types the inclusion of which in the
Contract Pool has given rise to the existence of such Excess Concentration
Reserve (which Contracts shall consist of Pledged Contracts which are identified
by the Issuer on a basis which is not adverse to any of the Trustee, the
Collateral Agent or the Noteholders), and in an aggregate Principal Balance
approximately equal to (but not greater than) the amount of such Excess
Concentration Reserve (collectively, the "Overconcentration Contracts"), and (B)
---------------------------
cause such Overconcentration Contracts to be released from the Lien of this
Agreement by paying to the Trustee the Release Price therefor on such Payment
Date (an "Overconcentration Contract Release Date") or (ii) on the next Payment
----------------------------------------
Date, purchase from FAC pursuant to the terms and provisions of Section 2.4
Substitute Contracts, which shall constitute Eligible Contracts, of a type and
in an amount necessary to reduce such Excess Concentration Reserve to zero.
(d) Promptly after the occurrence of a Payment Date constituting a
Defective Contract Release Date, Defaulted Contract Release Date or
Overconcentration Contract Release Date, the Servicer shall delete the relevant
Defective Contracts, Defaulted Contracts or Overconcentration Contracts from the
Contract Schedule and shall notify the Collateral Agent and Custodian to do the
same with respect to the records and any computer files maintained by it;
provided, however that in all events it shall be a condition precedent to the
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effectiveness of the release of any Pledged Contract pursuant to Section 3.5(a),
(b) or (c) that the Issuer shall have delivered or caused the Servicer to have
delivered to the Trustee, on the Business Day next succeeding such Payment Date
a certificate substantially in the form of Exhibit "R" hereto to the effect that
-----------
all amounts required to be paid to the Trustee pursuant to Section 3.5(a), (b)
and (c) have been paid in full in cash. In connection with the release of a
Defective Contract, Defaulted Contract or Overconcentration Contract, and the
related Collateral hereunder, the Collateral Agent hereby appoints the Servicer
as its agent and attorney-in-fact (which appointment has been evidenced by
various recorded powers of attorney which pursuant to their terms are revocable
at the option of the Collateral Agent upon written notice to the Servicer) to
execute all documents necessary to evidence such release.
(e) In connection with each release pursuant to Section 3.5(a), (b) or
(c), and upon the satisfaction of the conditions precedent set forth in Section
3.5(d), the Trustee and Collateral Agent shall automatically and without further
action be deemed to consent to the transfer and assignment by Issuer to
Servicer, without recourse, representation or warranty, of all the right, title
and interest of Issuer in and to any Defective Contract, Defaulted Contract or
Overconcentration Contract, or any other Collateral released pursuant to the
terms thereof (including the interest in the underlying VOI), and all monies
thereafter due or to become due with respect thereto, and all proceeds thereof,
and following such transfer and assignment by Issuer, Collateral Agent shall be
deemed to have such interest in the released Collateral as is set forth in the
Collateral Agency Agreement. The Collateral Agent shall execute such documents
and instruments of transfer or assignment and take such other actions as shall
reasonably be requested by the Issuer to effect the conveyance of such released
Collateral pursuant to this subsection.
(f) The obligation of the Issuer to effect the release of any Defective
Contract shall constitute the sole remedy hereunder respecting any breach of the
representations and warranties set forth in Sections 3.2 or 3.3 available
hereunder to the Trustee and Collateral Agent on behalf of the Noteholders;
provided, however, that this provision shall not limit in any way any rights of
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any of the Trustee, Collateral Agent or Noteholders against any other Person or
entity.
SECTION 3.6. Remarketing Obligations.
-----------------------
(a) FCI's Obligations. In the event that either (i) the Issuer fails to
-----------------
effect, within one Business Day after a Payment Date prior to which the Issuer
or the Servicer has become aware (or otherwise received written notice) that any
Pledged Contract has become a Defective
Contract or a Defaulted Contract, the release of such Pledged Contract from the
Lien of this Agreement pursuant to the terms of any of Sections 3.5(a) or (b),
or (ii) a Contract becomes a Defaulted Contract, Defective Contract at any time
after the occurrence of an Event of Default,
(x) the Servicer shall, in the case of each such Defective
Contract and Defaulted Contract, to the extent permitted by the terms
of the applicable Contract, at the sole cost and expense of the
Servicer, enforce the Issuer's rights and remedies against, and realize
upon and obtain on behalf of the Issuer, subject in all events to the
Lien created by this Agreement, all of the relevant Obligor's right,
title and interest in, to and under the related VOI (including, without
limitation, such Obligor's right to possess the related VOI) without
any legal or judicial process (except to the extent otherwise required
by applicable law or pursuant to the terms of such Contract), and
(y) FCI shall exercise its best efforts, at its sole cost and
expense, to (1) assist the Servicer in the performance of its
obligations described under clause (x) above, and (2) take such actions
with respect to the VOI relating to such Defective Contract or
Defaulted Contract as provided under the terms and conditions of the
Remarketing Agreement, and
(z) the Collateral Agent hereby agrees to submit such VOI to
the remarketing procedures described in the Remarketing Agreement, and,
at the sole cost and expense of FCI, to take any and all other
reasonable actions as may be reasonably requested by FCI under the
terms of the Remarketing Agreement in order to facilitate the taking of
the actions provided for in the Remarketing Agreement with respect to
such VOI.
(b) Effect on Other Provisions of this Agreement. Each Remarketed
-----------------------------------------------
Contract transferred pursuant to the Remarketing Agreement by FCI and FAC to the
Issuer, and Granted pursuant to the Remarketing Agreement by the Issuer to the
Collateral Agent for the benefit of the Trustee and the Noteholders shall be a
"Pledged Contract", and shall therefore constitute part of the "Contract Pool"
for purposes of this Agreement and the other Facility Documents and each
reference to Pledged Contracts transferred "under the Receivables Purchase
Agreement" or Granted hereunder (or words of similar effect) shall include
Remarketed Contracts so transferred or Granted pursuant to the Remarketing
Agreement; provided that the effect of the foregoing clause is specifically
--------
qualified to the extent specifically set forth below:
(i) For purposes of determining whether or not a Remarketed
Contract constitutes an "Eligible Contract" for any other purposes of this
Agreement (including, by way of example and not limitation, in order to
determine whether or not the representation set forth in Section 3.2 has been
breached with respect to a Remarketed Contract), the definition of Eligible
Contract shall be deemed not to include clause (x) thereof.
(ii) For the purposes of this Agreement, the applicable
"Cut-Off Date" of a Remarketed Contract shall be the date of such Contract's
origination by FCI.
In addition, promptly after the Grant of any Remarketed Contract to the
Collateral Agent pursuant to the terms of the Remarketing Agreement, the
Servicer shall add such Remarketed Contract to the Contract Schedule and shall
notify the Collateral Agent to do the same with respect to the records and any
computer file maintained by it.
SECTION 3.7. Notice of Breach. Upon the discovery by Issuer, the
----------------
Servicer or the Trustee of any breach of any of the representations and
warranties contained in Sections 3.1, 3.2 or 3.3, such party shall notify in
writing each of the other parties hereto and the Trustee shall notify each
Noteholder and the Rating Agency. The Trustee shall be under no duty to
independently verify or investigate the accuracy of any of the representations
or warranties contained in Article III.
ARTICLE IV
ADDITIONAL COVENANTS OF ISSUER
SECTION 4.1. Affirmative Covenants. From the Closing Date until the
----------------------
Termination Date, the Issuer shall, unless the Majority Holders shall otherwise
consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects, and
--------------------------
cause the Servicer to comply in all material respects, with all applicable laws,
rules, regulations and orders with respect to it, its business and properties,
and all Contracts and Facility Documents to which it is a party (including,
without limitation, the laws, rules and regulations of each state governing the
sale of time share contracts).
(b) Preservation of Corporate Existence. Preserve and maintain its
--------------------------------------
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in good standing as a
foreign corporation, and maintain all necessary licenses and approvals, in each
jurisdiction, 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) Audits. (i) At any time and from time to time during regular
------
business hours, permit the Noteholders or their agents or representatives,
access
(A) to the offices and properties of the Issuer (including,
without limitation, any repository used by the Issuer, or the Servicer on the
Issuer's behalf, to store the computer tapes or other computer records
constituting the Servicer's Daily Report), in order to examine and make copies
of and abstracts from all books, correspondence and Records of the Issuer as
appropriate to verify the Issuer's compliance with this Agreement, the
Receivables Purchase Agreement, any other Facility Documents to which it is a
party and any other agreement contemplated hereby or thereby, and the
Noteholders and/or their agents and representatives may examine and audit the
same, and make photocopies and computer tape or other computer replicas thereof
(as appropriate), and Issuer agrees to render to the Noteholders and/or their
agents and
representatives, at Issuer's cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto; and
(B) to the officers or employees of the Issuer in order to
discuss matters relating to the Contracts or the Issuer's performance hereunder
with any of the officers or employees of the Issuer having knowledge of such
matters.
The number and frequency of any such audits shall initially be quarterly and
thereafter shall be limited to such number and frequency as shall be reasonable
in the exercise of the Noteholder's reasonable commercial judgment. Each such
audit shall be at the sole expense of the Issuer (subject to the Issuer's right
under the Receivables Purchase Agreement to recover such expenses from the
Seller). Each of the Noteholders and their agents and representatives shall also
have the right to discuss the Issuer's affairs with the officers and employees
of the Issuer and Issuer's independent accountants and to verify under
appropriate procedures the validity, amount, quality, quantity, value and
condition of, or any other matter relating to, the Collateral.
(ii) On a mutually agreeable date occurring during the six month period
immediately following each of the (x) Closing Date and (y) Amortization
Commencement Date, the Noteholders may in their discretion designate a third
party agent to perform an audit of the Pledged Contracts (the "Contract Audit")
to determine whether such Pledged Contracts conform with the eligibility
requirements set forth in the definition of Eligible Contract. Each of the
Contract Audits shall be at the expense of the Issuer (subject to the Issuer's
right under the Receivables Purchase Agreement to recover such expenses from the
Seller); provided that, the amount to be paid by Issuer and Seller for each
Contract Audit shall not exceed $10,000 and any expenses above said amount shall
be at the sole expense of the Noteholders.
(d) Keeping of Records and Books of Account. Maintain and implement
---------------------------------------
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing the Pledged Contracts 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 Contracts (including, without
limitation, records adequate to permit the daily identification of all
Collections with respect to, and adjustments of amounts payable under, each
Pledged Contract).
(e) Performance and Compliance with Receivables and Contracts. At its
----------------------------------------------------------
expense, timely and fully perform and comply, and cause the Seller and/or FCI to
comply, in all material respects, with all provisions, covenants and other
promises required to be observed by it or the Seller under the Pledged
Contracts.
(f) Credit Standards and Collection Policies. Comply in all material
------------------------------------------
respects with the Credit Standards and Collections Policies and Servicer's
Customary Practices in regard to each Pledged Contract and the related
Collateral.
(g) Collections. (1) Instruct all Obligors to either
-----------
(A) send all Collections directly to a Post Office Box or
Lock-Box Account, or
(B) in the alternative, make 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, which Payments shall be electronically transferred
directly to a Lock-Box Account immediately upon each such debit
(provided that, for the avoidance of doubt, each Obligor may at any
--------
time cease to deposit its Collections directly to a Post Office Box or
a Lock-Box Account, or pursuant to a PAC or Credit Card Account, so
long as such Servicer promptly instructs such Obligor to commence one
of the two alternative methods of funds transfer provided for in
either of subclasses (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 Lock-Box Bank
and/or the Collection Account Bank to take, all necessary and
appropriate action to ensure that each such pre-authorized debit is
credited directly to a Lock-Box Account.
(3) If the Issuer shall receive any Collections, the Issuer
shall hold such Collections in trust for the benefit of the Trustee and
Noteholders and deposit such Collections into a Lock-Box Account or the
Collection Account within one Business Day following Issuer's receipt
thereof.
(4) If either of FCI or FAC receives any Collections, the
Issuer shall cause FCI or FAC, as the case may be, to hold such
Collections in trust for the benefit of the Trustee and Noteholders and
deposit such Collections into a Lock-Box Account or the Collection
Account within one Business Day following such Person's receipt
thereof.
(h) Compliance with ERISA. Comply in all material respects with the
----------------------
provisions of ERISA, the Internal Revenue Code, and all other applicable laws,
and the regulations and interpretations thereunder.
(i) Perfected Security Interest. Take such action with respect to each
---------------------------
Pledged Contract as is necessary to ensure that the Issuer maintains, either a
first priority perfected security interest in, or a legal and valid ownership
interest in, any Collateral relating thereto, in each case free and clear of any
Liens (other than the Lien created by this Agreement and in the case of any
VOIs, any Permitted Encumbrance).
(j) Legal Opinion. On or before September 30 in each calendar year
--------------
commencing with 1999, the Issuer shall furnish to the Trustee (i) an Opinion of
Counsel stating that, in the opinion of such counsel, such action has been taken
with respect to the recording, filing, re-recording and refiling of this
Agreement and any other requisite documents (including, without limitation, the
Receivables Purchase Agreement), and with respect to the execution and filing of
any financing statements and continuation statements as is necessary to maintain
the Lien in the Pledged Contracts and other Collateral created by this Agreement
and reciting the
details of such action or stating that in the opinion of such counsel no such
action is necessary to maintain such Liens and (ii) such opinions of local
counsel as the Noteholders may reasonably request. Such Opinion of Counsel shall
also describe the recording, filing, re-recording and refiling of this Agreement
and any other requisite documents and the execution and filing of any financing
statements and continuation statements that will, in the opinion of such
counsel, be required to maintain the liens and security interests Granted
hereunder until September 30 in the following calendar year.
(k) Instruments. The Issuer shall not remove any portion of the
-----------
Collateral that consists of money or is evidenced by an instrument, certificate
or other writing (including any Contract) from the jurisdiction in which it was
held at the date of the most recent Opinion of Counsel delivered pursuant to
Section 4.1(j) (or from the jurisdiction in which it was held as described in
the Opinion of Counsel delivered at the Closing Date if no Opinion of Counsel
has yet been delivered pursuant to Section 4.1(j)) unless the Trustee shall have
first received an Opinion of Counsel to the effect that the Lien created by this
Agreement with respect to such property will continue to be maintained after
giving effect to such action or actions; provided, however, that each of the
-------- -------
Collateral Agent and the Servicer may remove Pledged Contracts 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
and Section 4.1(n).
(l) No Release. The Issuer shall 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 covenants or obligations under any
document, instrument or agreement included in the Collateral, or which would
result in the amendment, hypothecation, subordination, termination or discharge
of, or impair the validity or effectiveness of, any such document, instrument or
agreement, except as expressly provided in this Agreement or such other
instrument or document.
(m) Insurance and Condemnation.
--------------------------
(i) The Issuer shall, and shall cause FCI (1) to use its best
efforts, in the case of Developments where FCI or any Subsidiary of FCI
maintains primary or substantial responsibility for management, administration
or other services of a similar nature, and (2) to do or cause to be done all
things which it may accomplish with a reasonable amount of cost or effort, in
the case of Developments where FCI or any Subsidiary of FCI does not maintain
primary or substantial responsibility for management, administration or other
services of a similar nature, to cause each of the POAs for each Development, 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 which provides for adequate
"business interruption" coverage and (z) provides for the replacement cost of
property destroyed; 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
(which efforts shall include, in any case, voting as a member of the POA or as a
proxy or attorney-in-fact for the Nominee). 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 VOI Regime.
(ii) The Issuer shall remit, and shall cause each of FAC and
FCI to remit, to the Collection Account, the portion of any proceeds received
pursuant to a condemnation of property in any Development relating to any of the
VOIs.
(n) Custodian.
---------
(i) On or before each Contract Grant Date, and thereafter
promptly upon the generation of any documents, instruments and agreements
evidencing or otherwise relating to the Pledged Contracts or related Collateral
received by any of the Issuer, FAC or any Originator, the Issuer or Servicer
shall deliver or cause to be delivered directly to the Custodian for the benefit
of the Collateral Agent pursuant to the Custodial Agreement all such documents,
instruments and agreements of the Issuer, including without limitation, all
original Pledged Contracts (or in the case of Pledged Contracts consisting of a
sales contract and a separate promissory note, the original of such promissory
note), installment promissory notes, mortgages, and all ancillary and collateral
documentation executed in connection therewith (collectively, the "Primary
Custodial Documents"). The Custodian shall hold, maintain and keep custody of
all such Primary Custodial Documents for the benefit of the Collateral Agent in
the secure fire retardant location at an office of the Custodian, which location
shall be reasonably acceptable to the Collateral Agent, Trustee and Noteholders.
In addition, the Servicer shall obtain a copy of the each of the Primary
Custodial Documents described above on microfiche, CD-Rom or other format
reasonably acceptable to the Collateral Agent, Trustee and Noteholders, which
copy shall in each case be maintained in a fireproof vault at a repository
located outside of the offices of the Servicer or the Issuer (which repository
initially shall be Offsite Data Storage, Inc., Mabelvale, Arkansas, and which
repository shall in all cases provide an acknowledgment in form and substance
satisfactory to the Collateral Agent, Trustee and Noteholders to the effect that
such repository maintains an account in the name of the Trustee).
(ii) The Custodian shall at all times maintain control of the
Primary Custodial Documents for the benefit of the Collateral Agent on behalf of
the Trustee and the Noteholders, in each case pursuant to the Custodial
Agreement. Each of FAC, FCI and the Issuer may access the Primary Custodial
Documents at the Custodian's storage facility only for the purposes and upon the
terms and conditions set forth herein and in the Custodial Agreement. Each of
the Issuer and the Servicer may only remove Primary Custodial Documents for
collection services and other routine servicing requirements from such facility
in accordance with the terms of the Custodial Agreement, all as set forth and
pursuant to the "Bailment Agreement" (as defined in, and attached as an exhibit
to, the Custodial Agreement).
(iii) The Issuer shall at all times comply, and shall cause
each of FCI and FAC to comply, with the terms of, and their respective
obligations under, the Custodial Agreement, and shall not enter into any
modification, amendment or supplement of or to, and shall not terminate, any of
the Custodial Agreements, without the Collateral Agent's prior written consent.
(o) 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) conduct all of its business, and make all communications
to third parties (including all invoices (if any), letters, checks and other
instruments) solely in its own name (and not as a division of any other Person),
and require that its employees, if any, when conducting its business identify
themselves as such and not as employees of any other Affiliate of the Issuer
(including, without limitation, by means of providing appropriate employees with
business or identification cards identifying such employees as the Issuer's
employees);
(ii) compensate all employees, consultants and agents directly
or indirectly through reimbursement of the Seller, from the Issuer's bank
accounts, for services provided to the Issuer by such employees, consultants and
agents and, to the extent any employee, consultant or agent of the Issuer is
also an employee, consultant or agent of any Affiliate of the Issuer, allocate
the compensation of such employee, consultant or agent between the Issuer and
such Affiliate on a basis which reflects the respective services rendered to the
Issuer and such Affiliate (provided that any fees and expenses payable to the
Custodian under the Custodial Agreement shall be the responsibility of the
Servicer to be paid out of its Servicing Fee) other than with respect to the
services covered under the terms of the Administrative Services Agreement;
(iii) (A) pay its own incidental administrative costs and
expenses not covered under the terms of the Administrative Services Agreement,
from its own funds, (B) allocate all other shared overhead expenses (including,
without limitation, telephone and other utility charges, the services of shared
employees, consultants and agents, and reasonable legal and auditing expenses)
which are not reflected in the Servicing Fee, and other items of cost and
expense shared between the Issuer and any Affiliate, pursuant to the terms of
the Administrative Services Agreement, on the basis of actual use to the extent
practicable and, to the extent such allocation is not practicable, on a basis
reasonably related to actual use or the value of services rendered, and (C)
allocate taxes on the basis set forth in the Tax Sharing Agreement;
(iv) at all times have at least one "Independent Director",
which satisfies the requirements set forth in Section 3.1(n) hereof and under
the Issuer's Certificate of Incorporation, and have at least one officer
responsible for managing its day-to-day business and manage such business by or
under the direction of its board of directors;
(v) maintain its books and records separate from those of
any Affiliate;
(vi) prepare its financial statements separately from those of
its Affiliates and ensure that any consolidated financial statements of each of
FAC and FCI have notes to the effect that the Issuer is a separate corporate
entity whose creditors have a claim on its assets prior to
those assets becoming available to its equity holders and therefore to any
creditors of FAC or FCI, as the case may be;
(vii) not commingle its funds or other assets with those of
any of its Affiliates (other than in respect of items of payment which are not
material in the aggregate and which have been mistakenly forwarded by an Obligor
directly to any of FCI, FAC or any of their respective Affiliates), and not to
hold its assets in any manner that would create an appearance that such assets
belong to any such Affiliate, not maintain bank accounts or other depository
accounts to which any such Affiliate is an account party, into which any such
Affiliate makes deposits or from which any such Affiliate has the power to make
withdrawals, and not act as an agent or representative of any of its Affiliates
in any capacity;
(viii) not permit any of its Affiliates to pay the Issuer's
operating expenses (except pursuant to allocation arrangements that comply with
the requirements of subsection (ii) or (iii) of this Section 4.1(o) or pursuant
-------------- ---
to the terms of the Receivables Purchase Agreement);
(ix) not guarantee any obligation of any of its Affiliates nor
have any of its obligations guaranteed by any such Affiliate, (either directly
or by seeking credit based on the assets of such Affiliate) or otherwise hold
itself out as responsible for the debts of any Affiliate;
(x) maintain at all times stationery and a telephone number
separate from that of any Affiliate and which telephone number will be answered
in its own name, and have all its officers and employees conduct all of its
business solely in its own name;
(xi) hold regular meetings of its board of directors in
accordance with the provisions of its Certificate of Incorporation and otherwise
take such actions as are necessary on its part to ensure that all corporate
procedures required by its Certificate of Incorporation and by-laws are duly and
validly taken;
(xii) maintain a separate office from the offices of any of
its Affiliates and identify such office by a sign in its own name;
(xiii) not advance funds or other assets to, or commit to
advance funds or other assets to (other than by way of payments in respect of a
Purchase on any Contract Grant Date under the Receivables Purchase Agreement),
or accept funds from (other than by way of contributions to capital) FAC or any
of its Affiliates for any purpose or transaction (other than in compliance with
the provisions of Section 5.02(k) with respect to transactions with Affiliates),
--------------
or permit FAC or any of its Affiliates to be involved in the management of the
Issuer;
(xiv) respond to any inquiries with respect to ownership of a
Pledged Contract by stating that it is the owner of such Pledged Contract, and
that such Pledged Contract is Granted to the Collateral Agent;
(xv) on or before September 30 of each year, beginning in
1999, the Issuer shall deliver to the Trustee an Officer's Certificate stating
that Issuer has, during the preceding
year, observed all of the requisite corporate formalities and conducted its
business and operations in such a manner as required for the Issuer to maintain
its separate corporate existence from any other entity; and
(xvi) take such other actions as are necessary on its part to
ensure that the facts and assumptions set forth in the non-consolidation opinion
delivered by Issuer's counsel and described in the List of Closing Documents
attached at Exhibit "D" remain true and correct at all times.
----------
(p) Computer Files. ▇▇▇▇ or cause to be marked each Pledged Contract in
--------------
its computer files as described in Section 3.3(b) hereof.
(q) Taxes. File or cause to be filed, and cause each of its Affiliates
-----
with whom it shares consolidated tax liability to file, all federal, state and
local tax returns which are required to be filed by it, except where the failure
to file such returns could not reasonably be expected to have a Material Adverse
Effect, or which could otherwise be reasonably expected to expose the Issuer to
a material liability. The Issuer shall pay or cause to be paid all taxes shown
to be due and payable on such returns or on any assessments received by it,
other than any taxes or assessments, the validity of which are being contested
in good faith by appropriate proceedings and with respect to which the Issuer or
the applicable Affiliate shall have set aside adequate reserves on its books in
accordance with GAAP, and which proceedings could not reasonably be expected to
have a Material Adverse Effect, or which could otherwise be reasonably expected
to expose the Issuer to a material liability.
(r) Facility Documents. Comply in all material respects with the terms
------------------
of, employ the procedures outlined in and enforce the obligations of the Seller
and/or FCI (as the case may be) under the Receivables Purchase Agreement, and
all of the other Facility Documents to which such Person is a party, and take
all such action to such end as may be from time to time reasonably requested by
the Trustee or Noteholders to maintain all such Facility Documents in full force
and effect and make to the Seller or FCI such reasonable demands and requests
for information and reports or for action as the Issuer is entitled to make
thereunder and as may be from time to time reasonably requested by the Trustee
or Noteholders.
(s) Contract Schedule. Promptly amend the Contract Schedule to reflect
-----------------
terms or discrepancies that become known after the Contract Grant Date, and
promptly notify the Trustee of any such amendments.
(t) Segregation of Collections. Prevent the deposit into any of the
----------------------------
Lock-Box Accounts, the Collection Account or the Reserve Account of any funds
other than Collections in respect of the Pledged Contracts (except, in the case
of the Reserve Account, for the initial deposit therein); provided that this
--------
covenant shall not have been breached to the extent that items other than
Collections, which are not material in the aggregate, have been mistakenly
forwarded by an Obligor directly to any of the Lock-Box Accounts, the Collection
Account or the Reserve Account and, to the extent that any such funds are
nevertheless deposited into any of such Lock-
Box Accounts, the Collection Account or the Reserve Account, promptly identify
any such funds to the Servicer for segregation and remittance to the owner
thereof.
(u) Filings; Further Assurances. (i) On or prior to the Contract Grant
---------------------------
Date corresponding with the Closing Date, the Issuer shall have caused, at its
sole expense, the UCC-1 financing statements, assignments thereof and other
items referred to in the List of Closing Documents set forth in Exhibit "D"
-----------
hereto as items which are required to be filed or recorded on or prior to such
Contract Grant Date, to be so filed or recorded in the appropriate offices, and
(2) within five Business Days after such Contract Grant Date, the Issuer shall
cause each of the other UCC-1 financing statements, UCC-2 and UCC-3 amendment
and/or termination statements, and other similar items referred to in the List
of Closing Documents set forth in Exhibit "D" hereto to be filed or recorded
-----------
within five Business Days after such Contract Grant Date, and in each such case
shall thereafter promptly cause evidence of such filings to be delivered to the
Collateral Agent.
(ii) The Issuer shall, at its sole expense, from time to time
prepare, execute and deliver, or cause to be prepared, executed and delivered,
all such financing statements, continuation statements, instruments of further
assurance and other instruments, in such forms, and shall take such other
actions, as shall be required by the Servicer, Trustee(at the direction of the
Majority Holders) or Collateral Agent, or as Servicer, Trustee (at the direction
of the Majority Holders) or Collateral Agent otherwise deems reasonably
necessary or advisable to perfect the Lien created by this Agreement in the
Collateral. The Servicer agrees, at its sole expense, to cooperate with and
assist the Issuer in taking any such action (whether at the request of the
Issuer or the Collateral Agent). Without limiting the foregoing, the Issuer
shall from time to time, at its sole expense, execute, file, deliver and record
all such supplements and amendments hereto and all such financing statements,
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 either of the Servicer, the Trustee (at
the direction of the Majority Holders) or the Collateral Agent 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, publish notice of, or protect the validity of any Grant made or to be
made pursuant to this Agreement; (iv) enforce any of the Pledged Contracts or
any of the other Collateral (including, without limitation, by cooperating with
the Collateral Agent, at the expense of the Issuer, in filing and recording such
UCC financing statements against such Obligors as the Servicer, Trustee (at the
direction of the Majority Holders) or Collateral Agent shall deem necessary or
advisable from time to time); (v) preserve and defend title to any Pledged
Contracts on all or any other part of the Collateral, and the rights of the
Collateral Agent in such Pledged Contracts or other Collateral, against the
claims of all Persons and parties; or (vi) pay any and all taxes levied or
assessed upon all or any part of the Collateral. The Issuer hereby designates
the Servicer its agent and attorney-in-fact to execute, upon the Issuer's
failure to do so, any financing statement, continuation statement or other
instrument required pursuant to this Section 4.1(u) or required, as indicated in
any Opinion of Counsel delivered pursuant to the List of Closing Documents set
forth at Exhibit "D" hereto, or any Opinion of Counsel delivered
----------
pursuant to Section 4.1(j) hereof, to maintain the Lien and security interests
granted hereunder with respect to the Collateral.
(iii) The Issuer shall, on or prior to the date of Grant of
any Contracts hereunder, deliver all original copies of the Contract (other than
in the case of any Contracts not required to be in the relevant Contract File
pursuant to Section 3.2(v)), together with related Contract 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 and the Collateral Agent. In the event
that the Issuer receives any other instrument or any writing which, in either
event, evidences a Pledged Contract or other Collateral, the Issuer shall
deliver such instrument or writing to the Custodian on behalf of the Collateral
Agent, the Trustee and/or the Noteholders 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, specific assignment or other writing or paper and to
take any other action that the Trustee or Collateral Agent in its sole
discretion, may deem necessary or appropriate to further perfect the Lien
created hereby. The Issuer agrees that a carbon, photographic, photostatic, or
other reproduction of this Agreement or of a financing statement is sufficient
as a financing statement where permitted by applicable law. Any expenses
incurred by the Trustee or Collateral Agent pursuant to the exercise of its
rights under this Section 4.1(u)(iv) shall be for the sole account and
responsibility of the Issuer, and shall constitute "Carrying Costs" payable by
the Issuer hereunder.
SECTION 4.2. Negative Covenants of the Issuer. From the Closing Date
---------------------------------
until the Termination Date, the Issuer shall not, without the prior written
consent of the Majority Holders:
(a) Sales, Liens, Etc. Against Receivables and Related Security. Except
-----------------------------------------------------------
for the releases contemplated under Section 3.5 and 3.6, sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or suffer to
exist, any Lien (other than the Lien created by this Agreement or, with respect
to VOIs relating to Pledged Contracts, any Permitted Encumbrances thereon) upon
or with respect to, any Pledged Contract or any other Collateral, or any
interests in either thereof, or upon or with respect to any Post Office Box, the
Collection Account, the Reserve Account or any Lock-Box Account, or assign any
right to receive income in respect thereof. The Issuer shall immediately notify
the Trustee and Collateral Agent of the existence of any Lien on any Pledged
Contract or any other Collateral, and the Issuer shall defend the right, title
and interest of each of the Issuer and the Collateral Agent, Trustee and
Noteholders in, to and under the Pledged Contracts and all other Collateral,
against all claims of third parties.
(b) Extension or Amendment of Contract Terms. Extend, amend, waive or
----------------------------------------
otherwise modify the terms of any Pledged Contract, or permit the rescission or
cancellation of any Pledged Contract, whether for any reason relating to a
negative change in the related Obligor's
creditworthiness or inability to make any payment under the Pledged Contract or
otherwise; provided, however, that the following modifications may be made to a
-------- -------
Pledged Contract from time to time: (i) extensions which are Permitted
Deferrals, (ii) amendments entered into in accordance with Customary Practices
and Credit Standards and Collections Policies, which do not reduce the amount or
extend the maturity of required Payments, and (iii) modifications in the
applicability of a PAC (which will, among other things, result in a change in
the relevant Contract Rate).
(c) Change in Business or Credit and Collection Policy. (i) Make any
----------------------------------------------------
change in the character of its business, or, (ii) make any change in the Credit
Standards and Collection Policies, or deviate from the exercise of Customary
Practices, which change or deviation described in this clause (ii) would, in
either case, materially impair the value or collectibility of any Pledged
Contract.
(d) Change in Payment Instructions to Obligors. Add or terminate any
--------------------------------------------
bank as a Lock-Box Bank from those listed in Exhibit "F" or make any change in
----------
its instructions to Obligors regarding payments to be made to any Lock-Box
Account at a Lock-Box 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) Lock Box Account in existence; and (iii) prior to the
effective date of such addition, termination or change, (x) executed copies of
Lock-Box Agreements executed by each new Lock-Box Bank, the Issuer, and the
Trustee and the Servicer and (y) copies of all agreements and documents signed
by either the Issuer or the respective Lock-Box Bank with respect to any new
Lock-Box Account.
(e) Stock, Merger, Consolidation, Etc. Sell any shares of any class of
----------------------------------
its capital stock to any Person (other than FAC) or consolidate with or merge
into or with any other corporation, 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 for the granting of the
Lien of this Agreement as expressly permitted under the terms of this Agreement.
(f) Change in Corporate Name, etc. Make any change to its corporate
-------------------------------
name, or use any trade names, fictitious names, assumed names or "doing business
as" names.
(g) ERISA Matters. (i) Engage or permit any ERISA Affiliate to engage
-------------
in any prohibited transaction for which an exemption is not available or has not
previously been obtained from the DOL; (ii) permit to exist any accumulated
funding deficiency, as defined in Section 302(a) of ERISA and Section 412(a) of
the IRC, or funding deficiency with respect to any Benefit Plan other than a
Multiemployer Plan; (iii) fail to make any payments to any Multiemployer Plan
that the Issuer or any ERISA Affiliate may be required to make under the
agreement relating to such Multiemployer Plan or any law pertaining thereto;
(iv) terminate any Benefit Plan so as to result in any liability; or (v) permit
to exist any occurrence of any reportable event described in Title IV of ERISA
which represents a material risk of a liability of the Issuer or any ERISA
Affiliate under ERISA or the IRC; provided, however, the Issuer's ERISA
-------- -------
Affiliates may take or allow such prohibited transactions, accumulated funding
deficiencies, payments, terminations and reportable events described in clauses
(i) through (iv) above so long as such events occurring within any fiscal year
of the Issuer, in the aggregate, involve a payment of money by or an incurrence
of liability of any such ERISA Affiliate (collectively, "ERISA Liabilities") in
-----------------
an amount which does not exceed $500,000.
(h) Terminate or Reject Contracts. Without limiting anything in Section
-----------------------------
4.2, terminate or reject any Pledged Contract prior to the end of the term of
such Contract, whether such rejection or early termination is made pursuant to
an equitable cause, statute, regulation, judicial proceeding or other applicable
law (including, without limitation, Section 365 of the Bankruptcy Code), unless
prior to such termination or rejection, such Pledged Contract and any related
Collateral have been released from the Lien created by this Agreement pursuant
to Section 3.5.
(i) Debt. Create, incur, assume or suffer to exist any Debt except for
----
(i) Debt to the Noteholders, the Trustee or the Collateral Agent expressly
contemplated hereunder, or (ii) intercompany obligations to FAC in respect of
Carrying Costs paid by FAC on behalf of Issuer and which are settled no more
frequently than monthly.
(j) Guarantees. Guarantee, endorse or otherwise be or become
----------
contingently liable (including by agreement to maintain balance sheet tests) in
connection with the obligations of any other Person, except endorsements of
negotiable instruments for collection in the ordinary course of business and
reimbursement or indemnification obligations in favor of the Trustee, the
Collateral Agent or any Noteholder as provided for under this Agreement.
(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 Receivables
Purchase Agreement;
(ii) transactions related to the allocation of shared overhead
expenses or taxes as described in clause (iii) of Section 4.1(o); and
(iii) to the extent not otherwise prohibited under this
Agreement, other transactions in the nature of employment contracts and
directors' fees, 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) Facility Documents. Except as otherwise permitted under Section
-------------------
16.1, without the prior consent of the Majority Holders (a) terminate, amend or
otherwise modify any Facility Document to which it is a party, or grant any
waiver or consent thereunder, (b) exercise any discretionary rights granted to
the Issuer under the Receivables Purchase Agreement pursuant to provisions
thereof providing for certain actions to be taken "with the consent of the
Company", "acceptable to the Company" as "specified by the Company", "in the
reasonable judgment of the
Company" or similar provisions (it being understood that inaction by the Issuer
shall not be considered to be an exercise of such discretionary rights), or (c)
terminate, amend or otherwise modify the FairShare Plus Agreement; provided,
--------
however, (A) the Title Clearing Agreements may be amended for the purposes of
-------
(1) making additional properties subject thereto, (2) making an Affiliate of FCI
a party thereto having the same rights and obligations thereunder as FCI or (3)
identifying a separate pool of Contracts (which shall not include the Pledged
Contracts) to be sold or pledged to secure debt under a pooling or pledge
arrangement similar to that evidenced by this Agreement, and (B) the FairShare
Plus Agreement may be amended from time to time (1) to substitute or add
additional parties thereto, (2) to comply with state and federal laws or
regulations, or (3) for any other purpose, provided that with respect to this
clause (3), the Issuer furnishes to the Trustee and Noteholders an Opinion of
Counsel in form and substance acceptable to the Trustee and Noteholders to the
effect that such amendment or modification will not adversely affect in any
material respect the respective interests of the Collateral Agent, the Trustee
or the Noteholders.
(m) Charter and By-Laws. Amend or otherwise modify its Certificate of
-------------------
Incorporation or By-laws in any manner which requires the consent of an
"Independent Director" (as defined in the Issuer's Certificate of
Incorporation).
(n) Lines of Business. Conduct any business other than that described
-----------------
in Section 3.1(q), or enter into any transaction with any Person which is not
contemplated by or incidental to the performance of its obligations under the
Facility Documents to which it is a party.
(o) Accounting Treatment. Prepare any financial statements or other
---------------------
statements (including any tax filings which are not consolidated with those of
FCI or FAC) which shall account for the transactions contemplated by the
Receivables Purchase Agreement in any manner other than as the sale of, or a
capital contribution of, the Pledged Contracts by the Seller to the Issuer.
(p) 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, (ii) the purchase of Contracts pursuant to the terms of the
Receivables Purchase Agreement and (iii) the acceptance of investments in
exchange for Defaulted Contracts, in an effort to maximize the recoveries
thereon (in each such case, with the prior written consent of the Majority
Holders).
(q) Insolvency Proceedings. Institute Insolvency Proceedings with
-----------------------
respect to the Issuer, FAC, FCI, or any Affiliate thereof or consent to the
institution of Insolvency Proceedings against the Issuer, FAC, FCI, or any
affiliate thereof or take any corporate action in furtherance of any such
action, or seek dissolution or liquidation in whole or in part of the Issuer,
FAC, FCI, or any Affiliate thereof.
(r) Prohibited Payments.
-------------------
(i) Pay or declare any Dividend or other distribution with
respect to its capital stock, or make any payment on account of the purchase,
redemption or other acquisition or retirement of its capital stock or any
warrant, option or other right to acquire any such capital stock, either
directly or indirectly (any such distribution or payment being a "Dividend") if,
after giving effect to such declaration, payment or distribution of a Dividend
the Issuer (A) would be "insolvent" (as such term is defined in ss.101(32)(A) of
the Bankruptcy Code), (B) would be unable to pay its debts as they become due,
or (C) would 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
(provided that nothing in this clause (i) shall prohibit the Issuer from
effecting any Dividends consisting of property constituting VOIs for which the
applicable requirements for release of the related Contract from the Lien of
this Agreement under Section 3.5 have been satisfied);
(ii) On or after the occurrence of an Event of Default, pay,
distribute or declare any Dividend; or
(iii) make, or agree to make or schedule to be made, any
payments of principal or accrued interest in respect of any subordinated Debt of
Issuer.
(s) [reserved].
(t) Place of Business; Change of Name. The Issuer will not change (x)
----------------------------------
its principal place of business or chief executive office from the location
listed in such Section 3.1(k), (y) its name, identity or corporate structure or
(z) the location of its Records relating to the Collateral from the location
listed in such Section 3.1(k), unless in any such event the Issuer shall have
given the Trustee and Collateral Agent at least thirty (30) days' prior written
notice thereof and shall have taken all action necessary or reasonably requested
by the Trustee or Collateral Agent to amend its existing financing statements
and continuation statements so that they are not misleading and to file
additional financing statements in all applicable jurisdictions to perfect the
Lien of the Collateral Agent on behalf of itself, the Trustee and the
Noteholders.
ARTICLE V
SERVICING OF CONTRACT POOL
SECTION 5.1. Responsibility for Contract Administration. The Servicer
-------------------------------------------
shall manage, administer, service and make collections on the Pledged Contracts
and perform or cause to be performed all contractual and customary undertakings
of the holder of the Contracts to the Obligor in trust on behalf of the Trustee
and Issuer. Without limiting the generality of the foregoing, but subject to all
other provisions hereof, the Trustee and Collateral Agent grant to the Servicer
a limited power of attorney to execute and such Servicer is hereby authorized
and empowered to so execute and deliver, on behalf of itself, the Noteholders,
the Collateral Agent 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 Contracts, any Mortgages and
the VOIs, but only to the extent useful or necessary by the Servicer.
The Trustee and 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 Contract Files, to the
requirements of the second paragraph of Section 4.1(n)). FAC is hereby appointed
as the Servicer until such time as any Service Transfer shall be effected under
Article XIII.
SECTION 5.2. Standard of Care. In managing, administering, servicing
----------------
and making collections on the Contracts pursuant to this Agreement, the Servicer
will exercise that degree of skill and care consistent with Customary Practices
and the Credit Standards and Collection Policies.
SECTION 5.3. 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
Contract and will enable such Contract to be serviced, in accordance with the
terms of this Agreement, by a Successor Servicer following a Service Transfer.
SECTION 5.4. Inspection.
----------
(a) Inspection of Servicer. The Trustee and any Noteholder and their
----------------------
respective representatives shall at all times upon reasonable prior notice have
full and reasonable access during normal business hours to all books,
correspondence and written and computer records of the Servicer as appropriate
to verify the Servicer's compliance with this Agreement, and the Trustee and
such Noteholder and their representatives may examine and audit the same, and
make photocopies thereof, and the Servicer agrees to render to the Trustee, any
such Noteholder and their representatives, at Servicer's cost and expense, such
clerical and other assistance as may be reasonably requested with regard
thereto. The Trustee and each Noteholder and the Rating Agency and their
respective representatives shall also have the right to discuss the Servicer's
affairs with the officers of the Servicer and the Servicer's independent
accountants and to verify under appropriate procedures the validity, amount,
quality, quantity, value and condition of, or any other matter relating to, the
Collateral.
(b) Confidential Information. The Servicer agrees that, to the extent
-------------------------
that any information obtained by any Noteholder or its representative pursuant
to Section 5.4(a) shall be Confidential Information, such Noteholder may
disclose such Confidential Information to (i) such Noteholder's and its
Affiliates' directors, officers, employees, agents, trustees and professional
consultants, (ii) any other Noteholder, (iii) any Person to which such
Noteholder offers to sell a Note or Notes, (iv) any Person to which such
Noteholder sells or offers to sell a participation in all or any part of a Note,
(v) any federal or state regulatory authority having jurisdiction over such
Noteholder, (vi) the National Association of Insurance Commissioners, or (vii)
any other Person to which such delivery or disclosure may be necessary or
appropriate (1) in compliance with any law, rule, regulation or order applicable
to such Noteholder, (2) in response to any subpoena or other legal process, (3)
in connection with any litigation to which such Noteholder is or may become a
party or (4) in order to protect such Noteholder's investment in such Note or
Notes.
(c) Inspection of Contract Schedule. At all times during the term
----------------------------------
hereof, the Servicer shall keep available a copy of the Contract Schedule at its
principal executive office for inspection by Noteholders.
SECTION 5.5. Enforcement.
-----------
(a) The Servicer will, consistent with Section 5.2 hereof, act with
respect to the Pledged Contracts in such manner as will maximize the receipt of
Collections in respect of such Pledged Contracts.
(b) The Servicer may ▇▇▇ to enforce or collect upon Contracts, in its
own name, if possible, or as agent for Issuer. If the Servicer elects to
commence a legal proceeding to enforce a Pledged Contract, the act of
commencement shall be deemed to be an automatic assignment of the Pledged
Contract 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 Contract on the grounds that it is not a real party in
interest or a holder entitled to enforce the Pledged Contract, the Collateral
Agent on behalf of the Issuer shall, at the Servicer's expense, take such steps
as the Servicer deems necessary to enforce the Pledged Contract, including
bringing suit in its name or the name of the Issuer. The Servicer shall provide
to the Collateral Agent 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 Contract any rebate, refund or adjustment out of the 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 permit any modification, amendment, waiver,
rescission or cancellation of any Pledged Contract by the Obligor, without the
prior consent of the Majority Holders, except that the following modifications
may be made to a Pledged Contract from time to time:
(i) extensions which are Permitted Deferrals,
(ii) amendments, entered into in accordance with Customary
Practices and Credit Standards and Collections Policies, which do not reduce the
amount or extend the maturity of required Payments, and
(iii) modifications in the applicability of a PAC (which
modification will, among other things, result in a change in the relevant
Contract Rate).
SECTION 5.6. Trustee to Cooperate. Upon request of a Servicing Officer,
--------------------
the Trustee and 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
Noteholders' rights and remedies with respect to Pledged Contracts.
SECTION 5.7. Other Matters Relating to the Servicer. The Servicer is
---------------------------------------
hereby authorized and empowered (i) to advise the Trustee in connection with the
amount of withdrawals from Accounts in accordance with the provisions of this
Agreement, (ii) to execute and deliver, on behalf of 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
Contracts and, after the delinquency of any Pledged Contract and to the extent
permitted under and in compliance with applicable law and regulations, to
commence enforcement proceedings with respect to such Pledged Contract
including, without limitation, the exercise of rights under any
power-of-attorney granted in any Pledged Contract and (iii) to 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 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 5.8. Servicer Insurance Coverage. The Servicer shall maintain,
---------------------------
and shall cause FCI to maintain, separate errors and omissions coverage insuring
the Trustee's and Noteholders' risk against losses through errors of the
Servicer's, FCI's or Issuer's officers and employees involved in the servicing
of Contracts covering such actions and in an amount no less than $2,000,000 per
occurrence. The Servicer shall also maintain, and shall cause FCI to maintain, a
separate fidelity bond coverage insuring the Trustee's and Noteholders' risk
against losses through wrongdoing of the Servicer's or FCI's officers and
employees involved in the servicing of Contracts covering such actions and in an
amount no less than $2,000,000 per occurrence and naming the Trustee, for the
benefit of Noteholders, as an additional named insured. Each such insurance
policy required pursuant to this Section 5.8 shall provide for written notice to
the Trustee by the insurer at least 30 days prior to the cancellation of such
insurance. Evidence reasonably satisfactory to the Trustee of all renewals or
replacements necessary to maintain such insurance from time to time in force
shall be delivered by the Servicer to the Trustee prior to the expiration date
of the then current insurance policy.
SECTION 5.9. Servicing Compensation. As compensation for its servicing
----------------------
activities hereunder, the Servicer shall be entitled to receive the Monthly
Servicing Fee which shall be paid to the Servicer pursuant to Section 7.3. On
the first Payment Date the Monthly Servicing Fee shall be prorated, based on the
initial Contract Pool Principal Balance, from the Closing Date to the first
Determination Date.
SECTION 5.10. Costs and Expenses. (a) Except as provided in Section
-------------------
7.3(q), 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 Contracts, shall be paid by the
Servicer and the Servicer shall not be entitled to reimbursement hereunder. Upon
request, the Servicer shall provide Issuer or Trustee with supporting
documentation for any costs or expenses paid pursuant to Section 7.3(q).
(b) The Servicer agrees to pay all reasonable costs and disbursements
in connection with the perfection and maintenance of perfection, as against all
third parties, of all of the right, title and interest of each of the Collateral
Agent and Trustee, in and to the Collateral to the extent that such payments are
not made by the Issuer in accordance with Section 4.1(u).
SECTION 5.11. Reserved.
--------
SECTION 5.12. Representations and Warranties of the Servicer. The
--------------------------------------------------
Servicer hereby represents and warrants to the Trustee and the Noteholders as of
the date of this Agreement and as of the date of issuance of the Notes that:
(a) Organization and Good Standing. The Servicer is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power, authority, and legal right to own its
property and conduct its business as such properties are presently owned and
such business is presently conducted, and to execute, deliver and perform its
obligations under this Agreement. The Servicer is duly qualified to do business
and is in good standing as a foreign corporation, and has obtained all necessary
licenses and approvals in each jurisdiction necessary for the enforcement of
each Pledged Contract 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 Facility Documents to which it is a party, and the consummation 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 Facility Documents to which
--------------------
Servicer is a party constitutes a legal, valid and binding obligation of the
Servicer enforceable against the Servicer in accordance with its terms, except
as such enforceability may be subject to or limited by applicable Debtor Relief
Laws relating to or affecting the enforcement of creditors' rights in general
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 of each of
---------------------------
the Facility Documents to which Servicer is a party, and the performance of the
transactions contemplated by such agreements and the fulfillment 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 indenture,
contract, agreement, mortgage, deed of trust, or other 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 best knowledge of the Servicer, threatened against the Servicer,
before any court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity
of this Agreement or any of the other Facility Documents, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement or any of the other Facility Documents, (iii) seeking any
determination or ruling that, in the reasonable judgment of the Servicer, would
adversely affect the performance by the Servicer of its obligations under this
Agreement or any of the other Facility Documents, (iv) seeking any determination
or ruling that would adversely affect the validity or enforceability of this
Agreement or any of the other Facility Documents, or (v) seeking any
determination or ruling that would have a Material Adverse Effect.
(f) All Consents Required. All approvals, authorizations, consents,
----------------------
orders or other actions of any Person or any governmental body or official
required in connection with the execution and delivery by Servicer of this
Agreement or of the other Facility Documents to which it is a party or the
performance of the transactions contemplated hereby and thereby and the
fulfillment of the terms hereof and thereof, have been obtained, except where
the failure so to do would not have a Material Adverse Effect.
SECTION 5.13. Information. The Servicer agrees to furnish to each
-----------
Noteholder or any prospective transferee of a Note at such Noteholder's (or
transferee's) request all information with respect to the Issuer or the
Servicer, the Pledged Contracts or the Notes required pursuant to Rule 144A
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended, to enable such Noteholder to effect reseals of the Notes
(or interests therein) pursuant to such rule.
SECTION 5.14. Advances by Servicer. On or before the close of business
--------------------
on the Business Day prior to each Payment Date, the Servicer shall deposit in
the Collection Account an amount equal to Advances due; provided however, an
-----------------
Advance will only be required by the Servicer if there are insufficient funds in
the Collection Account and/or the Reserve Account to pay amounts owing in
accordance with payment priorities contained in Section 7.3 of this Agreement;
and provided further, the Servicer shall only be required to make Advances if
-----------------
the Servicer in good faith believes that such Advance, if made, would not be a
Nonrecoverable Advance. Advances, if any, will be for specific Delinquent
Contracts which the Servicer identifies.
SECTION 5.15. Additional Covenants of the Servicer. From the Closing
-------------------------------------
Date until the Termination Date, unless the Majority Holders shall otherwise
consent in writing:
(a) Change in Payment Instructions to Obligors. The Servicer shall not
------------------------------------------
add or terminate any bank as a Lock-Box Bank from those listed in Exhibit "F" or
----------
make any change in its instructions to Obligors regarding payments to be made to
any Lock-Box 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) executed copies of
Lock-Box Agreements executed by each new Lock-Box Bank, the Issuer, the Trustee
and the Servicer and (y) copies of all agreements and documents signed by either
the Issuer or the respective Lock-Box Bank with respect to any new Lock-Box
Account.
(b) Collections. If the Servicer shall receive any Collections, the
-----------
Servicer shall hold such Collections in trust for the benefit of the Trustee and
Noteholders and deposit such
Collections into a Lock-Box Account or the Collection Account within one
Business Day following Servicer's receipt thereof, and (ii) if any of FAC, FCI
or the Issuer receives any Collections, the Servicer shall cause FAC, FCI or the
Issuer, as the case may be, to hold such Collections in trust for the benefit of
the Trustee and Noteholders and deposit such Collections into a Lock-Box Account
or the Collection Account within one Business Day following such Person's
receipt thereof.
(c) Compliance with Requirements of Law. The Servicer shall maintain
-------------------------------------
in effect all qualifications required under all relevant laws, rules,
regulations and orders in order to service each Pledged Contract 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 Contracts (including, without limitation, the laws, rules and
regulations of each state governing the sale of time share contracts).
(d) Protection of Rights. The Servicer shall take no action which would
--------------------
impair in any material respect the rights of any of the Collateral Agent, the
Trustee or the Noteholders in the Collateral.
(e) Credit Standards and Collection Policies. The Servicer shall comply
----------------------------------------
in all material respects with the Credit Standards and Collection Policies and
Customary Practices in regard to each Pledged Contract.
(f) Notice to Obligors. The Servicer shall ensure that the Obligor of
------------------
each Contract either
(1) shall have been instructed, pursuant to the Servicer's
routine distribution of a periodic statement to such Obligor next succeeding
(A) any Contract Grant Date, or
(B) the day on which a PAC ceased to apply to such
Contract, in the case of a Pledged Contract formerly subject
to a PAC,
but in no event later than the then next succeeding due date for Payment under
the related Pledged Contract, to remit Payments thereunder to a Post Office Box
for credit to a Lock-Box Account, or directly to a Lock-Box Account, in each
case maintained at a Lock-Box Bank pursuant to the terms of a Lock-Box
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
Payments as they become due and payable, and the Issuer has, and has caused each
of the Servicer, a Lock-Box Bank and/or the Collection Account Bank, to take all
necessary and appropriate action to ensure that each such pre-authorized debit
is credited directly to a Lock-Box Account.
(g) Relocation of Servicer. The Servicer shall give the Trustee, the
----------------------
Collateral Agent and the Rating Agency at least 30 days prior written notice of
any relocation of any office from which it services Contracts or keeps records
concerning the Pledged Contracts or of its principal place of business and chief
executive office and whether, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement and shall file such financing statement or amendments as may be
necessary to continue the perfection of the Collateral Agent's security
interests in the Pledged Contracts, and Related Collateral and the proceeds
thereof. The Servicer shall at all times maintain each office from which it
services Contracts and its principal place of business and chief executive
office within the United States of America.
(h) Instruments. The Servicer shall not remove any portion of the
-----------
Collateral that consists of money or is evidenced by an instrument, certificate
or other writing (including any Contract) from the jurisdiction in which it was
held at the date the most recent Opinion of Counsel was delivered pursuant to
Section 4.1(j) (or from the jurisdiction in which it was held as described in
the Opinion of Counsel delivered at the Closing Date if no Opinion of Counsel
has yet been delivered pursuant to Section 4.1(j)) unless the Trustee shall have
first received an Opinion of Counsel to the effect that the Lien created by this
Agreement with respect to such property will continue to be maintained after
giving effect to such action or actions; provided, however, that each of the
Collateral Agent and the Servicer may remove Pledged Contracts 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
and Section 4.1(n).
(i) Contract Schedule. The Servicer shall promptly amend the Contract
------------------
Schedule to reflect terms or discrepancies that become known to the Servicer
after the Closing Date.
(j) Segregation of Collections. The Servicer shall prevent the deposit
--------------------------
into any of the Lock-Box Accounts, the Collection Account, or the Reserve
Account of any funds other than Collections in respect of the Pledged
Contracts,(provided that this covenant shall not be breached to the extent that
--------
items of payment, which are not material in the aggregate, have been mistakenly
forwarded by an Obligor directly to any of FCI, FAC or any of their respective
Affiliates, or deposited into a lock-box account maintained for the benefit of
BKB under its credit arrangements with FCI and FAC) and, to the extent that any
such funds are nevertheless deposited into any of such Lock-Box Accounts, the
Collection Account or the Reserve Account, promptly segregate such funds and
provide for the remittance of such funds to the owner thereof.
(k) Terminate or Reject Contracts. Without limiting anything in
-------------------------------
Section 4.2(b), the Servicer shall not terminate or reject any Pledged Contract
prior to the end of the term of such Contract, whether such rejection or early
termination is made pursuant to an equitable cause, statute, regulation,
judicial proceeding or other applicable law (including, without limitation,
Section 365 of the Bankruptcy Code), unless prior to such termination or
rejection, such Pledged Contract and any related Collateral have been released
from the Lien of this Agreement (x) pursuant to Section 3.5, or (y) pursuant to
Section 3.6 in connection with the satisfaction of the remarketing obligations
described therein.
(l) Change in Business or Credit and Collection Policy. The Servicer
----------------------------------------------------
shall 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 Contract.
(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
Contracts 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 Contracts
(including, without limitation, records adequate to permit the daily
identification of all Collections with respect to, and adjustments of amounts
payable under, each Pledged Contract).
(n) Year 2000 Compliance. The Servicer covenants that its computer and
--------------------
other systems used in servicing the Pledged Contracts are currently being
modified to operate in a manner such that on and after January 1, 2000 (i) the
Servicer can service the Pledged Contracts in accordance with the terms of this
Agreement and (ii) the Servicer can operate its business in the same manner as
it is operating on the date hereof. The Servicer shall certify in writing to the
Trustee no later than June 30, 1999 that it is in compliance with this Section
5.15(n).
SECTION 5.16. FCI and the Servicer.
--------------------
(a) Guaranty of Servicer Obligations.
--------------------------------
(i) FCI hereby irrevocably and unconditionally guarantees to
each of the Collateral Agent, the Trustee and the Noteholders, the due and
punctual performance by FAC of all of its obligations in its capacity as
Servicer hereunder (collectively, the "FAC Servicer Obligations").
------------------------
(ii) It shall not be a condition to the accrual of the
obligations of FCI hereunder that the Trustee or any other Person shall have
first made any request of or demand upon or given any notice to FAC or have
initiated any action or proceeding against FAC in respect thereof. The Trustee
may proceed to enforce the obligations of FCI under the foregoing paragraph
without first pursuing or exhausting any right or remedy which any of the
Collateral Agent, the Trustee or any of the Noteholders may have against FAC or
any other Person, the Collateral or any other property.
(iii) FCI hereby agrees that its obligations under this
Section 5.16(a) shall be irrevocable and unconditional, irrespective of (A) the
validity, enforceability, avoidance, subordination, discharge, or disaffirmance
by any Person (including a trustee in bankruptcy) of the FAC Servicer
Obligations, any Pledged Contract or any of the other Collateral, (B) the
absence of any attempt to collect any Payments from the Obligor related thereto
or any guarantor, or to collect the FAC Servicer Obligations from FAC or any
other Person, (C) the waiver, consent, extension, forbearance or granting of any
indulgence by any of the Collateral
Agent, the Trustee or the Noteholders, with respect to any provision of any
instrument evidencing the FAC Servicer Obligations or any Pledged Contract, (D)
any change of the time, manner or place of performance of, or in any other term
of any of the FAC Servicer Obligations or any Pledged Contract, including
without limitation, any amendment to or modification of any of the Facility
Documents, (E) any law, regulation or order of any jurisdiction affecting any
term of any of the FAC Servicer Obligations, any Pledged Contract, or rights of
any of the Collateral Agent, the Trustee or the Noteholders, (F) the failure by
any of the Collateral Agent, the Trustee or the Noteholders to take any steps to
perfect and maintain perfected its respective interest in any Collateral, (G)
any exchange or release of any Collateral or other property in which an interest
was acquired pursuant to the Facility Documents, (H) any failure to obtain any
authorization or approval from, or to notify or file with, any governmental
authority or regulatory body, which authorization, approval, notification or
filing was required in connection with the performance of the obligations of FAC
or FCI hereunder or (I) any impossibility or impracticability of performance,
illegality, force majeure, any act of government, or other circumstances which
might constitute a defense available to, or a discharge of, the FAC Servicer
Obligations or any of FCI's obligations hereunder, or any other circumstance,
event or happening whatsoever whether foreseen or unforeseen and whether similar
to or dissimilar to anything referred to above, or (J) any termination of FAC as
Servicer, and appointment of a Successor Servicer.
(iv) FCI hereby waives promptness, diligence, notice of
default by FAC, notice of the incurrence of any FAC Servicer Obligations and any
other notice with respect to any of the FAC Servicer Obligations and the
Facility Documents and any other document related thereto. FCI hereby warrants
that its has adequate means to obtain from FAC on a continuing basis, all
information concerning the financial condition of FAC and the Collateral, and
that it is not relying on any of the Collateral Agent, the Trustee or the
Noteholders to provide such information either now or in the future.
(v) FCI further agrees that:
(A) its obligations under this Section 5.16(a) shall
not be limited by any valuation, estimation or disallowance
made in connection with any proceedings involving FAC filed
under the Bankruptcy Code (whether pursuant to Section 502
thereof or any other section thereof); and
(B) neither the Trustee nor the Collateral Agent
shall be under any obligation to ▇▇▇▇▇▇▇▇ any assets in favor
of or against or in payment of any or all of the FAC Servicer
Obligations.
(vi) FCI hereby waives all set-offs and counterclaims and all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance of or reliance
upon this Agreement. FCI's obligations under this Section 5.16(a) shall not be
limited if any of the Collateral Agent, the Trustee or the Noteholders is
precluded for any reason (including without limitation, the application of the
automatic stay under Section 362 of the Bankruptcy Code) from enforcing or
exercising any right or remedy with respect to the FAC Servicer Obligations.
(vii) FCI hereby agrees not to exercise or assert any rights
which it may acquire by way of subrogation under this Section 5.16(a) if any,
unless and until all of the FAC Servicer Obligations shall have been paid and/or
performed in full and in cash. If any payment shall be made to FCI on account of
any subrogation rights at any time prior to the occurrence of the events
described in the preceding sentence, each and every amount so paid will be held
in trust for the benefit of the Collateral Agent, the Trustee or the Noteholders
and forthwith be paid to the Trustee to be credited and applied to the FAC
Servicer Obligations to the extent then unsatisfied, in accordance with the
terms of this letter of undertaking or any document delivered in connection
therewith.
(viii) The agreements of FCI in this Section 5.16(a) shall
remain in full force and effect until all of the FAC Servicer Obligations shall
have been performed in full; provided that to the extent that FAC makes a
--------
payment, transfer or deposit to any of the Issuer, the Collateral Agent, the
Trustee or the Noteholders, which payment, transfer or deposit (or any part
thereof) is subsequently invalidated, declared to be fraudulent or preferential
or set aside and required to be repaid to FAC, its estate, trustee or receiver
or any other Person, under any Debtor Relief Law, common law or equitable cause,
then to the extent of such repayment, the agreements of FCI hereunder in respect
of such FAC Servicer Obligations or part thereof which had been so repaid, shall
be reinstated and continued in full force and effect as of the date such initial
payment, transfer or deposit occurred.
(ix) FCI acknowledges that (i) performance of all of the terms
contained in this Section 5.16(a) is necessary, and (ii) substantial performance
shall not be deemed sufficient performance. In addition, FCI consents to an
award of specific performance if sought by the Trustee in the event a court of
competent jurisdiction determines a breach of any of its obligations hereunder
to have occurred.
(x) In the event that, notwithstanding anything in this
Section 5.16(a) to the contrary, FCI has the right under applicable law to
revoke its obligations hereunder, this Agreement shall continue in full force
and effect until a written revocation executed by FCI, specifically referring to
this Section 5.16(a), is received by the Trustee at its address for notice set
forth herein. Any such revocation shall not affect the rights of any of the
Collateral Agent, the Trustee or the Noteholders hereunder with respect to any
of the FAC Servicer Obligations (including without limitation any FAC Servicer
Obligations which are contingent or unmatured) which arose on or prior to the
date on which the above-referenced revocation was received by the Trustee.
(b) Management of Developments. FCI hereby covenants and agrees that
---------------------------
from the Closing Date until the Termination Date, it shall
(i) with respect to Developments where FCI or any Subsidiary
of FCI maintains primary or substantial responsibility for management,
administration or other services
of a similar nature, whether by way of contract or pursuant to any relevant VOI
Regime, do or cause to be done all things necessary to maintain each such
Development (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 time share properties; and
(ii) with respect to Developments where FCI or any Subsidiary
of FCI does not maintain primary or substantial responsibility for management,
administration or other services of a similar nature, do or cause to be done all
things which it may accomplish with a reasonable amount of cost or effort,
consistent with its relationship (whether contractual or otherwise) with the
Person having such primary or substantial responsibility for management,
administration or other services), in order to maintain each such Development
(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 time share properties.
(c) Management of FairShare Plus Program. FCI hereby covenants that
-------------------------------------
from the Closing Date until the Termination Date, it shall perform all of its
duties and responsibilities related to the operation and management of the
FairShare Plus Program, as described more fully in the FairShare Plus Agreement.
SECTION 5.17 The Servicer not to Resign. The 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 and (ii) there is no reasonable action which
can be taken to make the performance of its duties hereunder permissible under
applicable law. Any such determination permitting the resignation of the
Servicer pursuant to clause (i) hereof 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 13.02 hereof.
SECTION 5.18. 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 5.18, and all conditions precedent provided for herein relating to such
transaction have been satisfied;
(iii) a letter from the Rating Agency shall have been
delivered to the Trustee and each Noteholder confirming that the rating assigned
to the Notes will not be downgraded or withdrawn (a "Rating Confirmation
Letter")as a result of such consolidation, 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 Event of Default under the
terms of this Agreement shall have occurred and be continuing.
SECTION 5.19. Examination of Records. Each of the Issuer and the
------------------------
Servicer shall clearly and unambiguously identify each Pledged Contract in its
respective computer or other records to reflect that such Pledged Contract has
been Granted to the Collateral Agent pursuant to this Agreement. Each of the
Issuer and the Servicer shall, prior to the sale or transfer to a third party of
any Contract similar to the Pledged Contracts held in its custody, examine its
computer and other records to determine that such Contract is not a Pledged
Contract.
ARTICLE VI
REPORTS
SECTION 6.1. Daily Reports. By no later than 3:00 p.m., Las Vegas, Nevada
-------------
time on each Business Day,
(a) a report on computer tape (or other computer record format
reasonably acceptable to the Collateral Agent) containing the master file for
each Pledged Contract, updated through the close of business on the prior
Business Day and appropriately filled-out (which master file shall contain,
among other things, (i) the Contract Pool Principal Balance of each Pledged
Contract as of the close of business on the preceding Business Day, (ii) the
interest rate payable under each Pledged Contract, and (iii) an identifying
notation for each Pledged Contract to which a PAC is applicable), shall be
delivered by the Servicer to a repository which may be designated by the
Collateral Agent from time to time (which repository initially shall be Offsite
Data Storage, Inc., Mabelvale, Arkansas, and which repository shall in all cases
provide an acknowledgment in form and substance satisfactory to the Collateral
Agent to the effect that such repository maintains an account in the name of the
Collateral Agent); and
(b) a report, by telecopy, containing the aggregate amount of
Collections processed by the Servicer on the preceding Business Day (each such
report described in clause (a)
or this clause (b) being referred to herein as a "Servicer's Daily Report")
-------------------------
shall be delivered by the Servicer to the Trustee on each Business Day.
Any transmission or other delivery of each such report to the Trustee or a
document repository for the Collateral Agent, as the case may be, shall be
deemed to be a representation and warranty by the Servicer to the Trustee and
Collateral Agent that the information contained therein is true and correct in
all material respects.
SECTION 6.2. Monthly Reports. By not later than 3:00 p.m., Las Vegas,
----------------
Nevada time, on the fifth Business Day preceding each Payment Date the Servicer
shall transmit to the Trustee in a form or forms acceptable to the Trustee
information necessary to transfer funds as provided in Sections 7.3 and 7.4 and
produce the Settlement Statement for such Payment Date. Transmission of such
information to the Trustee shall be deemed to be a representation and warranty
by the Servicer to the Trustee that such information is true and correct in all
material respects.
SECTION 6.3. Certificate of Servicing Officer. On each Payment Date,
---------------------------------
the Servicer shall deliver to the Trustee, each Noteholder and the Rating Agency
in hard copy form, the Servicer's Monthly Report in the form set forth in
Exhibit "S" with such additions as the Trustee may from time to time request,
----------
together with a certificate of a Servicing Officer substantially in the form of
Exhibit "T," 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 also identify which,
if any, Pledged Contracts have become Defective Contracts or Defaulted Contracts
required to be released on such Payment Date.
SECTION 6.4. Other Data. In addition, the Servicer shall, on request of
----------
the Trustee, Collateral Agent or Rating Agency, furnish the Trustee, Collateral
Agent or Rating Agency such underlying data as can be generated by the
Servicer's existing data processing system without undue modification or
expense.
SECTION 6.5. Annual Servicer's Certificate. The Servicer will deliver
------------------------------
to the Trustee, the Rating Agency, and each Noteholder on or before September 30
of each calendar year, beginning in 1999, an Officer's Certificate stating that
(a) a review of the activities of the Servicer during the preceding calendar
year (or, in the case of the first such Officer's Certificate, the period since
the Closing Date) and of its performance under this Agreement was made under the
supervision of the officer signing such certificate and (b) to the best of such
officer's knowledge, based on such review, the Servicer has fully performed all
of its obligations under this Agreement throughout such year, or, if there has
been a default in the performance of any such obligation, specifying each such
default known to such officer and the nature and status thereof.
SECTION 6.6. Annual Report of Accountants. On or before September 30 of
----------------------------
each calendar year, beginning in 1999, the Servicer, at its own expense, shall
cause a firm of nationally recognized independent "Big 5" public accountants
(who may also render other services to the Servicer, Issuer or FCI) to furnish a
statement to the Trustee, the Rating Agency, and each Noteholder to the effect
that such firm, in connection with its annual examination of the Servicer,
has (A) made a study and evaluation of the Servicer's internal accounting
controls and computer systems relative to the servicing of the Pledged Contracts
and that, on the basis of such examination, such firm is of the opinion that
(assuming the accuracy of reports by Service's third party agents) the system of
internal accounting controls in effect on the date of such statement relating to
servicing procedures in connection with the Contracts performed by the Servicer,
taken as a whole, was sufficient for the prevention and detection of material
errors and material irregularities; and (B) compared the mathematical
calculations of each amount set forth in the Servicer's Monthly Reports for each
Calculation Period in the preceding twelve-month period with the computer
records of the Servicer, and that such firm is of the opinion that such amounts
are in agreement; except in either case for such exceptions as they believe to
be immaterial and such other exceptions as shall be set forth in such statement.
SECTION 6.7. [Reserved]
SECTION 6.8. Notices to FAC. In the event that FAC is no longer acting
--------------
as Servicer, any Successor Servicer appointed and acting pursuant to Section
13.2 shall deliver or make available to the Issuer and FAC each certificate and
report required to be prepared, forwarded or delivered thereafter pursuant to
the provisions of this Article VI.
ARTICLE VII
RIGHTS OF NOTEHOLDERS;
ACCOUNTS AND APPLICATION
OF FUNDS
SECTION 7.1. Establishment of Accounts.
-------------------------
(a) Collection Account. The Trustee, for the benefit of the
--------------------
Noteholders, shall establish and maintain in the name of the Trustee, a
segregated trust account designated as the "FFCII 1998-A Collection Account"
bearing a designation clearly indicating that the funds deposited therein are
held in trust for the benefit of the Noteholders pursuant to this Agreement.
(b) 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 Section 7.3 and the information most
recently delivered to the Trustee pursuant to Section 6.2; provided, however,
-------- -------
that the Trustee shall be authorized (absent instructions to the Trustee to the
contrary from the Majority Holders), to accept instructions from the Servicer
regarding withdrawals or order transfers of funds from the Collection Account,
in all events in accordance with the provisions of Section 7.3 and the
information most recently delivered pursuant to Section 6.2. 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 (absent
further instructions to the contrary from the Majority Holders) regarding
withdrawals or order transfers of funds from the Collection Account, to the
extent such funds either (i) have been mistakenly deposited into the Collection
Account (including, without limitation, funds representing Assessments or dues
payable by Obligors to property owners' associations or other entities), or (ii)
relate to items subsequently returned for insufficient funds or as a result of
stop payments. In the case of any withdrawal or transfer pursuant to the
foregoing sentence, the Servicer shall provide the Trustee with notice of such
withdrawal or transfer, together with reasonable supporting details, on the next
Monthly 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) of the
second foregoing sentence.
(c) Reinvestment Account. The Trustee, for the benefit of Noteholders,
---------------------
shall establish and maintain in the name of the Trustee a segregated trust
account designated as the "FFCII 1998-A Reinvestment Account" bearing a
designation clearly indicating that the funds therein are held for the benefit
of Noteholders pursuant to this Agreement. Pursuant to authority granted to it
pursuant to Section 14.1, the Trustee shall be authorized (absent instructions
to the contrary from the Majority Holders) to accept instructions from the
Servicer regarding the withdrawal of funds from the Reinvestment Account on the
basis of the data provided to it by the Servicer and Issuer pursuant to Sections
2.4, 6.2, and 6.3 hereof.
(d) Reserve Account. The Trustee, for the benefit of the Noteholders,
---------------
shall establish and maintain in the name of the Trustee, a segregated trust
account designated as the "FFCII 1998-A Reserve Account" bearing a designation
clearly indicating that the funds deposited therein are held in trust for the
benefit of the Noteholders pursuant to this Agreement. The Trustee shall have
the sole and exclusive right to withdraw or order a transfer of funds from the
Reserve Account, in all events in accordance with the terms and provisions of
Section 7.3 and this Section 7.1(d) and the information most recently delivered
to the Trustee pursuant to Section 6.3; provided, however, that the Trustee
-------- -------
shall be authorized (prior to the occurrence of an Event of Default and absence
of instructions to the contrary from the Majority Holders) to accept
instructions from the Servicer to transfer, on each Business Day next succeeding
a Payment Date, an amount of funds held in the Reserve Account which shall in no
event be greater than the excess (if any) on such Business Day (the "Reserve
-------
Account Excess") of the then outstanding balance of available funds held in the
--------------
Reserve Account over the Reserve Account Requirement in effect as of the opening
of Business on such Business Day (after giving effect to all transactions and
fund transfers required to take place hereunder pursuant on the next preceding
Payment Date). Any amount so transferred shall constitute an additional
Servicing Fee paid to the Servicer, and shall not decrease the amount of any
Servicing fee otherwise payable to the Servicer in accordance herewith. The
Servicer, in making any such instructions for the transfer of funds from the
Reserve Account, shall simultaneously provide the Trustee with a certificate of
a Servicing Officer as to the existence and size of any Reserve Account Excess
to which Servicer is entitled. Notwithstanding anything contained in the
foregoing Paragraph to the contrary, on each Business Day from and after the
occurrence of an Event of Default, the Trustee shall have the sole right to
withdraw all or any portion of the funds on deposit in the Reserve Account for
transfer to the Collection Account, to be used solely for the purposes and in
the applicable order of priority set forth in Section 7.3 hereof.
Any funds remaining in the Reserve Account after the later of
the Termination Date and the final payment, in full and in cash, of all of the
obligations outstanding under the Notes shall, at the direction of the Trustee,
be remitted to the Issuer or as otherwise required by law.
(e) Reserved.
--------
(f) Administration of the Accounts. Funds in the Accounts shall, to the
------------------------------
best of the Servicer's and Trustee's ability, at all times be invested in
Permitted Investments; provided, however, that the Trustee shall have the sole
-------- -------
right to restrict the maturities of any Permitted Investments held in the
Accounts in order to ensure that payments may be made on each Payment Date in
accordance with Section 7.3 hereof. The Trustee shall maintain or cause to be
maintained for the benefit of the Noteholders possession of the negotiable
instruments or securities evidencing the Permitted Investments described in
clause (a) of the definition thereof from the time of purchase thereof until the
time of sale or maturity. Subject to the restrictions set forth above, the
Servicer shall instruct the Trustee in writing with respect to the investment of
funds on deposit in the Accounts. For purposes of determining the availability
of Balances in Accounts for withdrawal pursuant to Sections 7.3 and 7.4 of this
Agreement, all investment earnings on such funds shall be deemed to be available
to Issuer under this Agreement for the uses specified in such sections. 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.
(g) Any deposit made into any Account hereunder shall, except as
otherwise provided herein, be irrevocable and the amount of such deposit and any
instrument or security held in such Account hereunder and all interest thereon
shall be held in trust by the Trustee and applied solely as provided herein.
(h) All amounts delivered to the Trustee shall be accompanied by
information in reasonable detail specifying the source and nature of the
amounts.
SECTION 7.2. Lock-Box Accounts. The Issuer has established and shall
------------------
maintain a system of operations, accounts and instructions with respect to the
Obligors and Lock-Box Accounts at the Lock-Box Banks as described in Sections
--------
3.1(l), 4.1(g), 4.1(t) and 4.2(d). Pursuant to the Lock-Box Agreement to which
----- ----- ----- -----
it is party, each Lock-Box Bank shall be irrevocably instructed to initiate an
electronic transfer of all funds on deposit in the relevant Lock-Box Account to
the Collection Account on the Business Day on which such funds become available.
None of FCI, the other Originators, FAC or the Issuer, nor any Person claiming
by, through or under FCI, the other Originators, FAC or the Issuer, shall have
any control over the use of, or any right to withdraw any item or amount from,
any Lock-Box Account. Prior to the occurrence of an Event of Default or absent
instructions to the contrary from the Majority Holders, the Trustee shall be
authorized to allow the Servicer to effect or direct deposits into the Lock-Box
Accounts. The Trustee on behalf of the Noteholders is hereby irrevocably
authorized and empowered, as the Issuer's attorney-in-fact,
to endorse any item deposited in a Lock-Box Account, or presented for deposit in
any Lock-Box 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.
SECTION 7.3. Application of Funds. On each Payment Date, the Trustee
---------------------
shall, based upon the information set forth in the Servicer's Monthly Report,
apply funds in the Accounts as and in the order indicated:
(a) Provided that no Servicer Default shall have occurred and be
continuing, from amounts on deposit in the Collection Account constituting funds
recovered from Obligors or otherwise in respect of any Pledged Contract(s) as to
which the Servicer has previously made an unreimbursed Advance, to the Servicer
in an amount equal to the amount of such unreimbursed Advance;
(b) From the Reinvestment Account to the Collection Account, any
amounts in the Reinvestment Account constituting income from Permitted
Investments since the preceding Payment Date;
(c) From the Reserve Account to the Collection Account, any amounts
therein in excess of the Reserve Account Requirement;
(d) Provided that no Servicer Default shall have occurred and be
continuing, from the Collection Account, to the Servicer, an amount equal to any
Nonrecoverable Advances made by the Servicer with respect to Delinquent
Contracts;
(e) From the Collection Account, then the Reserve Account, to the
Trustee, the amount of the Trustee's Fees and expenses then due to the Trustee
pursuant to Section 14.5, and following a Service Transfer, provided that the
Successor Servicer is not FAC or any of its Affiliates, to the Servicer, the
Monthly Servicing Fee, said payments to the Trustee and the Servicer to be pro
rata and pari passu;
(f) From the Collection Account, then the Reserve Account, to BKB, the
amount of the Collateral Agent Fee;
(g) From the Collection Account, then the Reserve Account, to the
Noteholders an amount equal to the Monthly Interest;
(h) From the Collection Account, then the Reserve Account, to the
Noteholders the amount of any Unpaid Interest;
(i) From the Collection Account, to the Reserve Account, the amount
necessary to fund the Reserve Account to the Reserve Account Requirement;
(j) If prior to the Amortization Commencement Date:
(i) from the Collection Account to the Noteholders as a payment
of principal, the Release Price for Overconcentration Contracts;
(ii) from the Collection Account to the Reinvestment Account
an amount equal to the sum of (A) Gross Contract Amortization and (B)
Contract Amortization Shortfall; and
(iii) from the Reinvestment Account to Noteholders as a
payment of principal, any Excess Reinvestment Account Amount;
(k) If on or after the Amortization Commencement Date:
(i) from the Collection Account, then the Reserve Account to
Noteholders as a payment of principal an amount equal to the lesser of
(A) the Aggregate Note Principal Balance, or (B) the sum of (1) the
Note Principal Payment and (2) Unpaid Principal; and
(ii) from the Reinvestment Account to Noteholders as a payment
of principal, the entire Balance in the Reinvestment Account;
(l) From the Collection Account to the Noteholders, an amount equal to
any indemnity payments due from Issuer pursuant to Article 10;
(m) [reserved];
(n) From the Collection Account to the Servicer, if the Servicer is FAC
or any of its Affiliates, the Monthly Servicing Fee;
(o) [reserved];
(p) If an Event of Default has occurred and is continuing, or if on or
after the Amortization Commencement Date the Overcollateralization Requirement
is not met after giving effect to the payments made pursuant to Section 7.3(k),
from the Collection Account to the Noteholders as a payment of principal, the
entire remaining Balance of the Collection Account;
(q) Following a Service Transfer, from amounts in the Collection
Account in excess of an amount equal to the sum of (i) Early Collections and
(ii) the aggregate Release Price of all Defective Contacts which the Issuer was
required but failed to effect the release of on any Payment Date, to the
Servicer, the Monthly Excess Servicing Fee; and
(r) From the Collection Account to the Issuer, free of the Lien of this
Agreement, an amount equal to (i) the remaining Balance of the Collection
Account minus
-----
(ii) if any Notes are outstanding, the sum of (x) Early Collections and (y) the
aggregate Release Price of all Defective Contracts which the Issuer was required
but failed to effect the release of on any Payment Date, such funds to be used
by Issuer for any purposes not otherwise prohibited by this Agreement,
including, without limitation, (1) the payment of any Dividend to the extent
permitted pursuant to the terms of Section 4.2(r) hereof, (2) the payment of any
and all tax obligations (and imputed tax obligations) then due and payable by
the Issuer, and (3) interest on Pledged Contracts which was accrued and unpaid
on the Cutoff Date relating thereto, but subsequently deposited into the
Collection Account.
SECTION 7.4. Payment for Substitute Contracts. On each Payment Date
----------------------------------
prior to the Amortization Commencement Date, the Trustee shall, after
application of funds pursuant to Section 7.3, release from the Reinvestment
Account to the Issuer, amounts for which Substitute Contracts have been properly
Granted to the Trustee pursuant to Section 2.4.
SECTION 7.5. Servicer's Failure to Make a Deposit or Payment. The
--------------------------------------------------
Servicer shall promptly provide the Trustee with all information necessary to
enable the Trustee to make the payments and deposits required pursuant to
Sections 7.3 and 7.4. If the Servicer fails to give instructions to make any
payment or deposit required to be given by the Servicer at the time specified in
this Agreement, the Trustee shall make such payment or deposit from the
applicable Account to the extent that the Trustee is in possession of
information satisfactory to it to enable the Trustee to determine the amount of
any such payment or deposit.
SECTION 7.6. Tax Treatment. Issuer has structured this Agreement and
-------------
the Notes with the intention that the Notes will qualify under applicable tax
law as indebtedness of Issuer, and Issuer and each Noteholder by acceptance of
its Note agree to treat the Notes (or beneficial interest therein) as
indebtedness for purposes of federal, state and local income or franchise taxes
or any other tax imposed on or measured by income.
ARTICLE VIII
PAYMENTS AND REPORTS TO
NOTEHOLDERS
SECTION 8.1. Payments. On each Payment Date the Trustee shall
--------
distribute to each Noteholder of record at the close of business on the
preceding Determination Date its pro rata share, represented by Notes held by
such Noteholder, of amounts as are payable to the Noteholders pursuant to
Sections 7.3 hereof by wire transfer or other means pursuant to written
instructions delivered to the Trustee by a Noteholder at least ten (10) days
prior to such Payment Date.
SECTION 8.2. Monthly and Annual Noteholders' Statement.
-----------------------------------------
(a) Monthly Noteholders' Statement. On each Payment Date, the Trustee
------------------------------
shall forward to each Noteholder (with a copy thereof to Issuer and the
Servicer) a statement substantially in the
form of Exhibit "U" (the "Settlement Statement") prepared by the Trustee based
----------
on information and data furnished to it by the Servicer (which, in the case of
the amount of principal and interest, respectively, paid on the Notes shall be
stated in the aggregate and on the basis of an original principal amount of
$1,000 per Note).
(b) Annual Noteholders' Statement. On the Settlement Statement
--------------------------------
delivered on September 20th of each calendar year, commencing in 1999, the
Trustee shall include the aggregate amounts of principal and interest,
respectively, paid on the Notes during the preceding calendar year or portion
thereof (which shall be stated in the aggregate and on the basis of an original
principal amount of $1,000 per Note).
(c) Annual 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 Internal Revenue Code consistent with the treatment of the Notes as
indebtedness of Issuer for federal income tax purposes.
SECTION 8.3. Financial Statements. The Servicer will deliver or cause
--------------------
to be delivered, in duplicate, to each Noteholder, the Trustee and the Rating
Agency:
(a) as soon as practicable, and in any event not later than the later
of 50 days following the end of each quarterly accounting period or 10 days
following the filing of a Form 10-Q, if any, with the Securities and Exchange
Commission, consolidated statements of income and cash flows for the Servicer
and its subsidiaries for the period from the beginning of the current fiscal
year to the end of such quarterly period, and a consolidated balance sheet of
the Servicer as at the end of such quarterly period, setting forth in each case
figures for the corresponding period in the preceding fiscal year, all in
reasonable detail and certified by the authorized financial officer of the
Servicer, subject to changes resulting from normal year-end adjustments;
(b) as soon as practicable, and in any event not later than the later
of 95 days following the end of each annual accounting period or within 10 days
following the filing of a Form 10-K, if any, with the Securities and Exchange
Commission, audited consolidated statements of income and cash flows for the
Servicer for such year, and a consolidated balance sheet of the Servicer and its
subsidiaries as at the end of such year, setting forth in each case
corresponding figures from the preceding annual financial statements, all in
reasonable detail and certified by a firm of independent accountants; and
(c) to the extent not covered in subsections (a) and (b) above, as soon
as practicable and in any event within ten (10) days after such filing, any
financial reports filed by the Servicer with the Securities and Exchange
Commission.
ARTICLE IX
THE NOTES
SECTION 9.1. The Notes. The Notes shall be substantially in the form of
---------
Exhibit "G" hereto, and shall, upon original issue, be executed by Issuer by
----------
manual signature for authentication by manual signature of the Trustee upon the
order of Issuer upon receipt by the Trustee of the documents listed in Section
2.2 to be received by it on or before the Closing Date. On the Closing Date, the
Notes shall be issued in minimum denominations of $500,000 initial principal
balance and shall mature and be due and payable in their entirety on the Note
Maturity Date. Notes bearing the manual signature of the individual who was, at
the time when such signature was affixed, authorized to sign on behalf of the
Issuer shall not be rendered invalid, notwithstanding that such individual has
ceased to be so authorized prior to the authentication and delivery of such
Notes or does not hold such office at the date of such Notes. No Note shall be
entitled to any benefit under this Agreement, or be valid for any purpose,
unless there appears on such Note a certificate of authentication substantially
in the form provided for herein executed by or on behalf of the Trustee by the
manual signature of a duly authorized signatory, and such certificate upon any
Note shall be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder. All Notes shall be dated the
date of their authentication.
The Notes shall represent secured, senior indebtedness of the Issuer,
payable as provided in this Agreement.
SECTION 9.2. Registration of Transfer and Exchange of Notes.
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(a) The Trustee shall cause to be kept at the office or agency to be
maintained by a transfer agent and registrar (the "Transfer Agent and
Registrar") in accordance with the provisions of Section 9.2(b) a register (the
"Note Register") in which, subject to such reasonable regulations as it may
prescribe, the Transfer Agent and Registrar shall provide for the registration
of the Notes and of transfers and exchanges of the Notes as herein provided. The
Trustee is hereby initially appointed Transfer Agent and Registrar for the
purpose of registering the Notes and transfers and exchanges of the Notes as
herein provided. Promptly after the Closing Date, the Trustee will give the
Servicer, in writing, the names of all Noteholders and the Trustee will give the
Servicer prompt written notice of any change in the Noteholders. The Trustee (or
any successor Transfer Agent and Registrar) shall be permitted to resign as
Transfer Agent and Registrar upon 30 days' written notice to the Servicer;
provided, however, that no such resignation shall be effective until such time
------------------
that the Servicer shall have appointed a successor Transfer Agent meeting the
eligibility requirements applicable to the Trustee as set forth in Section 14.6
hereof.
No transfer of the Notes shall be made unless such transfer is exempt
from the registration requirements of the Securities Act of 1933, as amended,
and any applicable state securities laws or is made in accordance with said act
and laws. The Trustee shall require the transferee to execute a
transferee certificate (substantially in the form of Exhibit "V" hereto)
-----------
certifying to the Servicer and the Trustee the facts surrounding such transfer.
No transfer of a Note shall be made unless the Trustee shall have
received a representation letter from the transferee of such Note, substantially
in the form of Exhibit "V" hereto as to certain matters in connection with the
----------
Employee Retirement Income Security Act of 1974, as amended.
Upon surrender for registration of transfer of any Note at any office
or agency of the Transfer Agent and Registrar maintained for such purpose, the
Issuer shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferee, one or more new Notes in
authorized denominations and like aggregate principal balance.
At the option of a Noteholder, any Notes may be exchanged for other
Notes of authorized denominations and aggregate principal balance, upon
surrender of the Notes to be exchanged at any such office or agency. Whenever
any Notes are so surrendered for exchange, Issuer shall execute and the Trustee
shall authenticate and deliver the Notes which the Noteholder making the
exchange is entitled to receive. Every Note presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in a form satisfactory to the Trustee and the Transfer
Agent and Registrar duly executed by the Noteholder thereof or its attorney duly
authorized in writing.
No service charge shall be assessed against any Noteholder or Issuer
for any registration of transfer or exchange of Notes, but the Transfer Agent
and Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Notes, which sum shall not be an expense of the Trustee, Issuer or
the Servicer.
All Notes surrendered for registration of transfer and exchange shall
be cancelled and disposed of in a manner satisfactory to the Transfer Agent and
Registrar.
(b) The Transfer Agent and Registrar will maintain at its expense in
Salt Lake City, Utah, an office or offices or agency or agencies where Notes may
be surrendered for registration of transfer or exchange.
SECTION 9.3. Mutilated, Destroyed, Lost or Stolen Notes. If (a) any
--------------------------------------------
mutilated Note is surrendered to the Transfer Agent and Registrar, or the
Transfer Agent and Registrar receives evidence to its reasonable satisfaction of
the destruction, loss or theft of any Note and (b) there is delivered to the
Transfer Agent and Registrar and the Trustee such security or indemnity as the
Transfer Agent and Registrar and the Trustee may reasonably request (which, in
the case of an Institutional Investor, will be satisfied by an unsecured
indemnity agreement), then, in the absence of notice to the Trustee that such
Note has been acquired by a bona fide purchaser, the Trustee shall authenticate
and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost
or stolen Note, a new Note of like tenor and aggregate principal balance. In
connection with the issuance of any new Note under this Section 9.3, the Trustee
or the Transfer Agent and Registrar may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses of
the Trustee and Transfer Agent and Registrar) connected therewith, which sum
shall not be an expense of the Trustee, Issuer or the Servicer. Any replacement
Note issued pursuant to this Section 9.3 shall constitute complete and
indefeasible evidence of indebtedness of Issuer, as if originally issued,
whether or not the lost, stolen or destroyed Note shall be found at any time.
SECTION 9.4. Persons Deemed Owners. Prior to due presentation of a Note
---------------------
for registration of transfer, the Trustee, the Transfer Agent and Registrar and
any agent of any of them may treat the person in whose name any Note is
registered as the owner of such Note for the purpose of receiving distributions
pursuant to Article VII and for all other purposes whatsoever, and neither the
Trustee, the Transfer Agent and Registrar nor any agent of any of them shall be
affected by any notice to the contrary; provided, however, that in determining
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whether the holders of the requisite aggregate principal balance have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Notes owned by Issuer, the Servicer or any Affiliate thereof shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes which the
Trustee knows to be so owned shall be so disregarded. Notes so owned which have
been pledged in good faith shall not be disregarded and may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is not
Issuer, the Servicer or an Affiliate thereof.
SECTION 9.5. Access to List of Noteholders' Names and Addresses. The
---------------------------------------------------
Trustee will furnish or cause to be furnished by the Transfer Agent and
Registrar to the Servicer or any Noteholder, within five Business Days after
receipt by the Trustee of a written request therefor from the Servicer or such
Noteholder, respectively, a list in such form as the Servicer or such Noteholder
may reasonably require, of the names and addresses of the Noteholders as of the
most recent Determination Date for payment of distributions to Noteholders.
Every Noteholder, by receiving and holding a Note, agrees that neither the
Trustee, the Transfer Agent and Registrar, the Servicer nor any of their
respective agents, shall be held accountable by reason of the disclosure of any
such information pursuant to the preceding sentence, regardless of the source
from which such information was obtained.
ARTICLE X
INDEMNITIES
SECTION 10.1. Liabilities to Obligors. No obligation or liability to
------------------------
any Obligor under any of the Pledged Contracts is intended to be assumed by the
Trustee or the Noteholders under or as a result of this Agreement and the
transactions contemplated hereby and, to the maximum extent permitted by law,
the Trustee and the Noteholders expressly disclaim any such obligation and
liability.
SECTION 10.2. Tax Indemnification. Issuer agrees to pay, and to
--------------------
indemnify, defend and hold harmless the Trustee and the Noteholders from, any
taxes which may at any time be asserted with respect to, and as of the date of,
the Grant of the Pledged Contracts to the Trustee, 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. The Servicer shall defend and
-----------------------
indemnify the Trustee, Issuer, FAC (if it is no longer the Servicer) and the
Noteholders against any and all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel and expenses of
litigation, in respect of any action taken, or failure to take any action by the
Servicer (but not by any predecessor Servicer) with respect to this Agreement or
any Pledged Contract; provided, however, that if a Successor Servicer is acting
-----------------
as Servicer, 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 such Successor Servicer. This
indemnity shall survive any Service Transfer (but a Servicer's obligations under
this Section 10.3 shall not relate to any actions of any Successor Servicer
after a Service Transfer) and any payment of the amount owing under, or any
purchase release by Issuer of any such Pledged Contract.
SECTION 10.4. FAC's Indemnities. FAC shall defend and indemnify Issuer,
-----------------
the Trustee, the Noteholders and the Servicer (if FAC is no longer the Servicer)
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 (i) the breach of any representation, warranty or covenant of FAC
made hereunder or any representation, warranty or covenant of FAC made under the
Receivables Purchase Agreement and (ii) any action taken, or any failure to take
action, by FAC at any time whatsoever with respect to this Agreement or any
Pledged Contract.
SECTION 10.5. 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 or the Noteholders pursuant to this Article and if
either the Trustee or the Noteholders thereafter collects any of such amounts
from others, the Trustee or the Noteholders will promptly repay such amounts
collected to the Servicer without interest.
ARTICLE XI
[RESERVED]
ARTICLE XII
EVENTS OF DEFAULT
SECTION 12.1. Events of Default. If any one of the following events shall
-----------------
occur:
(a) failure on the part of Issuer or the Servicer (1) to make or cause
to be made any payment or deposit required by the terms of this Agreement on or
before the date such payment or deposit is required to be made herein, or (2)
duly to observe or perform or caused to be observed or performed any covenant or
agreement of Issuer or the Servicer set forth in this Agreement, the Receivables
Purchase Agreement or any Purchase Agreement, which continues unremedied for a
period of 30 days (or 5 Business Days, in the case of Sections 4.1(i) and (u)(i)
and 4.2(a), (d), (e), (i), (r)and (t)) after the earlier of (aa) the date on
which written notice of such failure, requiring the same to be remedied, shall
have been given to Issuer or the Servicer, as the case may be, by the Trustee,
or to Issuer or the Servicer, as the case may be, and the Trustee by any
Noteholder or (bb) the date on which Issuer or the Servicer has actual knowledge
thereof;
(b) any representation or warranty made (or deemed to be made) by
Issuer or the Servicer in Sections 3.1 and 5.12 of this Agreement, or any
representation or warranty made (or deemed to be made) by Issuer, FAC or FCI in
the Receivables Purchase Agreement or any Purchase Agreement, shall prove to
have been incorrect in any respect when made (or deemed to be made);
(c) (1) Issuer or the Trustee shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating to
Issuer or the Trustee of or relating to all or substantially all of its
property, or (2) a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against Issuer or the
Trustee and such decree or order shall have remained in force undischarged or
unstayed for a period of 60 days; or (3) Issuer or the Trustee 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; provided, however that the
------------------
occurrence of any of the events described in clauses (1), (2) or (3) with
respect to the Trustee shall not constitute an Event of Default if within 30
days following the occurrence thereof a successor Trustee satisfactory to the
Majority Holders shall have been appointed and accepted such appointment.
(d) Issuer shall become an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, or shall become under the
control of an "investment company";
(e) any Servicer Default shall occur and a Successor Servicer shall not
have been appointed and accepted appointment within five Business Days
thereafter;
(f) the Notes fail to qualify as debt for federal income tax purposes;
(g) the failure of the Contract Pool Principal Balance to be equal to
or greater than the Aggregate Note Principal Balance;
(h) any event which materially adversely affects the collectibility of
the Contract Pool or which materially adversely affects the ability of the
Servicer to collect on the Contract Pool; or
(i) failure on the part of FCI or FAC to observe and perform any
covenant or agreement set forth in the Receivables Purchase Agreement, or any
Purchase Agreement, which continues unremedied for a period of 30 days after the
earlier of (aa) the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to FCI or FAC by Issuer, the Servicer
or the Trustee, as the case may be, or to FCI or FAC and the Trustee by any
Noteholder or (bb) the date on which FCI or FAC has actual knowledge thereof.
THEN, in the case of any event described in subparagraph (a)(2) or (i), after
the applicable grace period, if any, set forth in such subparagraphs, either the
Trustee or the Holders of Notes aggregating more than 25% of the Aggregate Note
Principal Balance by notice then given in writing to Issuer (and to the Trustee
if given by the Noteholders) may declare that an event of default (an "Event of
Default") has occurred as of the date of such notice, and in the case of any
event described in subparagraph (a)(1), (b), (c), (d), (e), (f), (g) or (h), an
Event of Default shall occur without any notice or other action on the part of
the Trustee or the Noteholders, immediately upon the occurrence of such event
and shall continue unless waived in writing by the Holders of 100% of the Notes.
Promptly after the automatic occurrence of an Event of Default, and, in any
event, within two Business Days thereafter, the Trustee shall notify each
Noteholder and the 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 12.2. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
(a) If any Event of Default with respect to Issuer described in Section
12.1(c) hereof shall occur and be continuing, the principal of all the Notes
then outstanding, together with accrued interest thereon, shall automatically be
immediately due and payable. If any other Event of Default shall have occurred
and be continuing, the Majority Holders may declare the principal of all the
Notes then outstanding, together with accrued interest thereon to be immediately
due and payable, by a notice in writing to Issuer and to the Trustee 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 has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this Article
provided, the Majority Holders by written notice to Issuer and the
Trustee, may, but are not required to, rescind and annul such acceleration and
its consequences. No such rescission shall affect any subsequent Event of
Default or impair any right consequent thereon.
SECTION 12.3. Collection of Indebtedness and Suits for Enforcement by
--------------------------------------------------------
Trustee. 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, Issuer shall, upon demand of the Trustee, pay to it, for the
benefit of the Noteholders, the whole amount then due and payable on the Notes
for principal and interest, with interest upon the overdue principal and upon
overdue installments of interest at the Note Rate plus 2% per annum 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.
Until such demand is made by the Trustee, 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 Article VII of this Agreement,
whether or not the Notes are overdue.
If Issuer fails to pay such amounts forthwith upon such demand, then
the Trustee for the benefit of the Noteholders and as trustee of an express
trust, may, with the prior written consent of the Majority Holders institute
suits in equity, actions at law or other legal, judicial or administrative
proceedings (each a "Proceeding") for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against Issuer and collect the moneys adjudged or decreed to be
payable in the manner provided by law out of the property of Issuer, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may, with
the prior written consent of the Majority Holders, proceed to protect and
enforce its rights and the rights of the Noteholders hereunder and under the
Notes, by such appropriate Proceedings as are necessary to effectuate, protect
and enforce any such rights, whether for the specific enforcement of any
covenant, agreement, obligation or indemnity in this Agreement or in aid of the
exercise of any power granted herein or therein, or to enforce any other proper
remedy.
SECTION 12.4. 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 Issuer or
the property of Issuer or its creditors, the Trustee (irrespective of whether
the principal of the Notes shall then be due and payable as therein expressed or
by declaration or otherwise) shall be entitled and empowered, by intervention in
such Proceeding or otherwise,
(a) to file a proof of claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes and to file such other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of the
Noteholders allowed in such Proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same to the Noteholders;
and any receiver, assignee, trustee, liquidator or sequestrator (or other
similar official) in any such Proceeding is hereby authorized by each Noteholder
to make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Noteholders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Article XIV.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such Proceeding.
SECTION 12.5. Remedies.
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(a) If an Event of Default shall have occurred and be continuing, the
Trustee and Collateral Agent may, with the prior written consent of the Majority
Holders do one or more of the following (subject to Section 12.6 hereof):
(1) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the Notes or
under this Agreement, whether by declaration or otherwise, enforce any judgment
obtained, and collect from the Collateral and the property of Issuer monies
adjudged due;
(2) obtain possession of Pledged Contracts 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 12.13 hereof;
(3) institute Proceedings in its own name and as trustee of an
express trust from time to time for the complete or partial foreclosure of this
Agreement with respect to the Collateral; and
(4) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights and remedies
of the Trustee or the Holders and each other agreement contemplated hereby
(including retaining the Collateral pursuant to Section 12.6 hereof and applying
distributions from the Collateral pursuant to Section 12.7 hereof);
provided, however, that neither the Trustee, nor the Collateral Agent, may sell
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or otherwise liquidate the Collateral following an Event of Default other than
an Event of Default described in Section 12.1(a) hereof, unless either (i) the
Holders of 100% of the Aggregate Note Principal Balance then outstanding consent
thereto, (ii) the proceeds of such sale or liquidation distributable
to the Noteholders are sufficient to discharge in full the amounts then due and
unpaid upon the Notes for principal and accrued interest and the fees and other
amounts required to be paid prior to payment of amounts due on the Notes
pursuant to Section 12.7 hereof, or (iii) the Majority Holders consent thereto
and the Trustee determines that the Collateral will not continue to provide
sufficient funds for the payment of principal of, and interest on, the Notes as
they would have become due if such Notes would not have been declared due and
payable.
(b) In addition to the remedies provided in Section 12.5(a) hereof, if
an Event of Default as described in Section 12.1(a), (b), (d), (e), (f), (g),
(h), (i) or (j) hereof shall have occurred and be continuing the Trustee may,
and at the request of the Majority Holders shall, institute a Proceeding in its
own name and as Trustee of an express trust solely to compel performance of the
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
under such Section; and the Trustee may enforce any equitable decree or order
arising from such Proceeding.
SECTION 12.6. Optional Preservation of Collateral. If the Notes have
------------------------------------
been accelerated following an Event of Default and such acceleration and its
consequences have not been rescinded and annulled, to the extent permitted by
law, the Trustee may, and at the request of the Majority Holders shall, elect to
retain the Collateral securing the Notes intact for the benefit of the Holders
of the Notes and in such event it shall deposit all funds received with respect
to the Collateral in the Collection Account and apply such funds in accordance
with the payment priorities set forth in Article VII of this Agreement, as if
there had not been such an acceleration, provided that the Trustee shall have
determined that the distributions and other amounts receivable with respect to
such Collateral are sufficient to provide the funds required to pay the
principal of and interest on the Notes as and when such principal and interest
would have become due and payable pursuant to the terms hereof and of such Notes
if there had not been a declaration of acceleration of maturity of the Notes.
For purposes of clause (ii) or (iii) of the proviso to Section 12.5(a)
and this Section 12.6, 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.
Until the Trustee has elected, or has determined not to elect, to
retain the Collateral pursuant to this Section 12.6, the Trustee shall continue
to apply all distributions received on such Collateral in accordance with
Article VII of this Agreement. If the Trustee determines to retain the
Collateral as provided in this Section 12.6, such determination shall be deemed
to be a rescission and annulment (but not a waiver) of the aforementioned Event
of Default and its consequences pursuant to Section 12.2 but no such rescission
and annulment shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.
SECTION 12.7. Application of Money Collected During Event of Default.
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If the Notes have been accelerated following an Event of Default and such
acceleration and its
consequences have not been rescinded and annulled, and distributions on the
Collateral securing the Notes are not being applied pursuant to Section 12.6
hereof, any monies collected by the Trustee pursuant to this Article XII or
otherwise with respect to such Notes shall be applied on the date or dates fixed
by the Trustee in accordance with Section 7.3 hereof.
SECTION 12.8. Limitation on Suits by Individual Noteholders. Subject to
---------------------------------------------
Section 12.9, no Noteholder shall have any right to institute any Proceeding
with respect to this Agreement, or for the appointment of a receiver or trustee,
or for any other remedy hereunder or thereunder, unless:
(a) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(b) the Majority Holders shall have made written requests to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request (which in the case of an Institutional Investor
shall be satisfied by a written agreement to pay such costs, expenses and
liabilities); and
(d) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such Proceeding,
it being understood and intended that no one or more Noteholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Agreement to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Agreement, except in the manner
herein provided and for the equal and ratable benefit of all the Noteholders.
SECTION 12.9. Unconditional Rights of Noteholders to Receive Principal
--------------------------------------------------------
and Interest. Notwithstanding any other provision in this Agreement, the Holder
------------
of any Note shall have the right, which right is absolute and unconditional, to
receive payment of the principal and interest on such Note on or after the
respective due dates thereof expressed in such Note or in this Agreement (or, in
the case of redemption, on the Redemption Date) and to institute suit for the
enforcement of any such payment, and such right shall not be impaired without
the consent of such Noteholder.
SECTION 12.10. Restoration of Rights and Remedies. If the Trustee or
-----------------------------------
any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Agreement and such Proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee or to such
Noteholder, then and in every such case Issuer, the Trustee and the Noteholders
shall, subject to any determination in such Proceeding, be restored severally
and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Trustee and the Noteholders shall continue as though no such
Proceeding had been instituted.
SECTION 12.11. Waiver of Past Defaults. 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 Issuer in connection with this Agreement and
with the Notes, the Majority Holders may on behalf of the Holders of all the
Notes waive any past default hereunder and its consequences, except a default:
(a) in the payment of the principal of or interest on any Note, or
(b) in respect of a covenant or provision hereof which under Section
16.1 cannot be modified or amended without the consent of all the Noteholders
affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Agreement; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 12.12. Waiver of Stay or Extension Laws. Issuer covenants (to
--------------------------------
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Agreement; and
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 12.13. Sale of Collateral.
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(a) The power to effect any sale (a "Sale") of any portion of the
Collateral pursuant to Section 12.5 hereof 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 under this Agreement with respect thereto shall
have been paid, whichever occurs later. The Trustee may from time to time
postpone any Sale by public announcement made at the time and place of such
Sale. The Trustee hereby expressly waives its right to any amount fixed by law
as compensation for any Sale.
(b) The Trustee 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 Issuer to transfer and convey
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 12.14. Action on Notes. The Trustee's right to seek and recover
---------------
judgment on the Notes or under this Agreement shall not be affected by the
seeking, obtaining or application of any other relief under or with respect to
this Agreement. None of the rights or remedies of the Trustee or the Noteholders
hereunder shall be impaired by the recovery of any judgment by the Trustee or
any Noteholder against Issuer or by the levy of any execution under such
judgment upon any portion of the Collateral or upon any of the assets of Issuer.
SECTION 12.15. Rights of Dissenting Noteholders with Respect to Certain
--------------------------------------------------------
Actions. Any Noteholder not consenting to the foreclosure upon or disposition of
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any Collateral by the Trustee as provided by this Article, if such Noteholder
shall believe that such foreclosure or disposition might subject such Noteholder
to liability, may elect by written notice to the Trustee to abandon and
terminate all of its right, title and interest with respect to all of the
transactions contemplated by this Agreement, including without limitation its
right, title and interest in and to the Collateral and any amount thereafter
becoming due under the Notes held by it. Such abandonment and termination shall
be effective immediately upon delivery of such notice to the Trustee pursuant to
Section 16.5, whereupon without any further action such Noteholder shall forfeit
all of its rights and be released from all of its obligations with respect to
all of the transactions contemplated by this Agreement and shall otherwise cease
to be a Noteholder hereunder for any purpose whatsoever, and the Notes held by
such Noteholder shall be deemed not to be outstanding for any purpose
whatsoever; provided, however that such abandonment and termination shall not
------------------
deprive such Noteholder of any of its rights, nor relieve such Noteholder of any
of its obligations, with respect to any matters arising in connection with the
transactions contemplated by this Agreement prior to such abandonment and
termination.
ARTICLE XIII
SERVICER DEFAULTS
SECTION 13.1. Servicer Defaults. If any one of the following events (a
------------------
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to deliver any Servicer's Daily Report
pursuant to Section 6.1, which continues unremedied for a period of five
Business Days after such report is due; provided, however, the Servicer shall
------------------
not be entitled to cure any future failure to deliver any Servicer's Daily
Report pursuant to Section 6.1 after Servicer shall have received written notice
from Majority Holders to the effect that, in their reasonable good faith
judgment and based on information they believe to be reliable, they have
determined that the Servicer is no longer able (or, in the future may no longer
be able) to discharge its duties effectively under this Agreement;
(b) any failure by the Servicer to deliver any information to the
Trustee pursuant to Section 6.2 or any Servicer's Monthly Report to the Trustee,
the Rating Agency, and each Noteholder pursuant to Section 6.3 or to make any
payment, transfer or deposit or to give instructions or notice to the Trustee
pursuant to Article VII on or before the date such information,
Servicer's Monthly Report, payment, transfer, deposit, instruction or notice is
required to be made or given under the terms of this Agreement;
(c) failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer set forth in this Agreement or any
Purchase Agreement, which continues unremedied for a period of 30 days after 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 any Noteholder; or the Servicer shall assign its duties under this
Agreement, except as permitted by Section 5.17;
(d) any representation, warranty or certification made by the Servicer
in this Agreement or any Purchase Agreement or in any certificate delivered
pursuant to this Agreement or any Purchase Agreement shall prove to have been
incorrect in any material respect when made;
(e) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to the Servicer or
of or relating to all or substantially all of its property, or a decree or order
of a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Servicer and such decree or order shall have
remained in force undischarged or unstayed for a period of 60 days; or the
Servicer shall become insolvent, admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable Debtor Relief Law, make any assignment for the benefit of its
creditors or voluntarily suspend payment of its obligations;
(f) a final judgment is rendered against FAC while acting as Servicer
in an amount greater than $1,000,000 and, within 45 days after entry thereof,
such judgment is not discharged or execution thereof stayed pending appeal, or
within 45 days after the expiration of any such stay, such judgment is not
discharged; or
(g) the Majority Holders (A) shall receive notice from the Servicer
that the Servicer is no longer able to discharge its duties under this Agreement
or (B) shall determine, in their reasonable judgment and based upon published
reports (including wire services), which they reasonably believe in good faith
to be reliable, that the Servicer: (1) has experienced a material adverse change
in its business, assets, liabilities, operations, or financial condition, (2)
has defaulted on any of its material obligations (other than those included in
this Agreement), or (3) has ceased to conduct its business in the ordinary
course.
THEN, so long as such Servicer Default shall be continuing, either the Trustee,
or the Majority Holders, by notice then given in writing to the Servicer and
Rating Agency (and to the Trustee if given by the Majority Holders) (a
"Termination Notice"), may terminate all of the rights and obligations of the
Servicer as Servicer under this Agreement (such termination being herein called
a "Service Transfer"). After receipt by the Servicer of such Termination Notice
and on the date that a Successor Servicer shall have been appointed by the
Majority Holders pursuant to Section 13.2, all
authority and power of the Servicer under this Agreement shall pass to and be
vested in such Successor Servicer without further action on the part of any
Person, and, without limitation, the Trustee at the direction of the Majority
Holders is hereby authorized and empowered (upon the failure of the Servicer to
cooperate) to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, all documents and other instruments upon the
failure of the Servicer to execute or deliver such documents or instruments, and
to do and accomplish all other acts or things necessary or appropriate to effect
the purposes of such transfer of servicing rights.
The Servicer agrees to cooperate with the Trustee and such Successor
Servicer in effecting the termination of the responsibilities and rights of the
Servicer to conduct servicing hereunder, including, without limitation, the
transfer to such Successor Servicer of all authority of the Servicer to service
the Pledged Contracts provided for under this Agreement, including, without
limitation, all authority over any Collections which shall on the date of
transfer be held by the Servicer for deposit in a Lockbox Account or which shall
thereafter be received by the Servicer with respect to the Pledged Contracts,
and in assisting the Successor Servicer in enforcing all rights under this
Agreement including, without limitation, allowing the Successor Servicer's
personnel access to the Servicer's premises for the purpose of collecting
payments on the Pledged Contracts made at such premises. The Servicer shall
promptly transfer its electronic records relating to the Pledged Contracts 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 Contracts 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 13.1 shall require the Servicer to
disclose to the Successor Servicer information of any kind which the Servicer
reasonably deems to be confidential, the Successor Servicer shall be required to
enter into such customary licensing and confidentiality agreements as the
Servicer shall deem necessary to protect its interest and as shall be
satisfactory in form and substance to the Successor Servicer. The Servicer
hereby consents to the entry against it of an order for preliminary, temporary
or permanent injunctive relief by any court of competent jurisdiction, to ensure
compliance by the Servicer with the provisions of this paragraph.
SECTION 13.2. Appointment of Successor.
------------------------
(a) Appointment. On and after the receipt by the Servicer of a
-----------
Termination Notice pursuant to Section 13.1, or any permitted resignation of the
Servicer pursuant to Section 5.17, the Servicer shall continue to perform all
servicing functions under this Agreement until the date specified in the
Termination Notice or otherwise specified by the Trustee in writing or, if no
such date is specified in such Termination Notice, or otherwise specified by the
Trustee, until a date mutually agreed upon by the Servicer and the Trustee. Upon
receipt by the Servicer of a Termination Notice, the Majority Holders 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 Majority Holders; provided that such appointment shall be
subject to the receipt from the Rating Agency of a Rating Confirmation Letter.
In the event that a Successor Servicer has not been appointed and has not
accepted its appointment at the time when the Servicer ceases to act as
Servicer, the Majority Noteholders 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 Contracts or if no such institution is
available, other consumer finance receivables, as the Successor Servicer
hereunder.
(b) Duties and Obligations of Successor Servicer. Upon its appointment,
--------------------------------------------
the Successor Servicer shall be the successor in all respects to the Servicer
with respect to servicing functions under this Agreement and shall be subject to
all the responsibilities and duties relating thereto placed on the Servicer by
the terms and provisions hereof, and all references in this Agreement to the
Servicer shall be deemed to refer to the Successor Servicer.
(c) Compensation of Successor Servicer. In connection with such
-------------------------------------
appointment and assumption, the Trustee may make such arrangements for the
compensation of the Successor Servicer out of Collections as it and such
Successor Servicer shall agree; provided, however, that no such compensation
------------------
shall be in excess of the Monthly Servicing Fee and Monthly Excess Servicing
Fee.
(d) Termination of Servicer's Authority. All authority and power
--------------------------------------
granted to any Successor Servicer under this Agreement shall automatically cease
and terminate upon termination of this Agreement pursuant to Section 15.1, and
shall pass to and be vested in Issuer and, without limitation, Issuer is hereby
authorized and empowered to execute and deliver, on behalf of the Successor
Servicer, as attorney-in-fact or otherwise, all documents and other instruments,
and to do and accomplish all other acts or things necessary or appropriate to
effect the purposes of such transfer of servicing rights upon termination of
this Agreement. The Successor Servicer shall cooperate with Issuer in effecting
the termination of the responsibilities and rights of the Successor Servicer to
conduct servicing on the Pledged Contracts. The Successor Servicer shall
transfer its electronic records relating to the Pledged Contracts to Issuer in
such electronic form as Issuer may reasonably request and shall transfer all
other records, correspondence and documents relating to the Pledged Contracts to
Issuer in the manner and at such times as Issuer shall reasonably request. To
the extent that compliance with this Section 13.2 shall require the Successor
Servicer to disclose to the information of any kind which the Successor Servicer
deems to be confidential, Issuer shall be required to enter into such customary
licensing and confidentiality agreements as the Successor Servicer shall deem
necessary to protect its interests and as shall be reasonably satisfactory in
form and substance to Issuer.
SECTION 13.3. 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 Trustee shall give notice to the
Noteholders at their respective addresses appearing in the Note Register. Upon
any termination or appointment of a Successor Servicer pursuant to this Article
XIII, the Trustee shall give prompt written notice thereof to Noteholders at
their respective addresses appearing in the Note Register.
SECTION 13.4. Waiver of Past Defaults. The Majority Holders may, on
------------------------
behalf of all Holders, waive any default by the Servicer in the performance of
its obligations hereunder and its
consequences. Upon any such waiver of a past default, such default shall cease
to exist, and any default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon except to the
extent expressly so waived.
SECTION 13.5. Certain Matters Affecting the Successor Servicer. In the
------------------------------------------------
event that a Successor Servicer is appointed hereunder, it shall be entitled to
the following rights, remedies, and protections in carrying out its duties as
Servicer hereunder: (i) the Successor Servicer shall not be liable for any act
or omission in carrying out its duties hereunder except for its own negligence,
reckless disregard of its duties, bad faith or misconduct; (ii) the Successor
Servicer may rely on and be fully protected in acting or refraining from acting
in accordance with any resolution, certificate, letter, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond, or other
document received by it which it has reason to believe is genuine and signed or
presented to it by a proper party; (iii) the Successor Servicer may consult with
counsel, and any opinion from such counsel (so long as such counsel is not an
employee of the Successor Servicer or an Affiliate of the Successor Servicer)
shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by the Successor Servicer in good faith in accordance
with such opinion; and (iv) the Successor Servicer shall not be required to
expend or risk its own funds for extraordinary expenses or otherwise incur
extraordinary financial liability in the performance of its duties hereunder if
it reasonably believes that the repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it (which assurance
shall be deemed to have been given by an unsecured indemnity agreement from an
Institutional Investor). The reference to extraordinary expenses and liabilities
in clause (iv) of the preceding sentence refers to the out-of-pocket costs and
expenses, including any attorneys' fees and expenses, incurred in connection
with suits against Obligors for the enforcement of Pledged Contracts pursuant to
Section 5.5, together with the risk of any liabilities or counterclaims which
could be incurred in connection therewith.
ARTICLE XIV
THE TRUSTEE
SECTION 14.1. Duties of Trustee.
-----------------
(a) The Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. The Trustee is hereby
authorized and empowered to make the withdrawals and payments from the Accounts
in accordance with the instructions set forth in this Agreement until the
termination of this Agreement in accordance with Section 15.1 unless this
appointment is earlier terminated pursuant to the terms hereof.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to
determine whether they conform to such requirements. The Trustee shall give
prompt written notice to the Noteholders of any material lack of conformity of
any such instrument to the applicable requirements of this Agreement discovered
by the Trustee.
(c) Subject to Section 14.1(a) hereof, no provision of this Agreement
shall be construed to relieve the Trustee from liability for its own gross
negligence, reckless disregard of its duties, bad faith or misconduct; provided,
--------
however, that:
-------
(i) The Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer, Responsible Officers 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 the direction of the Majority Holders relating to the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under this
Agreement; and
(iii) The Trustee shall not be charged with knowledge of any
failure by any other party hereto to comply with its obligations hereunder or of
the occurrence of any Event of Default or Servicer Default unless a Responsible
Officer or employee of the Trustee obtains actual knowledge of such failure
based upon receipt of written information or other communication or the Trustee
receives written notice of such failure from the Servicer or any Noteholder.
(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, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Servicer under this Agreement except during such time,
if any, as the Trustee shall be the successor to, and be vested with the rights,
duties, powers and privileges of, the Servicer in accordance with the terms of
this Agreement.
(e) Except for actions expressly authorized by this Agreement, the
Trustee shall take no action reasonably likely to impair the interests of Issuer
in any Contract now existing or hereafter created or to impair the value of any
Contract now existing or hereafter created.
(f) Except as provided in this Agreement, the Trustee shall have no
power to dispose of or vary the Collateral.
(g) In the event that the Transfer Agent and Registrar shall fail to
perform any obligation, duty or agreement in the manner or on the day required
to be performed by the Transfer
Agent and Registrar, as the case may be, under this Agreement, the Trustee (if
it is not then the Transfer Agent and Registrar) shall be obligated promptly to
perform such obligation, duty or agreement in the manner so required.
SECTION 14.2. 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 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 Issuer or the Servicer) shall be full
and complete authorization and protection from liability to the Issuer and
Noteholders in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such Opinion of Counsel;
(c) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation hereunder or in relation hereto, at the request, order or
direction of any of the Noteholders, pursuant to the provisions of this
Agreement, unless such Noteholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby (which, in the case of an Institutional Investor,
will be satisfied by an unsecured indemnity agreement); nothing contained herein
shall, however, relieve the Trustee of the obligations, upon the occurrence of
any Servicer Default (which has not been cured), to exercise such of the rights
and powers vested in it by this Agreement, and to use the same degree of care
and skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs;
(d) Neither the Trustee nor any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be liable for any action taken,
suffered or omitted to be taken by the Trustee or such Person in good faith and
believed by such Person to be authorized or within the discretion or rights or
powers conferred upon it by this Agreement, nor for any action taken or omitted
to be taken by any other party hereto;
(e) the Trustee shall not be bound to make any investigation into the
facts of matters stated in any Monthly Servicing Report, 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 Majority Holders;
(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; and
(g) except as may be required by Section 14.1(b) hereof, the Trustee
shall not be required to make any initial or periodic examination of any
documents or records related to the Pledged Contracts for the purpose of
establishing the presence or absence of defects, the compliance by the Servicer
or Issuer with their respective representations and warranties or for any other
purpose.
SECTION 14.3. Trustee Not Liable for Recitals in Notes. The Trustee
-----------------------------------------
assumes no responsibility for the correctness of the recitals contained herein
and in the Notes (other than the certificate of authentication on the Notes) or
for any statements, representations or warranties made herein by any Person
other than the Trustee (except as expressly set forth herein). Except as set
forth in Section 14.14, the Trustee makes no representations as to the validity,
enforceability or sufficiency of this Agreement or of the Notes (other than the
certificate of authentication on the Notes) or of any Pledged Contract 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 Issuer of the proceeds of any of
the Notes, or for the use or application of any funds paid to Issuer in respect
of the Pledged Contracts.
SECTION 14.4. Trustee May Own Notes; Trustee in its Individual
-------------------------------------------------------
Capacity. First Security 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. First Security Bank, National
Association and its Affiliates may generally engage in any kind of business with
Issuer, the Servicer or FCI as though First Security Bank, National Association
were not acting in such capacity hereunder and without any duty to account
therefor. Nothing contained in this Agreement shall limit in any way the ability
of First Security Bank, National Association and its Affiliates to act as a
trustee or in a similar capacity for other interval ownership and lot contract
and installment note financings pursuant to agreements similar to this
Agreement.
SECTION 14.5. Trustee's Fees and Expenses; Indemnification. The Trustee
--------------------------------------------
shall be entitled to receive from time to time pursuant to Section 7.3(e) and
the Trustee Fee Letter, (a) such compensation as shall be agreed to between
Issuer and the Trustee (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust) for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties hereunder as the Trustee and to
be reimbursed for its out-of-pocket expenses (including reasonable attorneys'
fees), incurred or paid in establishing, administering and carrying out its
duties under this Agreement or the Collateral Agency Agreement, and (b) subject
to Section 10.3, Issuer and FAC agree, jointly and severally, to pay, reimburse,
indemnify and hold harmless the Trustee (without reimbursement from any Account
or otherwise) upon its request for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever (including, without limitation, fees, expenses and
disbursements of counsel) which may at any time (including without limitation,
at any time following the termination of this Agreement and payment on account
of the Notes) be imposed on, incurred by or asserted against the Trustee in any
way relating to or arising out of this Agreement, the Collateral Agency
Agreement or 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 misconduct of the Trustee and except that
if the Trustee is appointed Successor Servicer pursuant to Section 13.2, the
provisions of this Section 14.5 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 14.5 shall survive the termination of this
Agreement and all amounts payable on account of the Notes.
SECTION 14.6. Eligibility Requirements for Trustee. The Trustee
----------------------------------------
hereunder (if other than First Security 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 First Security 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 14.6, 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 14.6, the Trustee shall resign immediately in the
manner and with the effect specified in Section 14.7.
SECTION 14.7. 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,
Servicer, the Noteholders and the Rating Agency. Upon receiving such notice of
resignation, the Servicer shall promptly arrange to appoint a successor trustee,
subject to the approval of the Majority Holders, meeting the requirements of
Section 14.6 and the Servicer shall notify the Trustee and Rating Agency of such
appointment by written instrument, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to the successor Trustee. If no
successor Trustee shall have been so appointed and have accepted within 30 days
after the giving of such notice of resignation, a successor Trustee shall be
appointed by Majority Holders. The successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the Trustee. If no
successor Trustee shall have been so appointed by the Servicer or the
Noteholders and shall have accepted appointment in the manner hereinafter
provided, any Noteholder, on behalf of itself and all others similarly situated,
or the resigning Trustee may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
(b) If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 14.6 hereof and shall fail to resign after
written request therefor by the Servicer, or if at any time the Trustee shall be
legally unable to act, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation
or liquidation, then the Servicer or the Majority Holders may remove the Trustee
and promptly appoint a successor Trustee by written instrument, one copy of
which instrument shall be delivered to the Trustee so removed and one copy to
the successor Trustee.
(c) At any time the Majority Holders may remove the Trustee and
promptly appoint a successor Trustee by written instrument, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor Trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 14.7 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 14.8 hereof.
SECTION 14.8. Successor Trustee.
-----------------
(a) Any successor Trustee, appointed as provided in Section 14.7
hereof, shall execute, acknowledge and deliver to 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 documents and statements 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 14.8 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 14.6 hereof.
(c) Upon acceptance of appointment by a successor Trustee as provided
in this Section 14.8, such successor Trustee shall mail notice of such
succession hereunder to the Trustee, the Servicer and all Noteholders at their
addresses as shown in the Note Register.
SECTION 14.9. 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 14.6
hereof, 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 14.10. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
(a) Notwithstanding any other provisions of this Agreement, at any
time, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Collateral
may at the time be located, the Trustee shall have the power and may execute and
deliver all instruments to appoint one or more Persons to act as a co-trustee or
co-trustees, or separate trustee or separate trustees, of all or any part of the
Collateral, and to vest in such Person or Persons, in such capacity and for the
benefit of the Noteholders, such title to the Collateral, or any part thereof,
and, subject to the other provisions of this Section 14.10, 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 14.6 and no notice
to Noteholders of the appointment of any co-trustee or separate trustee shall be
required under Section 14.8 hereof.
(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 (whether as Trustee hereunder or as successor to the Servicer
hereunder), 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 Agreement and the conditions
of this Article XIV. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Servicer.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect to this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties,
rights, remedies and trusts shall vest in and be exercised by the Trustee, to
the extent permitted by law, without the appointment of a new or a successor
trustee.
SECTION 14.11. Trustee May Enforce Claims Without Possession of Notes.
------------------------------------------------------
All rights of action and claims under this Agreement or the Notes may be
prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as
trustee. Any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the Noteholders in respect
of which such judgment has been obtained.
SECTION 14.12. Suits for Enforcement. If an Event of Default or a
----------------------
Servicer Default shall occur and be continuing, the Trustee, in its discretion,
may, subject to the provisions of Article XII and Section 13.1, proceed to
protect and enforce its rights and the rights of the Noteholders under this
Agreement by a suit, action or proceeding in equity or at law or otherwise,
whether for the specific performance of any covenant or agreement contained in
this Agreement or in aid of the execution of any power granted in this Agreement
or for the enforcement of any other legal, equitable or other remedy as the
Trustee, being advised by counsel, shall deem most effectual to protect and
enforce any of the rights of the Trustee or the Noteholders.
SECTION 14.13. Rights of Noteholders to Direct Trustee. The Majority
----------------------------------------
Holders shall have the right to direct the time, method, and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee; provided, however, that, subject to Section
-------- -------
14.1, 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, as contemplated by Section 14.2, by such Holders; and provided
--------
further, that nothing in this Agreement shall impair the right of the Trustee to
-------
take any action deemed proper by the Trustee and which is not inconsistent with
such direction by the Noteholders.
SECTION 14.14. Representations and Warranties of 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 of America;
(b) The Trustee has full power, authority and right to execute, deliver
and perform this Agreement, and has taken all necessary action to authorize the
execution, delivery and performance by it of this Agreement; and
(c) This Agreement has been duly executed and delivered by the Trustee
and constitutes the legal, valid and binding agreement of the Trustee
enforceable against the Trustee in accordance
with its terms, except as such enforceability may be limited by Debtor Relief
Laws and except as such enforceability may be limited by general principles of
equity (whether considered in a suit at law or in equity).
SECTION 14.15. Maintenance of Office or Agency. The Trustee will
---------------------------------
maintain at its expense in the City of Las Vegas, State of Nevada, the City of
Salt Lake City, State of Utah, or the City of New York, State of New York, an
office or offices or agency or agencies where notices and demands to or upon the
Trustee in respect of the Notes and this Agreement may be served. The Trustee
initially appoints the Corporate Trust Office as its office for such purposes in
the City of Salt Lake City, Utah. The Trustee will give prompt written notice to
the Servicer and to Noteholders of any change in the location of any such office
or agency.
SECTION 14.16. No Assessment. First Security Bank, National
--------------
Association's agreement to act as Trustee hereunder shall not constitute or be
construed as First Security Bank, National Association's assessment of Issuer's
or any Obligor's creditworthiness or a credit analysis of any Contracts.
ARTICLE XV
TERMINATION
SECTION 15.1. Termination of Agreement. The respective obligations and
------------------------
responsibilities of Issuer, the Servicer, and the Trustee created hereby (other
than the obligation of the Trustee to make payments to Noteholders as hereafter
set forth) shall terminate (the "Termination Date"), except with respect to the
duties described in Sections 10.2, 10.3 or 10.4, 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 Note Principal Balance plus
Note interest accrued through the day preceding such Payment Date; provided that
all amounts required to be paid on such Payment Date pursuant to this Agreement,
including without limitation pursuant Sections 7.3(a), (d), (e), (l), and (n),
shall have been paid.
SECTION 15.2. Optional Redemption of Notes.
----------------------------
(a) Right of Redemption. The Issuer may, prior to the final Payment
--------------------
Date, at its option, redeem the Notes in whole, but not in part, by payment of
an amount (the "Redemption Price") equal to the Aggregate Note Principal
Balance, together with accrued interest thereon to the date on which such
redemption occurs, which date shall be a Payment Date (the "Redemption Date");
provided, however, that no such redemption shall occur prior to the first
-------- -------
Payment Date on which the Aggregate Note Principal Balance is less than 10% of
the Aggregate Note Principal Balance on the Closing Date.
(b) Election To Redeem; Notice to Trustee. If Issuer elects to redeem
--------------------------------------
the Notes, it shall, not earlier than 60 nor later than 30 days prior to the
Payment Date selected for redemption, deliver notice of such election to the
Trustee and the Rating Agency, together with an order directing the Trustee to
effect such redemption.
(c) Notice of Redemption. Notice of redemption shall be given in
----------------------
accordance with Section 16.5 of this Agreement not less than 15 days prior to
the Redemption Date, to each Holder of Notes, at its address appearing in the
Note Register.
Any notice of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price; and
(3) that on the Redemption Date the Redemption Price
will become due and payable on each Note, and that the amount
payable on each Note shall be limited to the Redemption Price
therefor and that, unless the Issuer shall default in the
payment of the Redemption Price, no interest shall accrue on
such Redemption Price for any period after the calendar day
preceding the Redemption Date.
Notice of redemption of Notes at the election of the Issuer shall be
given by the Issuer or, at the Issuer's request, by the Trustee in the name and
at the expense of the Issuer.
(d) Deposit of Redemption Price. Not later than the Business Day
------------------------------
preceding the Redemption Date, the Issuer shall deposit or cause to be deposited
with the Trustee in the Collection Account, in accordance with Section 7.3 of
this Agreement, an amount of money sufficient to pay the Redemption Price of all
the Notes to be redeemed on such date.
(e) Notes Payable on Redemption Date. Notice of redemption having been
--------------------------------
given as aforesaid, the Notes shall, on the Redemption Date, become due and
payable at the Redemption Price and on such date (unless the Issuer shall
default in the payment of the Redemption Price) the Notes shall cease to bear
interest. On the Redemption Date, the Notes shall be paid by the Issuer at the
Redemption Price in lieu of any payment required to be made on such date
pursuant to Sections 7.3(g), (h), (i) and (k).
If the Redemption Price of any Note shall not be so paid, the
Redemption Price and any accrued interest included in such Redemption Price,
shall, until paid, continue to bear interest from the Redemption Date at the
Note Rate. In addition, if the Redemption Price of any Note shall not be so
paid, the Issuer shall pay the holder of such Note a daily penalty from the date
proposed for such redemption until the date on which the Redemption Price is
actually paid as consideration for allowing redemption and to compensate the
holder for its loss arising from the Issuer's failure to redeem in accordance
with its election, such daily penalty to be equal to .00555556% of the principal
balance of the Note which the Issuer elected and failed to redeem. Such daily
penalty shall be payable on demand or in the absence of demand at the time all
principal and accrued interest on the Note is finally paid in full.
SECTION 15.3. 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 Noteholders and the Rating Agency mailed not later than the 5th day
of the month of such final payment (with a copy to the Trustee) specifying (a)
the Payment Date (which, in the case of a redemption of the Notes pursuant to
Section 15.2, shall be the Redemption Date upon which final payment of the Notes
will be made, and (b) the amount of any such final payment. The Trustee shall
give such notice to the Transfer Agent and Registrar at the time such notice is
given to 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; provided, however, that such surrender shall not be a condition to
the receipt of the final payment (or any other payment) in respect of such
Notes.
SECTION 15.4. Defeasance of Notes. Notwithstanding anything herein to
-------------------
the contrary, if at any time after Issuer's delivery of the notice pursuant to
Section 15.2(e), the Issuer shall deposit with the Trustee in the Collection
Account funds sufficient to pay all sums of principal and interest due or to
become due on all Notes pursuant to Section 15.2(e) and shall pay all costs,
charges, and expenses pursuant to Section 15.1 or otherwise incurred or to be
incurred by the Trustee in carrying out the provisions of this Agreement, the
Trustee, on written request of the Issuer accompanied by an Officer's
Certificate and Opinion of Counsel, shall release its liens on the Collateral
and assign to Issuer (without recourse, representation or warranty) all right,
title and interest of the Trustee in and to the Collateral, and all proceeds
thereof, except for the funds in the Collection Account. The Trustee shall
invest the funds in the Collection Account only in Permitted Investments. On the
Redemption Date, the Trustee shall apply the moneys so deposited in the
Collection Account, and earnings thereon, if any, to the payment of all sums due
and to become due for principal and interest on the Notes.
SECTION 15.5. Release of Collateral. Upon the termination of this
----------------------
Agreement pursuant to Sections 15.1, 15.2 or 15.3, the Trustee shall release all
liens and assign to Issuer (without recourse, representation or warranty) all
right, title and interest of the Trustee in and to the Collateral, and all
proceeds thereof. The Trustee shall execute and deliver such instruments of
assignment, in each case without recourse, as shall be reasonably requested by
Issuer to release the security interest of the Trustee in the Collateral.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
SECTION 16.1. Amendment.
---------
(a) This Agreement may be amended from time to time by the Servicer,
Issuer and the Trustee with the consent of the Majority Holders and subject to
the receipt of a Rating Confirmation Letter, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or modifying in any manner the rights of the Noteholders;
provided, however, that no such amendment shall (i) reduce in any manner the
------------------
amount of, or delay the timing of, principal, interest or other payments which
are required to be made on any Note without the consent of the Holder of such
Note, (ii) change the definition of the Aggregate Note Principal Balance or
Eligible Contract without the consent of each Noteholder, (iii) reduce the
percentage of Noteholders required to take or approve any action under this
Agreement without the consent of each Noteholder, or (iv) permit the creation of
any Lien on the Collateral (other than the Lien of this Agreement) without the
consent of each Noteholder.
(b) Promptly after the execution of any such amendment or consent the
Trustee shall furnish written notification of the substance of such amendment to
each Noteholder and the Trustee.
(c) It shall be necessary for the consent of Noteholders under this
Section 16.1 to approve the particular form of any proposed amendment. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Noteholders shall be subject to such reasonable
requirements as the Trustee may prescribe.
(d) 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 the Trustee knows pursuant to written notice (or in
the case of the Issuer, by reference to the Register if the Trustee is also the
Registrar) are so owned shall be so disregarded.
SECTION 16.2. Reserved.
--------
SECTION 16.3. Limitation on Rights of Noteholders.
-----------------------------------
(a) The death or incapacity of any Noteholder shall not operate to
terminate this Agreement, nor shall such death or incapacity entitle such
Noteholder's legal representatives or heirs to claim an accounting or to take
any action or commence any proceeding in any court for a partition or winding up
of the Collateral, nor otherwise affect the rights, obligations and liabilities
of the parties hereto or any of them.
(b) Nothing herein set forth, or contained in the terms of the Notes,
shall be construed so as to constitute the Noteholders from time to time as
partners or members of an association; nor shall any Noteholder be under any
liability to any third person by reason of any action taken by the parties to
this Agreement pursuant to any provision hereof.
(c) No Noteholder (other than a Holder of 100% of the outstanding
Notes) shall have any right by virtue of any provisions of this Agreement to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Agreement, unless such Noteholder previously shall have
given to the Trustee, and unless the Majority Holders shall have made, written
request upon the Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby (which, in the case of an Institutional Investor,
will be satisfied by an unsecured indemnity agreement), and the Trustee, for 60
days after its receipt of such notice, request and offer of indemnity, shall
have neglected or refused to institute any such action, suit or proceeding; it
being understood and intended, and being expressly covenanted by each Noteholder
with every other Noteholder and the Trustee, that no one or more Noteholder
shall have the right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Noteholders of any other of the Notes, or to obtain or seek to
obtain priority over or preference to any other such Noteholder, or to enforce
any right under this Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all Noteholders. For the protection and
enforcement
of the provisions of this Section 16.3, each and every Noteholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
SECTION 16.4. Governing Law. This Agreement shall be construed in
--------------
accordance with the laws of the State of Nevada, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 16.5. Notices. All communications and notices hereunder shall
-------
be in writing and shall be deemed to have been duly given if personally
delivered to, or transmitted by overnight courier, or transmitted by telex or
telecopy and confirmed by a mailed writing to, (a) in the case of Issuer,
Fairfield Funding Corporation II, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇, fax number ▇▇▇-▇▇▇-▇▇▇▇, Attention: President, or such other address as
may hereafter be furnished to the Noteholders, Trustee, Rating Agency, Servicer
and Collateral Agent in writing by Issuer, (b) in the case of Servicer,
Fairfield Acceptance Corporation--Nevada, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, fax number ▇▇▇-▇▇▇-▇▇▇▇, Attention: President, or such
other address as may hereafter be furnished to the Noteholders, Trustee, Rating
Agency, Issuer, FCI and Collateral Agent in writing by Servicer, (c) in the case
of Fairfield Communities, Inc., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, fax number ▇▇▇-▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, or such
other address as may be furnished in writing to the Issuer, Servicer,
Noteholders, Trustee Rating Agency and Collateral Agent, (d) in the case of the
Trustee, First Security Bank, National Association, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, fax number ▇▇▇-▇▇▇-▇▇▇▇, Attention: Corporate Trust
Services, or such other address as may be furnished to the Rating Agency,
Noteholders, Servicer, FCI, FAC, Issuer or Collateral Agent in writing by the
Trustee, (e) in the case of Collateral Agent, BankBoston, N.A., ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, fax number ▇▇▇-▇▇▇-▇▇▇▇, Attention: ▇▇▇
▇▇▇▇▇▇▇, or such other address as may be furnished in writing to the
Noteholders, Trustee, Rating Agency, Issuer, Servicer and FCI by the Collateral
Agent, (f) in the case of the Rating Agency, Duff & ▇▇▇▇▇▇ Credit Rating Co., ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, fax number ▇▇▇-▇▇▇-▇▇▇▇, Attention:
Timeshare Asset-Backed Group, or such other address as may be furnished in
writing to the Noteholders, Trustee, Issuer, Servicer, FCI and Collateral Agent
by the Rating Agency; or (g) in the case of the Noteholders, to the addresses
listed on Schedule II to the Purchase Agreements, or such other addresses as may
be furnished in writing by any Noteholder to the Trustee, Rating Agency, Issuer,
FCI, Servicer, and Collateral Agent.
All communications and notices pursuant hereto to a Noteholder 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 delivered or mailed at the address shown in the
Note Register. Any notice so given within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Noteholder receives such notice.
SECTION 16.6. Severability of Provisions. If any one or more of the
----------------------------
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements provisions or
terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Agreement
or of the Notes or rights of the Noteholders thereof.
SECTION 16.7. Assignment. Notwithstanding anything to the contrary
----------
contained herein, except as provided in Section 13.2, this Agreement may not be
assigned by Issuer or the Servicer without the prior consent of Majority
Holders.
SECTION 16.8. Notes Nonassessable and Fully Paid. It is the intention
------------------------------------
of Issuer that the Noteholders shall not be personally liable for obligations of
Issuer, that the indebtedness represented by the Notes shall be nonassessable
for any losses or expenses of Issuer or for any reason whatsoever, and that
Notes upon authentication thereof by the Trustee pursuant to Section 9.1 are and
shall be deemed fully paid for by the Noteholders.
SECTION 16.9. Further Assurances. Each of Issuer and the Servicer agree
------------------
to do and perform, from time to time, any and all acts and to execute any and
all further instruments required or reasonably requested by the Trustee more
fully to effect the purposes of this Agreement, including, without limitation,
the execution of any financing statements or continuation statements relating to
the Pledged Contracts for filing under the provisions of the UCC of any
applicable jurisdiction.
SECTION 16.10. No Waiver; Cumulative Remedies. No failure to exercise
-------------------------------
and no delay in exercising, on the part of the Trustee or the Noteholders, any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. No waiver of any
provision hereof shall be effective unless made in writing. The rights,
remedies, powers and privileges therein provided are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 16.11. Counterparts. This Agreement may be executed in two or
------------
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
SECTION 16.12. Third-Party Beneficiaries. This Agreement will inure to
-------------------------
the benefit of and be binding upon the parties hereto, the Noteholders and their
respective successors and permitted assigns. Except as otherwise provided in
this Article XVI, no other person will have any right or obligation hereunder.
SECTION 16.13. Actions by Noteholders.
----------------------
(a) Wherever in this Agreement a provision is made that an action may
be taken or a notice, demand or instruction given by Noteholders, such action,
notice or instruction may be taken or given by any Noteholder, unless such
provision requires a specific percentage of Noteholders. If, at any time, the
request, demand, authorization, direction, consent, waiver or other act of a
specific percentage of Noteholders is required pursuant to this Agreement,
written notification of
the substance thereof shall be furnished to all Noteholders whether such
Noteholder's request, demand, authorization, direction, consent, waiver or other
act is necessary to meet a specified percentage requirement.
(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 or the Servicer in reliance thereon, whether or not notation of such
action is made upon such Note.
SECTION 16.14. Merger and Integration. Except as set forth in the
------------------------
Trustee Fee Letter, and except as specifically stated otherwise herein, this
Agreement sets 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 Agreement. This
Agreement may not be modified, amended, waived or supplemented except as
provided herein.
SECTION 16.15. No Bankruptcy Petition. Each of the Trustee and
------------------------
Collateral Agent covenants and agrees that it will not (unless otherwise
directed by the Noteholders in the case of the Trustee) institute against
Issuer, or join any other person in instituting against Issuer, any Insolvency
Proceeding under federal bankruptcy law or under any similar federal or state
law.
SECTION 16.16. Retention of Successor Servicer. In connection with the
-------------------------------
determination by the Majority Holders to appoint a Successor Servicer pursuant
to Section 13.2 of this Agreement, the Collateral Agent shall use its reasonable
best efforts to identify and locate a successor servicer to act as Successor
Servicer hereunder. To the extent the Collateral Agent identifies and appoints a
successor servicer to service Contracts pledged to it or its Affiliates under
one or more credit facilities or agreements with FCI or FCI's Affiliates
(including FRC), Collateral Agent shall also cause, as a condition to such
appointment, such successor servicer to accept an appointment as Successor
Servicer hereunder upon no less favorable terms and conditions as agreed upon
between such successor servicer and Collateral Agent.
SECTION 16.17. Headings. The headings herein are for purposes of
--------
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
IN WITNESS WHEREOF, Issuer, the Servicer, FCI, the Trustee, and the
Collateral Agent have caused this Agreement to be duly executed by their
respective officers as of the day and year first above written.
FAIRFIELD FUNDING CORPORATION, II
as Issuer
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Title: President
FAIRFIELD ACCEPTANCE CORPORATION
-- NEVADA
as Servicer
By:/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Title: President
FAIRFIELD COMMUNITIES, INC.
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Title: Senior Vice President
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Trustee
By:/s/▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Title: Vice President
BANKBOSTON, N.A.
as Collateral Agent
By:/s/▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Title: Director
TABLE OF CONTENTS
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS........................................................1
SECTION 1.1.Definitions.......................................................1
SECTION 1.2.Other Definitional Provisions. ...................................29
ARTICLE II GRANT OF COLLATERAL...............................................30
SECTION 2.1.Grant and Acceptance of Collateral................................30
SECTION 2.2.Conditions to Closing.............................................30
SECTION 2.3.Reserved..........................................................32
SECTION 2.4.Substitute Contracts from Reinvestment Account....................33
SECTION 2.5.Authentication and Delivery of Notes..............................34
SECTION 2.6.Servicer's Record of Contracts....................................34
SECTION 2.7.Confidentiality...................................................35
SECTION 2.8.Confirmation of Representations and Warranties....................35
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ISSUER.........................35
SECTION 3.1.Representations and Warranties Regarding Issuer...................35
SECTION 3.2.Representations and Warranties Regarding Each Pledged
Contract in the Contract Pool............................41
SECTION 3.3.Representations and Warranties Regarding the Contract Files.......47
SECTION 3.4.Rights of Obligors and Release of Contract Files..................48
SECTION 3.5.Release of Defective Contracts, Defaulted Contracts and
Overconcentration Contracts..............................49
SECTION 3.6.Remarketing Obligations...........................................51
SECTION 3.7.Notice of Breach..................................................52
ARTICLE IV ADDITIONAL COVENANTS OF ISSUER....................................52
SECTION 4.1.Affirmative Covenants.............................................52
SECTION 4.2.Negative Covenants of the Issuer..................................61
ARTICLE V SERVICING OF CONTRACT POOL.........................................66
SECTION 5.1.Responsibility for Contract Administration........................66
SECTION 5.2.Standard of Care..................................................66
SECTION 5.3.Records...........................................................66
SECTION 5.4.Inspection........................................................66
SECTION 5.5.Enforcement.......................................................67
SECTION 5.6.Trustee to Cooperate..............................................68
SECTION 5.7.Other Matters Relating to the Servicer............................68
SECTION 5.8.Servicer Insurance Coverage.......................................68
SECTION 5.9.Servicing Compensation............................................68
SECTION 5.10. Costs and Expenses..............................................69
SECTION 5.11. Reserved........................................................69
SECTION 5.12. Representations and Warranties of the Servicer..................69
SECTION 5.13. Information.....................................................70
SECTION 5.14. Advances by Servicer............................................70
SECTION 5.15. Additional Covenants of the Servicer............................70
SECTION 5.16. FCI and the Servicer............................................73
SECTION 5.17 The Servicer not to Resign.......................................76
SECTION 5.18. Merger or Consolidation of, or Assumption of the Obligations
of Servicer....................................................76
SECTION 5.19. Examination of Records..........................................77
ARTICLE VI REPORTS...........................................................77
SECTION 6.1.Daily Reports.....................................................77
SECTION 6.2.Monthly Reports...................................................78
SECTION 6.3.Certificate of Servicing Officer..................................78
SECTION 6.4.Other Data........................................................78
SECTION 6.5.Annual Servicer's Certificate.....................................78
SECTION 6.6.Annual Report of Accountants......................................78
SECTION 6.7.Reserved..........................................................79
SECTION 6.8.Notices to FAC....................................................79
ARTICLE VII RIGHTS OF NOTEHOLDERS; ACCOUNTS AND APPLICATION OF FUNDS.........79
SECTION 7.1.Establishment of Accounts.........................................79
SECTION 7.2.Lock-Box Accounts.................................................81
SECTION 7.3.Application of Funds..............................................82
SECTION 7.4.Payment for Substitute Contracts..................................84
SECTION 7.5.Servicer's Failure to Make a Deposit or Payment...................84
SECTION ▇.▇.▇▇▇ Treatment.....................................................84
ARTICLE VIII PAYMENTS AND REPORTS TO NOTEHOLDERS.............................84
SECTION 8.1.Payments..........................................................84
SECTION 8.2.Monthly and Annual Noteholders' Statement.........................84
SECTION ▇.▇.▇▇▇▇▇▇▇▇▇ Statements..............................................85
ARTICLE IX THE NOTES.........................................................86
SECTION 9.1.The Notes.........................................................86
SECTION 9.2.Registration of Transfer and Exchange of Notes....................86
SECTION 9.3.Mutilated, Destroyed, Lost or Stolen Notes........................87
SECTION 9.4.Persons Deemed Owners.............................................88
SECTION 9.5.Access to List of Noteholders' Names and Addresses................88
ARTICLE X INDEMNITIES........................................................88
SECTION 10.1. Liabilities to Obligors.........................................88
SECTION 10.2. Tax Indemnification.............................................88
SECTION 10.3. Servicer's Indemnities..........................................89
SECTION 10.4. FAC's Indemnities...............................................89
SECTION 10.5. Operation of Indemnities........................................89
ARTICLE XI [RESERVED]........................................................89
ARTICLE XII EVENTS OF DEFAULT................................................90
SECTION ▇▇.▇.▇▇▇▇▇▇ of Default................................................90
SECTION 12.2.Acceleration of Maturity; Rescission and Annulment...............91
SECTION 12.3.Collection of Indebtedness and Suits for Enforcement by Trustee..91
SECTION 12.4.Trustee May File Proofs of Claim.................................92
SECTION 12.5.Remedies.........................................................93
SECTION 12.6.Optional Preservation of Collateral..............................94
SECTION 12.7.Application of Money Collected During Event of Default...........94
SECTION 12.8.Limitation on Suits by Individual Noteholders....................94
SECTION 12.9.Unconditional Rights of Noteholders to Receive Principal and
Interest........................................................95
SECTION 12.10.Restoration of Rights and Remedies..............................95
SECTION 12.11.Waiver of Past Defaults.........................................95
SECTION 12.12.Waiver of Stay or Extension Laws................................96
SECTION ▇▇.▇▇.▇▇▇▇ of Collateral..............................................96
SECTION 12.14.Action on Notes.................................................96
SECTION 12.15.Rights of Dissenting Noteholders with Respect to Certain
Actions........................................................96
ARTICLE XIII SERVICER DEFAULTS...............................................97
SECTION 13.1.Servicer Defaults................................................97
SECTION 13.2.Appointment of Successor.........................................99
SECTION 13.3.Notification to Noteholders.....................................100
SECTION 13.4.Waiver of Past Defaults.........................................100
SECTION 13.5.Certain Matters Affecting the Successor Servicer................100
ARTICLE XIV THE TRUSTEE......................................................101
SECTION 14.1.Duties of Trustee...............................................101
SECTION 14.2.Certain Matters Affecting the Trustee...........................102
SECTION 14.3.Trustee Not Liable for Recitals in Notes........................103
SECTION 14.4.Trustee May Own Notes; Trustee in its Individual Capacity.......104
SECTION 14.5.Trustee's Fees and Expenses; Indemnification....................104
SECTION 14.6.Eligibility Requirements for Trustee............................104
SECTION 14.7.Resignation or Removal of Trustee...............................105
SECTION 14.8.Successor Trustee...............................................105
SECTION 14.9.Merger or Consolidation of Trustee..............................106
SECTION 14.10.Appointment of Co-Trustee or Separate Trustee..................106
SECTION 14.11.Trustee May Enforce Claims Without Possession of Notes.........107
SECTION 14.12.Suits for Enforcement..........................................107
SECTION 14.13.Rights of Noteholders to Direct Trustee........................107
SECTION 14.14.Representations and Warranties of Trustee......................108
SECTION 14.15.Maintenance of Office or Agency................................108
SECTION ▇▇.▇▇.▇▇ Assessment..................................................108
ARTICLE XV TERMINATION......................................................109
SECTION 15.1.Termination of Agreement........................................109
SECTION 15.2.Optional Redemption of Notes....................................109
SECTION ▇▇.▇.▇▇▇▇▇ Payment...................................................110
SECTION 15.4.Defeasance of Notes.............................................110
SECTION 15.5.Release of Collateral...........................................111
ARTICLE XVI MISCELLANEOUS PROVISIONS........................................111
SECTION 16.1.Amendment.......................................................111
SECTION 16.2.Reserved........................................................112
SECTION 16.3.Limitation on Rights of Noteholders.............................112
SECTION 16.4.Governing Law...................................................112
SECTION 16.5.Notices.........................................................113
SECTION 16.6.Severability of Provisions......................................113
SECTION 16.7.Assignment......................................................114
SECTION 16.8.Notes Nonassessable and Fully Paid..............................114
SECTION 16.9.Further Assurances..............................................114
SECTION ▇▇.▇▇.▇▇ Waiver; Cumulative Remedies.................................114
SECTION 16.11.Counterparts...................................................114
SECTION 16.12.Third-Party Beneficiaries......................................114
SECTION 16.13.Actions by Noteholders.........................................114
SECTION 16.14.Merger and Integration.........................................115
SECTION ▇▇.▇▇.▇▇ Bankruptcy Petition.........................................115
SECTION 16.16. Retention of Successor Servicer ..............................115
SECTION 16.17.Headings.......................................................115
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EXHIBITS
Exhibit "A" -- Form of Document of Sale and Assignment
Exhibit "B" -- Form of Document of Pledge and Assignment
Exhibit "C" -- Credit Standards and Collection Policies
Exhibit "D" -- List of Closing Documents
Exhibit "E" -- FRC Document of Assignment
Exhibit "F" -- Forms of Lock Box Agreement and Lock Box Accounts
Exhibit "G" -- Form of Note
Exhibit "H" -- Form of Remarketing Agreement
Exhibit "I" -- Form of Supplemental Grant
Exhibit "J" -- Form of Tax Sharing Agreement
Exhibit "K" -- Form of Collateral Agent Certificate
Exhibit "L" -- Form of Issuer Officer's Certificate
Exhibit "M" -- Form of Servicing Officer's Certificate
Exhibit "N" -- Form of FAC/FCI Officer's Certificate
Exhibit "O" -- Form of Custodian Acknowledgement
Exhibit "P" -- [Reserved]
Exhibit "Q" -- Forms of Contracts
Exhibit "R" -- Certificate of Release
Exhibit "S" -- Servicer's Monthly Report
Exhibit "T" --- Servicer's Monthly Certificate
Exhibit "U" --- Settlement Statement
Exhibit "V" --- Form of Transferee Certificate
SCHEDULES
Schedule 1 -- Contract Schedule
Schedule 2 -- Developments
Schedule 3 -- Consents
Schedule 4 -- [reserved]
Schedule 5 -- Environmental Matters
Schedule 6 - Trustee Fee Letter