EXHIBIT 10.62
EXECUTION COPY
SERIES 2002-1 SUPPLEMENT
Dated as of August 29, 2002
to
MASTER INDENTURE AND SERVICING AGREEMENT
Dated as of August 29, 2002
--------------------------------------------------------------------------------
SIERRA RECEIVABLES FUNDING COMPANY, LLC
LOAN-BACKED
VARIABLE FUNDING NOTES,
SERIES 2002-1
--------------------------------------------------------------------------------
among
SIERRA RECEIVABLES FUNDING COMPANY, LLC,
as Issuer
FAIRFIELD ACCEPTANCE CORPORATION - NEVADA,
as Master Servicer
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Trustee
and
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Collateral Agent
TABLE OF CONTENTS
PAGE
ARTICLE I
DESIGNATION of the Series 2002-1 Notes
Section 1.01. Designation..................................................3
ARTICLE II
Definitions
Section 2.01. Definitions..................................................4
Section 2.02. Other Definitional Provisions...............................18
ARTICLE III
Servicing Compensation
Section 3.01. Servicing Compensation......................................18
ARTICLE IV
THE SERIES 2002-1 NOTES
Section 4.01. Forms Generally.............................................18
Section 4.02. Authorized Amount; Conditions to Initial Issuance...........19
Section 4.03. Principal, Interest and NPA Costs...........................20
Section 4.04. Nonrecourse to the Issuer...................................20
Section 4.05. Dating of the Notes.........................................20
Section 4.06. Payments on the Series 2002-1 Notes; Payment of NPA Costs...21
Section 4.07. Increases in Notes Principal Amount.........................21
Section 4.08. Reduction of the Facility Limit.............................22
Section 4.09. Increase of the Facility Limit..............................23
Section 4.10. Repayment Obligation........................................23
Section 4.11. Transfer Restrictions.......................................24
Section 4.12. Tax Treatment...............................................26
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE ISSUER; ASSIGNMENT OF
REPRESENTATIONS AND WARRANTIES
Section 5.01. Representations and Warranties of the Issuer................26
Section 5.02. Assignment of Representations and Warranties................27
Section 5.03. Addition of New Sellers.....................................27
ARTICLE VI
PAYMENTS, SECURITY AND ALLOCATIONS
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TABLE OF CONTENTS
(continued)
PAGE
Section 6.01. Priority of Payments........................................29
Section 6.02. Determination of Monthly Principal..........................30
Section 6.03. Information Provided to Trustee.............................30
Section 6.04. Payments....................................................30
Section 6.05. Collection Account..........................................31
Section 6.06. Reserve Account.............................................32
Section 6.07. Hedge Agreement.............................................34
Section 6.08. Replacement of Hedge Provider...............................34
ARTICLE VII
ADDITION, RELEASE AND SUBSTITUTION OF LOANS
Section 7.01. Addition of Series 2002-1 Collateral........................35
Section 7.02. Release of Defective Loans..................................37
Section 7.03. Release of Defaulted Loans..................................38
Section 7.04. Release Upon Transfer to New Series.........................38
Section 7.05. Release Upon Optional Substitution..........................39
Section 7.06. Release Upon Payment in Full................................40
ARTICLE VIII
REPORTS TO TRUSTEE AND NOTEHOLDERS
Section 8.01. Monthly Report to Trustee...................................40
Section 8.02. Monthly Servicing Report....................................40
Section 8.03. Delivery of Reports to Noteholders..........................40
Section 8.04. Tax Reporting...............................................40
ARTICLE IX
AMORTIZATION EVENTS
Section 9.01. Amortization Events.........................................41
ARTICLE X
Events of Default
Section 10.01. Events of Default...........................................44
Section 10.02. Acceleration of Maturity; Rescission and Annulment..........45
Section 10.03. Authority to Institute Proceedings and Direct Remedies......45
Section 10.04. Distributions of Amounts Collected..........................45
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TABLE OF CONTENTS
(continued)
PAGE
Section 10.05. Sale of Defaulted Loans After an Event of Default...........46
ARTICLE XI
PROVISIONS RELATING TO THE master SERVICER
Section 11.01. Master Servicer Advances....................................46
Section 11.02. Additional Events of Servicer Defaults......................47
Section 11.03. Additional Conditions to Master Servicer Transfer...........48
Section 11.04. Fair Market Value of Defaulted Loans........................48
ARTICLE XII
Miscellaneous Provisions
Section 12.01. Ratification of Agreement...................................49
Section 12.02. Counterparts................................................49
Section 12.03. Governing Law...............................................49
Section 12.04. Notices to Deal Agent and Bank of America, N.A..............49
Section 12.05. Changes to Credit Agreement.................................50
Section 12.07. Satisfaction of Rating Agency Condition.....................50
Section 12.08. Amendment to Documents......................................50
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EXHIBITS
EXHIBIT A Form of Supplemental Grant......................................A-1
EXHIBIT B Form of Series 2002-1 Notes and Certificate of Authentication...B-1
EXHIBIT C List of Initial Principal Amounts...............................C-1
EXHIBIT D Form of Monthly Report..........................................D-1
EXHIBIT E Methodology for Calculation of Extrapolated Cumulative
Cancellation Rate...............................................E-1
EXHIBIT F Forms of Documents to be used by New Sellers:
Form F-1 -- Form of Purchase Agreement.........................F-1
Form F-2 -- Form of Series 2002-1 Purchase Supplement..........F-2
SERIES 2002-1 SUPPLEMENT, dated as of August 29, 2002, among SIERRA
RECEIVABLES FUNDING COMPANY, LLC, a limited liability company formed under the
laws of the State of Delaware, as Issuer, FAIRFIELD ACCEPTANCE CORPORATION -
NEVADA, a Delaware corporation, as Master Servicer, WACHOVIA BANK, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity, but
solely as Trustee under the Agreement, and WACHOVIA BANK, NATIONAL ASSOCIATION,
a national banking association, as Collateral Agent.
Section 2.10 of the Agreement provides that the Issuer may, pursuant
to one or more Supplements, issue one or more Series of Notes and set forth the
terms of such Series.
Pursuant to this Supplement, the Issuer creates the Series 2002-1
Notes and specifies the terms thereof.
All things necessary to make this Supplement a valid agreement of the
Issuer, the Master Servicer, the Trustee and the Collateral Agent in accordance
with its terms have been done.
GRANTING CLAUSES
The Issuer hereby Grants to the Collateral Agent, for the benefit of
the Trustee for the benefit of the Series 2002-1 Noteholders, all of the
Issuer's right, title and interest, whether now owned or hereafter acquired, in,
to and under the following:
(a) all Series 2002-1 Pledged Loans, together with all other Series
2002-1 Pledged Assets;
(b) the Collection Account and all money, investment property,
instruments and other property credited to, carried in or
deposited in the Collection Account including any sub-accounts
within the Collection Account;
(c) all money, investment property, instruments and other property
credited to, carried in or deposited in a Lockbox Account or any
other bank or similar account into which Series 2002-1
Collections are deposited, to the extent such money, investment
property, instruments and other property constitutes Series
2002-1 Collections;
(d) the Reserve Account and all moneys, investment property,
instruments and other property credited to, carried in or
deposited in the Reserve Account including any sub-accounts
within the Reserve Account;
(e) the Hedge Agreement and all rights and interests therein and
thereto;
(f) all rights, remedies, powers, privileges and claims of the Issuer
under or with respect to the Series 2002-1 Pool Purchase
Supplement and each Series 2002-1 Purchase Supplement including,
without limitation all rights to enforce payment obligations of
the Issuer, the Depositor and each Seller and all rights to
collect all monies due and to become due to the Issuer
from the Depositor or any Seller under or in connection with the
Series 2002-1 Pool Purchase Supplement or any Series 2002-1
Purchase Supplement (including without limitation all interest
and finance charges for late payments accrued thereon and
proceeds of any liquidation or sale of Series 2002-1 Pledged
Loans or resale of Timeshare Properties or Vacation Credits and
all other Collections on the Series 2002-1 Pledged Loans) and all
other rights of the Issuer to enforce the Series 2002-1 Pool
Purchase Supplement and each Series 2002-1 Purchase Supplement;
(g) to the extent related to the Series 2002-1 Pledged Loans or the
Series 2002-1 Pledged Assets, all rights, remedies, powers,
privileges and claims of the Issuer under or with respect to the
Pool Purchase Agreement and the each of the Purchase Agreements
including, without limitation all rights to enforce payment
obligations of the Issuer, the Depositor and each Seller and all
rights to collect all monies due and to become due to the Issuer
from the Depositor or any Seller under or in connection with the
Series 2002-1 Pledged Loans (including without limitation all
interest and finance charges for late payments accrued thereon
and proceeds of any liquidation or sale of Series 2002-1 Pledged
Loans or resale of Timeshare Properties or Vacation Credits and
all other Collections on the Series 2002-1 Pledged Loans) and all
other rights of the Issuer to enforce the Pool Purchase Agreement
and each Purchase Agreement;
(h) all certificates and instruments if any, from time to time
representing or evidencing any of the foregoing property
described in clauses (a) through (g) above;
(i) all present and future claims, demands, causes of and choses in
action in respect of any of the foregoing and all interest,
principal, payments and distributions of any nature or type on
any of the foregoing;
(j) all accounts, chattel paper, deposit accounts, documents, general
intangibles, goods, instruments, investment property,
letter-of-credit rights, letters of credit, money, and oil, gas
and other minerals, consisting of, arising from, or relating to,
any of the foregoing; and
(k) all proceeds of the foregoing property described in clauses (a)
through (j) above, any security therefor, and all interest,
dividends, cash, instruments, financial assets and other
investment property and other property from time to time
received, receivable or otherwise distributed in respect of, or
in exchange for or on account of the sale, condemnation or other
disposition of, any or all of the then existing Series 2002-1
Collateral, and including all payments under Insurance Policies
(whether or not a Seller or an Originator, the Depositor, the
Issuer, the Collateral Agent or the Trustee is the loss payee
thereof) or any indemnity, warranty or guaranty payable by reason
of loss or damage to or otherwise with respect to any of the
Series 2002-1 Collateral; and
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(l) all proceeds of the foregoing.
The property described in the preceding sentence is collectively referred to as
the "SERIES 2002-1 COLLATERAL." The Grant of the Series 2002-1 Collateral to the
Collateral Agent is for the benefit of the Trustee to secure the Series 2002-1
Notes equally and ratably without prejudice, priority or distinction among any
Series 2002-1 Notes by reason of difference in time of issuance or otherwise,
except as otherwise expressly provided in the Agreement or in this Supplement
and to secure (i) the payment of all amounts due on the Series 2002-1 Notes in
accordance with their respective terms, (ii) the payment of all other sums
payable by the Issuer under the Series 2002-1 Documents or the Series 2002-1
Notes and (iii) compliance by the Issuer with the provisions of the Series
2002-1 Documents. This Supplement is a security agreement within the meaning of
the UCC.
The Collateral Agent and the Trustee acknowledge the Grant of the
Series 2002-1 Collateral, and the Collateral Agent accepts the Series 2002-1
Collateral in trust hereunder in accordance with the provisions hereof and
agrees to perform the duties herein to the end that the interests of the Series
2002-1 Noteholders may be adequately and effectively protected.
The Trustee and the Collateral Agent are directed to enter into the
Collateral Agency Agreement pursuant to which the Collateral Agent will act as
agent for the benefit of the Trustee for the purpose of maintaining a security
interest in the Series 2002-1 Collateral. The Trustee and Series 2002-1
Noteholders shall be bound by the terms of the Collateral Agency Agreement upon
the Trustee's execution thereof on their behalf. The Series 2002-1 Collateral
shall not secure the payment by or performance by the Issuer of any obligations
related to any other Series.
ARTICLE I
DESIGNATION OF THE SERIES 2002-1 NOTES
Section 1.01. DESIGNATION.
(a) There is hereby created and designated a Series of Notes to be
issued pursuant to the Agreement and this Supplement to be known as "SIERRA
RECEIVABLES FUNDING COMPANY, LLC, Loan-Backed Variable Funding Notes, Series
2002-1," the "SERIES 2002-1 NOTES" or the "NOTES."
(b) The terms of the Series 2002-1 Notes shall be as set forth in
this Supplement.
(c) In the event that any term or provision contained herein shall
conflict with or be inconsistent with any term or provision contained in the
Agreement, the terms and provisions of this Supplement shall be controlling.
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ARTICLE II
DEFINITIONS
Section 2.01. DEFINITIONS.
Terms used herein, but not defined herein, shall have the meaning
assigned to such terms in the Agreement or if not defined in the Agreement, the
meaning assigned to such terms in the applicable Purchase Agreement or the
applicable Series 2002-1 Purchase Supplement. Each capitalized term defined
herein shall relate only to the Series 2002-1 Notes and no other Series issued
by the Issuer. Whenever used in this Supplement, the following words and phrases
shall have the following meanings, and the definitions of such terms are
applicable to the singular as well as the plural forms of such terms and the
masculine as well as the feminine and neuter genders of such terms.
"ACCRUAL PERIOD" means, with respect to the Series 2002-1 Notes for
any Payment Date, the period beginning on and including the immediately
preceding Payment Date and ending on and excluding the current Payment Date,
except that the first Accrual Period will begin on and include the Closing Date
and end on and exclude the September 2002 Payment Date.
"ACQUIRED PORTFOLIO LOAN" means a loan (which shall be a loan,
installment contract or other contractual obligation incurred to finance the
acquisition of an interest in a vacation property or rights to use vacation
properties or otherwise substantially similar to Loans) which a Seller has
acquired either by purchase of a portfolio or by acquisition of an entity which
owns the portfolio and new loans originated with respect to such entity, program
or portfolio during the Transition Period; provided that, except for purposes of
calculating the Transaction Period Excess Amount, the term Acquired Portfolio
Loan shall not include loans acquired from Kona.
"ADDITION CUT-OFF DATE" means, with respect to Additional 2002-1
Pledged Loans, the cut-off date stated in the related Supplemental Grant.
"ADDITION DATE" means, with respect to Additional 2002-1 Pledged
Loans, the date designated in the related Supplemental Grant as the Addition
Date.
"ADDITIONAL 2002-1 PLEDGED LOANS" means Loans (including Qualified
Substitute Loans) pledged under this Supplement and a Supplemental Grant
subsequent to the Closing Date.
"ADVANCE RATE" means:
(i) 83% if the Three Month Default Percentage calculated as of
the last day of each of the immediately preceding three Due Periods is
less than 1.15%, or
(ii) 80% if the Three Month Default Percentage calculated as of
the last day of any of the immediately preceding three Due Periods is
1.15% or more.
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"AGREEMENT" means the Master Indenture and Servicing Agreement dated
as of August 29, 2002 among the Issuer, the Master Servicer, the Trustee and the
Collateral Agent, as amended, supplemented and restated from time to time.
"ALTERNATE INVESTOR" has the meaning assigned to that term in the Note
Purchase Agreement.
"AMORTIZATION EVENT" has the meaning specified in Section 9.01.
"AVAILABLE FUNDS" for any Payment Date means (i) all payments
(including prepayments) of principal, interest and fees collected from or on
behalf of the Obligors during the related Due Period on the Series 2002-1
Pledged Loans; (ii) all Master Servicer Advances made on or prior to the Payment
Date with respect to payments due from the Obligors on the Series 2002-1 Loans
during the related Due Period; (iii) the Release Price paid to the Trustee for
the release of any Series 2002-1 Pledged Loan and the related Series 2002-1
Pledged Assets; (iv) all Net Liquidation Proceeds from the disposition of a
Series 2002-1 Defaulted Loan; (v) any Net Hedge Receipts; and (vi) any amount
withdrawn from the Reserve Account under subsection 6.06(b) of this Supplement
and deposited into the Collection Account to be included as Available Funds on
or in respect of such Payment Date.
"BANK BASE RATE" has the meaning assigned to that term in the Note
Purchase Agreement.
"BORROWING BASE" means, at any time, the product of
(i) the remainder of (A) the Series 2002-1 Adjusted Loan Balance at
such time minus (B) the Excess Concentration Amount at such time
multiplied by
(ii) the Advance Rate.
"BORROWING BASE SHORTFALL" means, at any time, the amount, if any, by
which the Notes Principal Amount exceeds the Borrowing Base then if effect.
"CANCELLED LOAN" means a Loan with respect to which cancellation or
foreclosure actions have or should have been commenced in accordance with
Customary Practices and/or Credit Standards and Collection Policies by reason of
(a) uncollectibility in whole or in part, (b) relinquishment by the Obligor of
its rights in and to the related Timeshare Property or (c) termination in
connection with the origination of a new Loan.
"CARRYING COSTS" has the meaning assigned to that term in the Note
Purchase Agreement.
"CENDANT RATINGS REQUIREMENT" means that long-term senior secured debt
ratings of Cendant be not less than Baa3 by ▇▇▇▇▇'▇ and BBB- by S&P.
"CHANGE OF CONTROL" means that any of the Issuer, the Depositor, or
any Seller of Series 2002-1 Pledged Loans ceases to be wholly owned, directly or
indirectly, by Cendant.
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"CLASS" has the meaning assigned to that term in the Note Purchase
Agreement.
"CLASS AGENT" has the meaning assigned to that term in the Note
Purchase Agreement.
"CLOSING DATE" means August 30, 2002.
"COLLECTION ACCOUNT" means the account established pursuant to Section
6.05 of this Supplement.
"COLLATERAL AGENT" means Wachovia Bank, National Association, a
national banking association, as Collateral Agent, its successors and assigns
and any entity which is substituted as Collateral Agent under the terms of the
Collateral Agency Agreement.
"CONDUIT" has the meaning assigned to that term in the Note Purchase
Agreement.
"CONSOLIDATED EXTRAPOLATED CUMULATIVE CANCELLATION RATE" or "CECCR"
means the weighted average of the individual Extrapolated Cumulative
Cancellation Rate for each Seller.
"CONTRACT RATE" means, with respect to any Series 2002-1 Pledged Loan,
the annual rate at which interest accrues on such Loan, as modified from time to
time only in accordance with the terms of PAC or Credit Card Account (if
applicable).
"CUT-OFF DATE" means (a) with respect to the Initial Series 2002-1
Pledged Loans, the Initial Cut-Off Date, (b) with respect to any Additional
Series 2002-1 Pledged Loan including any Qualified Substitute Loan such date as
is set forth in the Supplemental Grant.
"DEAL AGENT" means Fleet Securities, Inc. in its capacity as "Deal
Agent" under the Note Purchase Agreement or any successor to or assignee thereof
(to the extent such assignment is permitted under the Note Purchase Agreement).
"DEFAULT PERCENTAGE" means for any Due Period a fraction (i) the
numerator of which is the aggregate outstanding Loan Balance of all Series
2002-1 Pledged Loans which became Defaulted Loans during such Due Period and
(ii) the denominator of which is the Series ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇▇ Loan Balance as of
the last day of such Due Period.
"DEFAULTED LOAN" means any Series 2002-1 Pledged Loan (a) with any
portion of a Scheduled Payment delinquent more than 60 days, (b) with respect to
which the Master Servicer shall have determined in good faith that the Obligor
will not resume making Scheduled Payments, (c) for which the related Obligor
shall have become the subject of a proceeding under a Debtor Relief Law or (d)
for which cancellation or foreclosure actions have been commenced.
"DEFECTIVE LOAN" means any Series 2002-1 Pledged Loan which is a
Defective Loan as such term is defined in the Purchase Agreement under which
such Series 2002-1 Pledged Loan was sold to the Depositor.
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"DEFERRED LOAN" means a Loan with respect to which the Obligor has
been granted an extension of the time required to pay the amounts due thereon.
"DELAYED COMPLETION GREEN LOANS" means Series 2002-1 Pledged Loans
which are Green Loans and which have been Series 2002-1 Pledged Loans for six
months or more and the Green Timeshare Property is still subject to completion.
"DELAYED COMPLETION GREEN LOANS EXCESS AMOUNT" means, at any time, the
sum of the Loan Balances for all Series 2002-1 Pledged Loans which are Delayed
Completion Green Loans.
"DELINQUENCY RATIO" means for any Due Period, a fraction the numerator
of which is the aggregate outstanding Loan Balance of all 2002-1 Pledged Loans
which are Delinquent Loans at the end of such Due Period and the denominator of
which is the Series ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇▇ Loan Balance as of the last day of such Due
Period.
"DELINQUENT LOAN" means a Series 2002-1 Pledged Loan with any
Scheduled Payment or portion of a Scheduled Payment delinquent more than 30 days
other than a Loan that is a Defaulted Loan.
"DETERMINATION DATE" means with respect to any Payment Date, the
second Business Day prior to such Payment Date.
"DUE DATE" has, with respect to any Series 2002-1 Pledged Loan, the
meaning assigned to the term in the applicable Purchase Agreement.
"DUE PERIOD" means for any Payment Date, the immediately preceding
calendar month; provided that for the Payment Date occurring in September 2002,
with respect to Series 2002-1, the Due Period shall be the period from and
including the Closing Date through and including the last day of August, 2002.
"EFI EXCESS AMOUNT" means, at any time, the amount by which (i) the
sum of the Loan Balances for all Series 2002-1 Pledged Loans which are EFI
Originated Loans, exceeds (ii) ten percent (10%) of the Series 2002-1 Adjusted
Loan Balance.
"EFI LOANS" means Series 2002-1 Pledged Loans which were sold to the
Depositor under the terms of the Master Loan Purchase Agreement dated as of
August 29, 2002 between EFI and the Depositor and the Series 2002-1 Purchase
Supplement thereto and transferred to the Issuer under the terms of the Pool
Purchase Agreement.
"EFI ORIGINATED LOANS" means any Loan which was originated by EFI or
by any successor in accordance with EFI's Credit Standards and Collection
Policies.
"ELIGIBLE ACCOUNT" means either (a) a segregated account (including a
securities account) with an Eligible Institution or (b) a segregated trust
account with the corporate trust department of a depository institution
organized under the laws of the United States of America or any one of the
states thereof or the District of Columbia (or any domestic branch of a foreign
bank), having corporate trust powers and acting as trustee for funds deposited
in such account, so
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long as any of the securities of such depository institution shall have a credit
rating from each Rating Agency in one of its generic rating categories which
signifies investment grade.
"ELIGIBLE LOAN," with respect to any Series 2002-1 Loan, has the
meaning assigned to that term in the Series 2002-1 Purchase Supplement pursuant
to which such Loan was transferred to the Depositor.
"ESTIMATED FEES" means an amount to be stated by the Master Servicer
each month in the Monthly Servicer Report and used to calculate the Reserve
Required Amount which Estimated Fees amount shall be the Master Servicer's good
faith estimate of the sum of the Monthly Trustee Fee for the immediately
following three months, the Monthly Master Servicer Fee for the immediately
following three months and the fees to become due under the Fee Letters for the
immediately following three months.
"EVENT OF DEFAULT" means one or more of the events described in
Section 10.1 of this Supplement.
"EXCESS CONCENTRATION AMOUNT" means on any day, an amount equal to the
sum of (i) the Non-US Excess Amount, (ii) the Green Loans Excess Amount, (iii)
the EFI Excess Amount, (iv) Delayed Completion Green Loans Excess Amount, (v)
the Single Development Excess Amount, (vi) the New Seller Excess Amount, (vii)
the Transition Period Excess Amount, (viii) the Large Loans Excess Amount, and
(ix) the Geographic Concentration Excess Amount.
"EXTRAPOLATED CUMULATIVE CANCELLATION RATE" or "ECCR" has the meaning
assigned thereto in Section 9.01.
"FACILITY LIMIT" means $550,000,000, as such amount may be reduced
from time to time in accordance with Section 4.08 hereof and the Note Purchase
Agreement or increased in accordance with Section 4.09 hereof and the Note
Purchase Agreement.
"FAC SERIES 2002-1 PLEDGED LOANS" means Series 2002-1 Pledged Loans
sold to the Depositor by FAC.
"FEE LETTER" has the meaning assigned to such term in the Note
Purchase Agreement.
"GEOGRAPHIC CONCENTRATION EXCESS AMOUNT" means at any time, if, with
respect to the locations and jurisdictions listed in any one of the following
numbered categories of
(1) Daytona Beach, Florida,
(2) Destin, Florida,
(3) Fort Lauderdale/Pompano, Florida,
(4) Orlando, Florida,
(5) State of California,
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(6) State of Nevada,
(7) States of Arizona or Colorado,
(8) State of Missouri,
(9) States of Arkansas or Tennessee,
(10) States of North Carolina, South Carolina or Georgia,
(11) State of Hawaii,
(12) Washington, D.C. or
(13) the Commonwealth of Virginia,
the Loan Balances of all FAC Series 2002-1 Pledged Loans which relate to Resorts
located in the such category exceed twenty-five percent (25%) of the Series
2002-1 Adjusted Loan Balance, then the Geographic Concentration Excess Amount
shall be the sum of the excess amounts for all of the categories for which an
excess exists.
"GREEN LOAN" means a Loan the proceeds of which are used to finance
the purchase of a Timeshare Property for which construction on the related
Resort has not yet begun or is subject to completion.
"GREEN LOANS EXCESS AMOUNT" means, at any time, (A) if the Cendant
Ratings Requirement is then met, an amount by which (i) the sum of the Loan
Balances for all Series 2002-1 Pledged Loans which are Green Loans exceeds (ii)
ten percent (10%) of the Series 2002-1 Adjusted Loan Balance of the Series
2002-1 Pledged Loans or (B) if the Cendant Ratings Requirement is not then met,
the sum of the Loan Balances for all Series 2002-1 Pledged Loans which are Green
Loans.
"GROSS EXCESS SPREAD" means for any Payment Date the Series 2002-1
Interest Collections for the immediately preceding Due Period, MINUS the sum of
(i) the aggregate amount of Notes Interest due on such Payment Date and (ii) the
Monthly Master Servicer Fee due on such Payment Date.
"GROSS EXCESS SPREAD PERCENTAGE" means for any Due Period the
percentage equivalent of a fraction, the numerator of which is the product of 12
times the Gross Excess Spread for the related Payment Date and the denominator
of which is the average daily Series ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇▇ Loan Balance.
"HEDGE AGREEMENT" means the cap confirmation originally dated on or
about the Closing Date between the Issuer and the counterparty as Hedge Provider
and as such Hedge Agreement may be amended, modified, adjusted or replaced.
"HEDGE PROVIDER" means any entity which enters into a Hedge Agreement
with the Issuer.
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"INITIAL CUT-OFF DATE" means the close of business on August 27, 2002.
"INITIAL NOTES PRINCIPAL AMOUNT" means the principal amount of the
Series 2002-1 Notes issued on the Closing Date, being in the aggregate
$232,506,160.43 and, with respect to each Note, the amount set forth in Exhibit
C.
"INITIAL SERIES 2002-1 PLEDGED LOANS" means those Loans listed on the
Series 2002-1 Loan Schedule delivered to the Collateral Agent as of the Closing
Date.
"ISSUER" means Sierra Receivables Funding Company, LLC, a Delaware
limited liability company and its successors and assigns.
"KONA" means Kona Hawaiian Vacation Ownership, LLC, a Hawaii limited
liability company, and its successors and assigns.
"LARGE LOANS EXCESS AMOUNT" means, at any time, the sum of (a) the
combined amount of the Loan Balances of all Series 2002-1 Pledged Loans which
have a Loan Balance at such time greater than $100,000 plus (b) the amount by
which (i) the combined amount of the Loan Balances of all Series 2002-1 Pledged
Loans which have a Loan Balance at such time of $75,000 or more (but not more
than $100,000) exceeds (ii) five percent (5%) of the Series 2002-1 Adjusted Loan
Balance.
"LIQUIDITY AGREEMENT" has the meaning assigned to such term in the
Note Purchase Agreement.
"LIQUIDITY FEES" means with respect to any Class, the liquidity fees
described in the Fee Letter for that Class.
"LIQUIDITY REDUCTION AMORTIZATION PERIOD" means the period beginning
with the Payment Date occurring in the first calendar month following the
occurrence of a Liquidity Reduction Date and continuing through the earlier of
(i) the Payment Date on which the Liquidity Reduction Amount has been paid in
full or (ii) the last Payment Date prior to the occurrence of an Amortization
Event.
"LIQUIDITY REDUCTION AMOUNT" means, if a Liquidity Reduction Event has
occurred with respect to a Conduit, the principal amount of Notes held by such
Class as of the Payment Date immediately following the applicable Liquidity
Reduction Date.
"LIQUIDITY REDUCTION DATE" means the date on which a Liquidity
Reduction Event occurs.
"LIQUIDITY REDUCTION EVENT" means the Liquidity Agreement of a Conduit
or Alternate Investor shall be terminated for any reason (whether at the stated
maturity or earlier) or shall otherwise cease to be in full force and effect.
"LIQUIDITY TERMINATION DATE" has the meaning assigned to that term in
the Note Purchase Agreement.
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"MAJORITY FACILITY INVESTORS" has the meaning assigned to that term in
the Note Purchase Agreement.
"MARKET SERVICING RATE" means the rate calculated by the Trustee
following a Servicer Default and which rate shall be calculated as follows: (1)
the Trustee shall, within 10 Business Days after the occurrence of a Servicer
Default, solicit bids from entities which are experienced in servicing loans
similar to the Pledged Loans and shall request delivery of such bids to the
Trustee within 30 days of the delivery of the notice to potential Successor
Servicer, and such bids shall state a servicing fee as part of the bid and (2)
upon the receipt of three arms length bids, the Trustee shall disregard the
highest bid and the lowest bid and select the remaining middle bid, and the
servicing fee rate bid by such bidder shall be the Market Servicing Rate.
"MASTER SERVICER" means Fairfield Acceptance Corporation-Nevada, a
Delaware corporation, or if a change in Master Servicer has occurred in
accordance with the terms of subsection 5.12(b) of the Agreement and Section
11.03 of this Supplement, Trendwest and, in each case, its successors and
assigns, as Master Servicer under the Agreement or if any Service Transfer
occurs under the Agreement, and thereafter means the Successor Master Servicer
appointed pursuant to Section 10.2 of the Agreement.
"MASTER SERVICER ADVANCE" means amounts, if any, advanced by the
Master Servicer, at its option, pursuant to Section 11.01 to cover any shortfall
between (i) the Scheduled Payments on the Series 2002-1 Pledged Loans for a Due
Period, and (ii) the amounts actually deposited in the Collection Account on
account of such Scheduled Payments on or prior to the Payment Date immediately
following such Due Period.
"MATURITY DATE" means August 15, 2005.
"MONTHLY INTEREST" for each Note means the Notes Interest due and
payable on any Payment Date.
"MONTHLY PRINCIPAL" has the meaning specified in Section 6.02.
"MONTHLY MASTER SERVICER FEE" means, in respect of any Due Period (or
portion thereof), an amount equal to one-twelfth of the product of (a) 1.0% and
(b) the Series ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇▇ Loan Balance at the beginning of such Due Period
(or portion thereof) or if a Successor Master Servicer has been appointed and
accepted the appointment or if the Trustee is acting as Master Servicer, an
amount equal to one-twelfth of the product of (x) the lesser of 3.5% and the
Market Servicing Rate and (y) the Series ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇▇ Loan Balance at the
beginning of such Due Period.
"MONTHLY TRUSTEE FEE" means, in respect of any Due Period, an amount
equal to one-twelfth of 0.01% of the Notes Principal Amount as of the first day
of such Due Period.
"NET HEDGE PAYMENT" means with respect to any Payment Date, the
aggregate amount, if any, which the Issuer is obligated to pay as an additional
premium to the Hedge Provider on such Payment Date as a result of an increase in
the notional amount of the Hedge Agreement and/or any other change in the terms
or adjustments of the Hedge Agreement which
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require payment of an increased or additional premium; the amount of any such
Net Hedge Payment shall be calculated by the Master Servicer and provided in
writing to the Trustee and the Deal Agent.
"NET HEDGE RECEIPT" means with respect to any Payment Date, the
aggregate amount, if any, paid on the Payment Date to the Trustee under the
terms of the Hedge Agreement then in effect including payments for termination
or sale of all or a portion of the Hedge Agreement.
"NET LIQUIDATION PROCEEDS" means, with respect to any Defaulted Loan
which is a Series 2002-1 Pledged Loan and which has not been released from the
Lien of this Supplement, the proceeds of the sale, liquidation or other
disposition of the Defaulted Loan and/or related Series 2002-1 Pledged Assets.
"NEW SELLER" means an entity other than FAC, EFI or Trendwest which
(a) is a subsidiary of Cendant, (b) performs its own loan origination and
servicing, (c) has entered into a Purchase Agreement and Series 2002-1 Purchase
Supplement as provided in Section 5.03 and, (d) with respect to any Loan Granted
under this Supplement has complied with all conditions set forth in Section
5.03.
"NEW SELLER EXCESS AMOUNT" means, at any time, an amount equal to the
sum of (a) the amount by which the sum of the Loan Balances for Series 2002-1
Pledged Loans that were sold to the Depositor by any one New Seller exceeds 10%
of the Series 2002-1 Adjusted Loan Balance plus, without duplication and (b) the
amount by which the sum of the Loan Balances for Series 2002-1 Pledged Loans
that were sold to the Depositor by all New Sellers exceeds 15% of the Series
2002-1 Adjusted Loan Balance.
"NEW SELLER LOANS" means Loans sold by a New Seller to the Depositor
under a Purchase Agreement.
"NON-US EXCESS AMOUNT" means, at any time, the amount by which (i) the
sum of the Loan Balances for all Series 2002-1 Loans with Obligors with billing
addresses not located in the United States of America exceeds (ii) five percent
(5%) of the Series 2002-1 Adjusted Loan Balance.
"NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement dated as
of August 29, 2002 which relates to the sale of the Series 2002-1 Notes by the
Issuer and which is by and among the Issuer, the Depositor, the Master Servicer,
the Performance Guarantor, the Deal Agent, the Conduits, the Alternate Investors
and the Class Agents (each such term not defined herein has the meaning set
forth in the Note Purchase Agreement) as amended, restated, supplemented or
otherwise modified.
"NOTES" means the Series 2002-1 Notes and "Note" means any one of the
Series 2002-1 Notes.
"NOTES INCREASE" means a draw on the Series 2002-1 Notes resulting in
an increase in the Notes Principal Amount outstanding.
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"NOTES INCREASE DATE" means with respect to a Notes Increase, the
Payment Date on which the Notes Increase occurs pursuant to Section 4.07 of this
Supplement.
"NOTES INTEREST" means for any Payment Date and for each Note
outstanding during the related Accrual Period, an amount equal to the Carrying
Costs of the related Class due on such Payment Date as such amount is reported
to the Trustee by the Deal Agent or the Master Servicer; PLUS the Liquidity Fees
and Program Fees due on such Payment Date under the terms of the related Fee
Letter as such amounts are reported to the Trustee by the Deal Agent or the
Master Servicer.
"NOTES PRINCIPAL AMOUNT" means as of the close of business on any
date, with respect to any Note, the Initial Notes Principal Amount of that Note,
less the aggregate amount of principal payments made on that Note on or prior to
such date plus the sum of all increases in that Note occurring pursuant to
Section 4.07 on or prior to such date; PROVIDED that any principal payments
required to be returned to the Issuer in connection with any Insolvency
Proceeding shall be reinstated to the Notes Principal Amount.
"NOTEHOLDER" or "HOLDER" means the Person in whose name a Series
2002-1 Note is registered in the Note Register.
"NOTICE OF INCREASE" means the notice presented by the Issuer to the
Deal Agent, Master Servicer and Trustee to request a Notes Increase.
"NPA COSTS" means at any time, the Breakage and Other Costs as defined
in the Note Purchase Agreement.
"OVERDUE 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, together with interest
thereon for each Accrual Period at the rate of the Bank Base Rate plus 2%.
"PAYMENT DATE" means the 13th day of each calendar month, or, if such
13th day is not a Business Day, the next succeeding Business Day, commencing in
September 2002.
"PERFORMANCE GUARANTY" means the performance guaranty dated as of
August 29, 2002 made by Performance Guarantor in favor of the Trustee.
"PERMITTED ENCUMBRANCE" with respect to any Series 2002-1 Pledged Loan
has the meaning assigned to that term under the Purchase Agreement pursuant to
which such Loan is sold to the Depositor.
"POTENTIAL AMORTIZATION EVENT" means an event which, but for the lapse
of time or the giving of notice or both, would constitute an Amortization Event.
"POTENTIAL EVENT OF DEFAULT" means an event which, but for the lapse
of time or the giving of notice or both, would constitute an Event of Default.
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"POTENTIAL SERVICER DEFAULT" means an event which, but for the lapse
of time or the giving of notice or both, would constitute a Servicer Default.
"PRINCIPAL DISTRIBUTION AMOUNT" means for any Payment Date an amount
equal to the Borrowing Base Shortfall as of the last day of the preceding Due
Period less the amount by which the Borrowing Base is increased on such Payment
Date.
"PRIORITY OF PAYMENTS" means the application of Available Funds in
accordance with Section 6.01.
"PROGRAM FEES" means with respect to any Class, the program fees
described in the Fee Letter for that Class.
"PURCHASE AGREEMENT" means a Master Loan Purchase Agreement between a
Seller and the Depositor pursuant to which the Seller sells Loans to the
Depositor.
"PURCHASERS" has the meaning assigned to that term in the Note
Purchase Agreement.
"QUALIFIED HEDGE PROVIDER" means an entity which provides a Hedge
Agreement and which provider has a long term unsecured debt rating of at least A
from each of ▇▇▇▇▇'▇ and S&P and a short-term unsecured debt rating of at least
A-1 from S&P and P-1 from ▇▇▇▇▇'▇.
"QUALIFIED SUBSTITUTE LOAN" means a substitute Series 2002-1 Pledged
Loan that is an Eligible Loan on the applicable date of substitution and that on
such date of substitution has a coupon rate not less than the coupon rate of the
substituted Pledged Loan.
"RATING AGENCY" means each of Fitch, S&P or ▇▇▇▇▇'▇ as appropriate and
their respective successors in interest.
"RATING AGENCY CONDITION" means, with respect to Series 2002-1, the
written consent of the Deal Agent.
"RECORD DATE" means as to any Payment Date the last day of the
preceding Due Period.
"RELEASE DATE" means the date on which Series 2002-1 Pledged Loans are
released from the Lien of this Supplement.
"RELEASE PRICE" means an amount equal to the outstanding Loan Balance
of the Series 2002-1 Pledged Loan as of the close of business on the Due Date
immediately preceding the Payment Date on which the release is to be made, plus
accrued and unpaid interest thereon to the date of such release.
"RELEASED SERIES 2002-1 PLEDGED LOAN" means any Loan which was
included as a Series 2002-1 Pledged Loan, but which has been released from the
Lien of this Supplement pursuant to the terms hereof.
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"REQUIRED CAP RATE" means, for any Accrual Period the Weighted Average
Series 2002-1 Loans Rate less 7.50%.
"REQUIRED CLASS AGENTS" has the meaning assigned to that term in the
Note Purchase Agreement.
"RESERVE ACCOUNT" means the account established pursuant to Section
6.06 of this Supplement.
"RESERVE ACCOUNT EXCESS" has the meaning specified in Section 6.06 of
this Supplement.
"RESERVE REQUIRED AMOUNT" as of the Closing Date means $8,403,837.12
and (i) thereafter so long as no Amortization Event has occurred, means as of
each Payment Date an amount equal to the greater of (x) 3.0% of the Series
▇▇▇▇-▇ ▇▇▇▇▇▇▇▇▇ Loan Balance as of the end of the prior Due Period and (y) the
Estimated Fees and (ii) from and after the first Payment Date following an
Amortization Event, the Reserve Required Amount shall be $0.
"SELLER OF SERIES 2002-1 LOANS" means a Seller which has sold a Loan
to the Depositor and such Loan is a Series 2002-1 Pledged Loan.
"SERIES 2002-1 ACCOUNT" means either of the Collection Account or the
Reserve Account and "SERIES 2002-1 ACCOUNTS" mean both of such accounts.
"SERIES 2002-1 ADJUSTED LOAN BALANCE" means the Series ▇▇▇▇-▇
▇▇▇▇▇▇▇▇▇ Loan Balance minus the sum of (i) the Loan Balances of any Series
2002-1 Pledged Loans which are Defaulted Loans, (ii) the Loan Balances of any
Series 2002-1 Pledged Loans which are Delinquent Loans on the last day of the
immediately preceding Due Period, (iii) the Loan Balances of any Series 2002-1
Pledged Loans which are Defective Loans and (iv) the Loan Balances of any Series
2002-1 Pledged Loans which are Deferred Loans.
"SERIES ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇▇ LOAN BALANCE" means, as of any time, the sum
of the Loan Balances for the Series 2002-1 Pledged Loans.
"SERIES 2002-1 COLLATERAL" has the meaning specified in the Granting
Clause of this Supplement.
"SERIES 2002-1 COLLECTIONS" means Collections, as defined in the
Agreement, with respect to all Series 2002-1 Pledged Loans.
"SERIES 2002-1 DOCUMENTS" means the Series 2002-1 Notes, this
Supplement, the Note Purchase Agreement and the Fee Letters.
"SERIES 2002-1 INTEREST COLLECTIONS" means Collections on the Series
2002-1 Pledged Loans which are allocable to interest on such Loans in accordance
with the terms thereof.
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"SERIES 2002-1 LOAN POOL" means all Loans identified in the Series
2002-1 Loan Schedule.
"SERIES 2002-1 LOAN SCHEDULE" means a Loan Schedule, as defined in the
Agreement, containing information about the Series 2002-1 Pledged Loans, which
Loan Schedule is as delivered by the Issuer to the Collateral Agent as of the
Closing Date and as amended each month by delivery of an amendment describing
the Series 2002-1 Pledged Loans added and released.
"SERIES 2002-1 NOTES" has the meaning specified in Section 1.01 of
this Supplement.
"SERIES 2002-1 PLEDGED ASSETS" with respect to each Series 2002-1
Pledged Loan, means the related "Pool Assets" as defined in the Pool Purchase
Agreement.
"SERIES 2002-1 PLEDGED LOANS" means the Initial Series 2002-1 Pledged
Loans and any Additional 2002-1 Pledged Loans, but excluding any Released Series
2002-1 Pledged Loans.
"SERIES 2002-1 POOL PURCHASE SUPPLEMENT" means the Series 2002-1
Supplement to the Pool Purchase Agreement which supplement is dated as of August
29, 2002 and is by and between the Depositor and the Issuer and provides for the
transfer of the Series 2002-1 Pledged Loans from the Depositor to the Issuer.
"SERIES 2002-1 PURCHASE SUPPLEMENTS" means each supplement to a
Purchase Agreement pursuant to which Series 2002-1 Pledged Loans are transferred
from the respective Seller to the Depositor.
"SETTLEMENT STATEMENT" means the information furnished by the Master
Servicer to the Trustee for distribution to the Noteholders pursuant to
Section 8.01 of this Supplement.
"SINGLE DEVELOPMENT EXCESS AMOUNT" means, at any time, the amount by
which (i) the sum of the Loan Balances for all Series 2002-1 Pledged Loans which
are Loans secured by Liens on Timeshare Properties in any one Resort exceeds
(ii) fifteen percent (15%) of the Series 2002-1 Adjusted Loan Balance.
"SUBSTITUTION ADJUSTMENT AMOUNT" has the meaning specified in the
Series 2002-1 Pool Purchase Supplement.
"SUPPLEMENT" means this Series 2002-1 Supplement as amended from time
to time.
"SUPPLEMENTAL GRANT" means, with respect to any Additional 2002-1
Pledged Loans Granted as provided in Section 3.5 of the Agreement, a
Supplemental Grant substantially in the form of Exhibit A hereto which shall be
accompanied by an amendment which amends the Series 2002-1 Loan Schedule listing
such Loans and which shall be deemed to be incorporated into and made a part of
this Supplement.
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"THREE MONTH DEFAULT PERCENTAGE" means (i) with respect to the
September 2002 Payment Date the Default Percentage for the August 2002 Due
Period, (ii) with respect to the October 2002 Payment Date, (a) the sum of the
Default Percentage for the August 2002 Due Period plus the Default Percentage
for the September 2002 Due Period divided by (b) two; (iii) with respect to the
November Payment Date, (a) the sum of the Default Percentage for the August 2002
Due Period plus the Default Percentage for the September 2002 Due Period, plus
the Default Percentage for the October 2002 Due Period divided by (b) three; and
(iv) for the December 2002 Payment Date and each Payment Date thereafter, the
sum of the Default Percentages for each of the three immediately preceding Due
Periods divided by three.
"THREE MONTH ROLLING AVERAGE DELINQUENCY RATIO" means (i) with respect
to the September 2002 Payment Date the Delinquency Ratio for the August 2002 Due
Period; (ii) with respect to the October 2002 Payment Date, (a) the sum of the
Delinquency Ratio for the August 2002 Due Period plus the Delinquency Ratio for
the September 2002 Due Period divided by (b) two; (iii) with respect to the
November Payment Date, (a) the sum of the Delinquency Ratio for the August Due
Period plus the Delinquency Ratio for the September Due Period, plus the
Delinquency Ratio for the October Due Period divided by (b) three; and (iv) for
the December 2002 Payment Date and each Payment Date thereafter, the sum of the
Delinquency Ratio for each of the three immediately preceding Due Periods
divided by three.
"TRANSITION PERIOD" means the period from the date a Seller acquires
an organization, facility or program from an unrelated entity to the date on
which the Seller has fully converted the origination and servicing of Loans
related to such organization, facility or program to the Seller's Credit
Standards and Collection Policies and such Loans are originated using the forms
and documents of the Seller.
"TRANSITION PERIOD EXCESS AMOUNT" means, at any time, an amount equal
to the Loan Balances of all Series 2002-1 Loans which are Acquired Portfolio
Loans (including, for such purposes, Loans acquired from Kona) and for which the
Transition Period has extended beyond 120 days and the Transition Period has not
been completed.
"TRENDWEST LOANS" means Series 2002-1 Pledged Loans which were sold to
the Depositor under the terms of the Master Loan Purchase Agreement dated as of
August 29, 2002 between Trendwest and the Depositor and the Series 2002-1
Purchase Supplement thereto and transferred to the Issuer under the terms of the
Pool Purchase Agreement.
"TRUSTEE" means Wachovia Bank, National Association, or its successor
in interest, or any successor trustee appointed as provided in the Agreement.
"WEIGHTED AVERAGE SERIES 2002-1 LOANS RATE" means as of the last day
of any Due Period, the weighted average of the Contract Rates for all Series
2002-1 Pledged Loans as of such date.
"WORLDMARK" means WorldMark, The Club, a California non-profit mutual
benefit corporation, and its successors in interest.
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Section 2.02. OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Supplement 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
2.01 or in the Agreement and accounting terms partly defined in Section 2.01 or
in the Agreement, 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 Supplement shall refer to this Supplement as a whole
and not to any particular provision of this Supplement; and Article, Section,
subsection, Schedule and Exhibit references contained in this Supplement are
references to Articles, Sections, subsections, Schedules and Exhibits in or to
this Supplement unless otherwise specified.
ARTICLE III
SERVICING COMPENSATION
Section 3.01. SERVICING COMPENSATION. As compensation for its
servicing activities with respect to the Series 2002-1 Pledged Loans, the Master
Servicer shall be entitled to receive the Monthly Master Servicer Fee which
shall be paid to the Master Servicer pursuant to Section 6.01 of this
Supplement. On the first Payment Date, the Monthly Master Servicer Fee shall be
$7,781.33.
ARTICLE IV
THE SERIES 2002-1 NOTES
Section 4.01. FORMS GENERALLY. The Series 2002-1 Notes and the
Trustee's or Authentication Agent's certificate of authentication thereon (the
"CERTIFICATE OF AUTHENTICATION") shall be in substantially the forms set forth
as Exhibit B to this Supplement, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by the Agreement
and this Supplement, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon, as may,
consistently herewith, be determined by the Authorized Officers of the Issuer
executing such Series 2002-1 Notes as evidenced by their execution of such
Series 2002-1 Notes. Any portion of the text of any Note may be set forth on the
reverse or subsequent pages thereof, with an appropriate reference thereto on
the face of the Series 2002-1 Note.
Each Note shall have a grid attached to it on which there shall be
recorded the initial Notes Principal Amount, each Notes Increase for that Note
and all principal payments made on that Note; PROVIDED, that such amounts may
instead be recorded in the Purchaser's or
18
Class Agent's records and the failure to make such recordings shall not affect
the obligations of the Issuer hereunder or under such Note.
One Note shall be issued for each Class and be registered in the name
of the Class Agent for that Class as set forth in Exhibit C to this Supplement.
Section 4.02. AUTHORIZED AMOUNT; CONDITIONS TO INITIAL ISSUANCE. (a)
The Initial Notes Principal Amount shall be $232,506,160.43. The Notes Principal
Amount may be increased from time to time as provided in Section 4.07 of this
Supplement; provided, however, that the Notes Principal Amount shall at no time
exceed the then effective Facility Limit. The Initial Notes Principal Amount of
the Note issued to each Class shall be as set forth in Exhibit C. Any Notes
Increase shall be allocated pro rata to each Note on the basis of the Initial
Notes Principal Amount, except that if any Note is then subject to a Liquidity
Reduction Amortization Period, such Note shall not be included in calculating
the pro rata allocation of the Notes Increase.
(b) The following shall be conditions to the issuance of the Series
2002-1 Notes:
(i) There shall have been delivered to the Trustee a
Performance Guaranty under which the Performance Guarantor will
guarantee to the Depositor, the Issuer, the Trustee and the Collateral
Agent on behalf of all holders of Notes issued under the Agreement,
the full and punctual payment and performance of all covenants,
agreements, terms, conditions and other obligations to be performed
and observed by each of FAC, as Seller and Master Servicer, EFI and
Trendwest under and pursuant to the Agreement and this Series
Supplement and all amounts related to the enforcement of the
Performance Guaranty;
(ii) The Issuer shall enter into and Grant to the Trustee the
Hedge Agreement with terms described in Section 6.07;
(iii) The premium due for the Hedge Agreement as of the Closing
Date shall have been paid as of the Closing Date;
(iv) On or immediately prior to the Closing Date the Custodian
has possession of each original Series 2002-1 Pledged Loan and the
related Loan File and has acknowledged to the Trustee and the Deal
Agent such receipt and its undertaking to hold each such original
Series 2002-1 Pledged Loan and the related Loan File for purposes of
perfection of the Collateral Agent's interests in such original Series
2002-1 Pledged Loans and the related Loan File; provided that the fact
that any document not required to be in its respective Loan File
pursuant to the applicable Purchase Agreement is not in the possession
of the Custodian in its respective Loan File does not constitute a
failure to satisfy this condition;
(v) The Issuer shall have delivered the Series 2002-1 Loan
Schedule to the Collateral Agent and each of the Initial Series 2002-1
Pledged Loans listed on
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such Loan Schedule shall be Loans sold by a Seller to the Depositor
under a Purchase Agreement and Series 2002-1 Purchase Supplement;
(vi) On the Closing Date, the Initial Notes Principal Balance
shall not exceed the Borrowing Base which shall for this purpose be
calculated by the Master Servicer as of the Initial Cut-Off Date; and
(vii) Any additional conditions set forth in Section 3.3 of the
Note Purchase Agreement shall have been satisfied.
Section 4.03. PRINCIPAL, INTEREST AND NPA COSTS. (a) PRINCIPAL. Each
Note shall be issued on the Closing Date and shall have a Maturity Date of
August 15, 2005.
Each Note shall be subject to prepayment in whole or in part as
required or permitted by the terms of this Supplement.
(b) INTEREST. Interest on each Note shall be due and payable on each
Payment Date in the amount of the Notes Interest calculated for that Note for
that Payment Date. On the Determination Date prior to each Payment Date, the
Deal Agent shall provide written notice to the Issuer, the Master Servicer and
the Trustee of the aggregate amount of Notes Interest to be paid on such Payment
Date on all Notes and the components used in calculating the Notes Interest
including the amount of Carrying Costs, Program Fees and Liquidity Fees for each
Class for such Payment Date.
(c) NPA COSTS. NPA Costs shall be due and payable to each Class Agent
on each Payment Date. On the Determination Date prior to each Payment Date, the
Deal Agent shall provide written notice to Issuer, the Master Servicer and the
Trustee of the aggregate amount of NPA Costs due on such Payment Date and the
amount due to each Class.
Section 4.04. NONRECOURSE TO THE ISSUER. The Series 2002-1 Notes are
limited obligations of the Issuer payable only from and to the extent of the
Series 2002-1 Collateral. The Holders of the Notes shall have recourse to the
Issuer only to the extent of the Series 2002-1 Collateral, and to the extent
such Series 2002-1 Collateral is not sufficient to pay the Series 2002-1 Notes
and the Notes Interest thereon in full and all other obligations of the Issuer
under this Series 2002-1 Supplement and the other Series 2002-1 Documents, the
Holders of the Series 2002-1 Notes and holders of other obligations payable from
the Series 2002-1 Collateral shall have no rights in any other assets which the
Issuer may have including, but not limited to any assets of the Issuer which may
be Granted to secure other obligations. To the extent any Noteholder is deemed
to have any interest in any assets of the Issuer which assets have been Granted
to secure other obligations such Noteholder agrees that its interest in those
assets is subordinated to claims or rights of such other debtholders with
respect to those assets. Further such Noteholders agree that such agreement
constitutes a subordination agreement for purposes of Section 510(a) of the
Bankruptcy Code.
Section 4.05. DATING OF THE NOTES. The Series 2002-1 Notes shall be
executed and authenticated as provided in the Agreement.
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Each Series 2002-1 Note authenticated and delivered by the Trustee or
the Authentication Agent to or upon Issuer Order on the Closing Date shall be
dated as of the Closing Date. All other Series 2002-1 Notes that are
authenticated after the Closing Date for any other purpose under this Agreement
shall be dated the date of their authentication.
Notes issued upon transfer, exchange or replacement of other Series
2002-1 Notes shall represent the outstanding principal amount of the Notes so
transferred, exchanged or replaced. If any Series 2002-1 Note is divided into
more than one Series 2002-1 Note in accordance with this Article IV the
aggregate principal amount of the Series 2002-1 Notes delivered in exchange
shall, in the aggregate be equal to the principal amount of the divided Series
2002-1 Note.
Section 4.06. PAYMENTS ON THE SERIES 2002-1 NOTES; PAYMENT OF NPA
COSTS.
(a) The Notes Interest calculated for each Payment Date will be due
and payable on that Payment Date.
(b) To the extent of Available Funds distributed as provided in
provision SIXTH of Section 6.01, principal of the Series 2002-1 Notes will be
subject to mandatory prepayment on each Payment Date in the amount of the
Monthly Principal. Except with respect to any Notes which are subject to a
Liquidity Reduction Amortization Period, all payments of principal on the Notes
shall be made pro rata based on the outstanding principal amount of the Notes.
All outstanding principal of the Notes (unless sooner paid) will be due and
payable on the Maturity Date.
(c) As a condition to the payment of principal of and interest on any
Series 2002-1 Note without the imposition of U. S. withholding tax, the Issuer
shall require certification acceptable to the Trustee to enable the Issuer, the
Trustee or any Paying Agent to determine their duties and liabilities with
respect to any taxes or other charges that they may be required to deduct or
withhold from payments in respect of such Note under any present or future law
or regulation of the United States or any present or future law or regulation of
any political subdivision thereof or taxing authority therein or to comply with
any reporting or other requirement under any such law or regulation.
(d) Payments in respect of interest on and principal of and any other
amount payable on or in respect of any Notes including NPA Costs shall be made
on each Payment Date (i) by wire transfer in immediately available funds sent by
the Trustee on or prior to 11:00 a.m.
New York City time on the Payment Date
with respect to any Note to a United States dollar account specified for such
Note in the Note Register and in accordance with wire transfer instructions
received by the Trustee on or before the Record Date applicable to such Payment
Date or, with respect to the first Payment Date, specified on the Closing Date
or, (ii) if no wire transfer instructions are received by a Paying Agent, by a
U. S. dollar check drawn on a United States bank and delivered by first-class
mail, postage prepaid to each Holder at the address shown in the Note Register.
Section 4.07. INCREASES IN NOTES PRINCIPAL AMOUNT. The Noteholders
agree, by acceptance of the Notes that the Issuer may from time to time by
irrevocable written notice
21
substantially in the form attached to the Note Purchase Agreement given to the
Deal Agent, the Trustee and the Master Servicer and subject to the terms and
conditions of this Section 4.07, request that the Series 2002-1 Noteholders on
the following Payment Date fund an increase in the outstanding principal balance
of the Series 2002-1 Notes in the aggregate amount specified in the notice;
provided that, with respect to any Notes Increase related to the initial
purchase of Loans from a Seller, such Note Increase may occur on any Business
Day whether or not such day is a Payment Date. If the terms and conditions to
the Note Increase set forth in this Section 4.07 and in the Note Purchase
Agreement are satisfied or waived, then the Noteholders shall fund an increase
by payment, in same day funds, to the Issuer of the amount of such increase in
accordance with the payment instructions specified in the Notice of Increase. In
addition to conditions set forth in the Note Purchase Agreement, the following
shall be conditions to each Note Increase:
(a) The Issuer and the Master Servicer shall have complied in all
material respects with all of their respective covenants and agreements
contained in the Agreement, this Supplement and the Note Purchase Agreement.
(b) No Amortization Event, Event of Default, Potential Amortization
Event or Potential Event of Default shall have occurred and be continuing.
(c) At least two (2) Business Days preceding the proposed Note
Increase Date, the Issuer shall have delivered to the Deal Agent, the Master
Servicer and the Trustee an electronic copy of a "Notice of Increase" in
substantially the form of Exhibit __ to the Note Purchase Agreement.
(d) After giving effect to the funding on such proposed Note Increase
Date, the Notes Principal Amount will not exceed the Borrowing Base; provided,
however, that, for such purposes, if the Cendant Ratings Requirement is not met
as of the Notes Increase Date, the Borrowing Base, as it was calculated on the
last day of the preceding Due Date, shall be reduced to remove from the
Borrowing Base the Loan Balances of all Series 2002-1 Pledged Loans which are
Green Loans.
(e) After giving effect to the funding on such proposed Note Increase
Date, the Notes Principal Amount will not exceed the Facility Limit.
(f) After giving effect to the funding on such proposed Note Increase
Date and the deposit of Available Funds, the amount in the Reserve Account will
be equal to the Reserve Required Amount.
(g) The Hedge Agreement shall have been adjusted, if required, so
that the notional amount is equal to 90% of the Notes Principal Amount after
giving effect to such Notes Increase and the amortization schedule on the Hedge
Agreement has been adjusted in accordance with a schedule prepared by the Master
Servicer and by the Deal Agent.
Section 4.08. REDUCTION OF THE FACILITY LIMIT. In accordance with the
Note Purchase Agreement, the Issuer may, upon at least five Business Days'
written notice to the Deal Agent reduce, in part, the Facility Limit to (but not
below) the Notes Principal Amount. Any such reduction in the Facility Limit
shall be made pro rata to each of the Classes and in the
22
aggregate for a reduction of not less than $20 million and in increments of
$1 million in excess thereof.
Section 4.09. INCREASE OF THE FACILITY LIMIT.
(a) So long as no Amortization Event shall have occurred and be
continuing, the Issuer may, on any Business Day, by written notice to the Deal
Agent request an increase in the Facility Limit. The written notice to the Deal
Agent shall specify:
(i) the amount of the requested increase in the Facility
Limit; and
(ii) the date on which such increase is proposed to occur.
(b) Any increase in the Facility Limit shall occur only if approved
by each of the Conduits and Alternate Investors as provided in the Note Purchase
Agreement and shall be evidenced by a notice from the Issuer and the Deal Agent
delivered to the Trustee which shall state the increased Facility Limit and the
date on which such increase shall be effective.
Section 4.10. REPAYMENT OBLIGATION. (a) On any Payment Date the Issuer
shall be obligated to prepay the Notes in an amount determined in a written
notice from the Deal Agent. The Deal Agent may, or at the direction of the
Majority Facility Investors shall, provide the Issuer with such written notice
of such prepayment obligation, and shall specify that such prepayment be made
from the proceeds of a sale of an additional Series which additional Series will
be secured by and payable from some or all of the assets then pledged as Series
2002-1 Collateral. Upon receipt of such notice, the Issuer shall use its
reasonable best efforts to issue and sell an additional Series and use the
proceeds to prepay the Series 2002-1 Notes or a portion thereof in accordance
with the notice received from the Deal Agent, and upon the issuance of such new
Series and the repayment of the Series 2002-1 Notes in the amounts set forth in
the Deal Agent's notice, release Series 2002-1 Pledged Loans and related Series
2002-1 Pledged Assets from the Lien of this Supplement and Grant such Loans and
related assets to secure the new Series, provided, that such sale of Notes and
prepayment shall not be required or permitted unless the following conditions
are met: (i) the Deal Agent shall provide the Issuer with a letter evidencing
the intent of a Person to enter into a purchase agreement or to arrange for the
purchase or placement of the new Series (such a letter, a "Letter of Intent"),
(ii) Cendant shall fail to exercise or waive the right of first refusal (as
described in subsection (b) below) to arrange for the purchase or placement of a
new Series by an alternative third party, (iii) after giving effect to such
prepayment and release of Series 2002-1 Collateral, no Borrowing Base Shortfall
shall exist and no Amortization Event or Event of Default shall exist, (iv) each
of the Issuer and the Master Servicer shall have delivered to the Deal Agent a
certificate to the effect that the Series 2002-1 Pledged Loans to be released
from the Lien of this Supplement were not selected in a manner involving any
adverse selection procedures and that the release of such Loans would not
reasonably be expected to cause a Potential Amortization Event or an
Amortization Event, and (v) the proceeds of the sale of the new Series shall be
adequate to pay all amounts required to be paid under this Section 4.10. The
proceeds of any such sale shall be deposited into the Collection Account and
used by the Trustee, at the direction of the Master Servicer, to prepay
principal on the Series 2002-1 Notes in the amount directed by the Master
Servicer which shall
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be at least equal to the amount required to be paid in accordance with the
written notice described in the first sentence of this paragraph.
(b) Simultaneously with the delivery of the notice of prepayment
obligation described in subsection (a) immediately above, the Deal Agent shall
deliver a notice to Cendant (such notice, a "Purchase Notice") containing (i)
the amount of the principal prepayment being required by the Deal Agent, (ii)
the identity of the Person providing the Letter of Intent, along with a copy of
such Letter of Intent and (iii) other material terms and conditions of the
proposed transaction. Within 60 calendar days after receipt of such notice, or
such lesser amount of time as Cendant may agree to in writing, Cendant may elect
to locate an alternative Person to purchase or place the additional Series
provided, that, Cendant shall have no right to acquire the additional Series or
the Loans or Pledged Assets for its own account. If Cendant does not elect to
locate an alternative purchaser or placement agent, such new Series shall be
sold in accordance with the terms provided in the Purchase Notice, provided,
that, unless waived by Cendant, any such transaction must be made for the
consideration and upon the terms and conditions set forth in the Purchase Notice
and in no event will the terms and conditions of the transaction be less
favorable to the Issuer than the terms, taken as a whole, stated in such
Purchase Notice. If the transaction is not consummated pursuant to the Letter of
Intent within 90 calendar days of the expiration of the above referenced 60 day
period, or, if earlier, the waiver by Cendant of its right of first refusal, the
prepayment rights and sale obligations provided under subsection (a) above shall
cease and the new Series shall not be sold unless first reoffered to Cendant in
accordance herewith.
(c) Upon the sale of a new Series and prepayment of the Notes in
accordance with subsections (a) and (b) immediately above, the Issuer shall
terminate the existing Hedge Agreement and, if any Series 2002-1 Notes remain
outstanding, replace it with a new Hedge Agreement in a notional amount equal to
90% of the Series 2002-1 Notes Principal Amount after the sale of the new Series
and the application of the proceeds. Any amounts received by the Issuer upon the
termination to the extent not used to acquire a new Hedge Agreement, shall be
deposited into the Collection Account. Such new Hedge Agreement shall have all
of the terms described in Section 6.07.
(d) If, after the date of this Supplement, there occurs a change in
generally accepted accounting principles in the United States and as a result
the terms of this Section 4.10, in the reasonable belief of the Issuer, may
cause an adverse change in accounting treatment with respect to the transfer of
the Series 2002-1 Pledged Loans from the Seller or Sellers thereof to the
Depositor, then the terms of this Section 4.10 may be amended by the parties to
this Supplement to the extent appropriate to preserve such accounting treatment.
If the Issuer requests that the Master Servicer, the Trustee and the Collateral
Agent enter into such amendment, it shall be deemed to be an amendment made
under the terms of and subject to the provisions of Section 13.01 of the
Agreement.
Section 4.11. TRANSFER RESTRICTIONS.
(a) The Series 2002-1 Notes have not been registered under the
Securities Act or any state securities law. Neither the Issuer nor the Trustee
nor any other Person is obligated to register the Series 2002-1 Notes under the
Securities Act or any other securities or "Blue Sky"
24
laws or to take any other action not otherwise required under the Agreement or
this Supplement to permit the transfer of the Series 2002-1 Notes without
registration.
(b) No transfer of the Series 2002-1 Notes or any interest therein
(including without limitation by pledge or hypothecation) shall be made except
in compliance with the restrictions on transfer set forth in this Section 4.11
(including the applicable legend to be set forth on the face of the Series
2002-1 Notes as provided in Exhibit B), in a transaction exempt from the
registration requirements of the Securities Act and applicable state securities
or "Blue Sky" laws (i) to a person who the transferor reasonably believes is a
"qualified institutional buyer" within the meaning thereof in Rule 144A (a
"QIB") and (B) that is aware that the resale or other transfer is being made in
reliance on Rule 144A.
(c) Each Holder of a Series 2002-1 Note, by its acceptance thereof,
will be deemed to have acknowledged, represented to and agreed with the Issuer
and, in the case of any transferee of a Purchaser, such Purchaser as follows:
(i) It understands that the Series 2002-1 Notes may be offered
and may be resold by a Noteholder of a Series 2002-1 Note only to QIBs
pursuant to Rule 144A.
(ii) It understands that the Series 2002-1 Notes have not been
and will not be registered under the Securities Act or any state or
other applicable securities law and that the Series 2002-1 Notes, or
any interest or participation therein, may not be offered, sold,
pledged or otherwise transferred unless registered pursuant to, or
exempt from registration under, the Securities Act and any other
applicable securities law.
(iii) It acknowledges that none of the Issuer or any Purchaser
or any person representing the Issuer or a Purchaser has made any
representation to it with respect to the Issuer or the offering or
sale of any Series 2002-1 Notes. It has had access to such financial
and other information concerning the Issuer, the Series 2002-1 Notes
and the source of payment for the Series 2002-1 Notes as it has deemed
necessary in connection with its decision to purchase the Series
2002-1 Notes.
(iv) It is purchasing the Series 2002-1 Notes for its own
account, or for one or more investor accounts for which it is acting
as fiduciary or agent, in each case for investment, and not with a
view to, or for offer or sale in connection with, any distribution
thereof in violation of the Securities Act, subject to any
requirements of law that the disposition of its property or the
property of such investor account or accounts be at all times within
its or their control and subject to its or their ability to resell
such Series 2002-1 Notes, or any interest or participation therein, as
described herein, in the Agreement and in the Note Purchase Agreement.
(v) It acknowledges that the Issuer, the Purchaser and others
will rely on the truth and accuracy of the foregoing acknowledgments,
representations and
25
agreements, and agrees that if any of the foregoing acknowledgments,
representations and agreements deemed to have been made by it are no
longer accurate, it shall promptly notify the Issuer.
(vi) It is not and is not acquiring the Series 2002-1 Notes by
or on behalf of, or with "plan assets" of, (i) an employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether or not subject to
Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the
Internal Revenue Code of 1986, as amended (the "Code"); (iii) (an
entity whose underlying assets include "plan assets" by reason of a
Plan's investment in the Purchaser; or (iv) a person who is otherwise
a "benefit plan investor," as defined in U.S. Department of Labor
("DOL") Regulation Section 2510.3-101 (a "Benefit Plan Investor"),
including any insurance company general account or a governmental or
foreign plan that is generally not subject to ERISA or Section 4975(e)
of the Code.
(vii) With respect to any foreign purchaser claiming an
exemption from United States income or withholding tax, that it has
delivered to the Trustee a true and complete Form W-8 BEN, Form 1001
or Form 4224, indicating such exemption or any other forms and
documentation as may be sufficient under the applicable regulations
for claiming such exemption.
Except as provided in subsection (d) below, any transfer, resale,
pledge or other transfer of the Series 2002-1 Notes contrary to the restrictions
set forth above and in the Agreement shall be deemed void ab initio by the
Trustee.
(d) Notwithstanding anything to the contrary herein, each Conduit
(as defined in the Note Purchase Agreement), under the terms of its Liquidity
Agreement or the Note Purchase Agreement, may at any time sell or grant to one
or more Liquidity Providers party to the Liquidity Agreement or one or more
Alternative Investors party to the Note Purchase Agreement, participating
interests or security interests in the Series 2002-1 Notes provided that each
Liquidity Provider or Alternate Investor shall, by any such purchase be deemed
to have acknowledged and agreed to the provisions of subsection 4.11(c) hereof.
Section 4.12. TAX TREATMENT. The Issuer has structured the Agreement
and this Supplement and the Notes with the intention that the Notes will qualify
under applicable tax law as indebtedness of the Issuer, and the Issuer and each
Noteholder by acceptance of its Note agree to treat the Notes (or beneficial
interest therein) as indebtedness for purposes of federal, state and local
income or franchise taxes or any other tax imposed on or measured by income.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE ISSUER;
ASSIGNMENT OF REPRESENTATIONS AND WARRANTIES
Section 5.01. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer
hereby represents and warrants to the Trustee, the Collateral Agent and the
Series 2002-1 Noteholders
26
on the date of execution of this Series Supplement, on the Initial Closing Date
and any date of an increase in the Facility Limit or a Notes Increase Date as
follows:
(a) PERFECTION OF SECURITY INTERESTS IN SERIES 2002-1 COLLATERAL.
(i) Payment of principal and interest on the Series 2002-1
Notes and the prompt observance and performance by the Issuer of all of the
terms and provisions of this Supplement are secured by the Series 2002-1
Collateral. Upon the issuance of the Series 2002-1 Notes and at all times
thereafter so long as any Series 2002-1 Notes are outstanding, this
Supplement creates a security interest (as defined in the applicable UCC)
in the Series 2002-1 Collateral in favor of the Collateral Agent for the
benefit of the Trustee and the Series 2002-1 Noteholders to secure amounts
payable under the Series 2002-1 Notes and the Series 2002-1 Documents,
which security interest is perfected and prior to all other Liens (other
than any Permitted Encumbrances) and is enforceable as such against all
creditors of and purchasers from the Issuer; and
(ii) the Series 2002-1 Collateral constitutes either
"accounts," "chattel paper," "instruments" or "general intangibles" within
the meaning of the applicable UCC.
(b) ELIGIBLE LOANS. Each Series 2002-1 Pledged Loan, on the date on
which it becomes a Series 2002-1 Pledged Loan, is an Eligible Loan and is a Loan
sold by a Seller to the Depositor under a Purchase Agreement and Series 2002-1
Purchase Supplement.
(c) SERVICER DEFAULT. No Servicer Default has occurred and is
continuing.
(d) EVENTS OF DEFAULT; AMORTIZATION EVENTS. No Event of Default has
occurred and is continuing, no Amortization Event has occurred and is
continuing, no Potential Event of Default has occurred and is continuing and no
Potential Amortization Event has occurred and is continuing.
Section 5.02. ASSIGNMENT OF REPRESENTATIONS AND WARRANTIES. The Issuer
hereby assigns to the Trustee its rights relating to the Series 2002-1 Pledged
Loans under the Pool Purchase Agreement including the rights assigned to the
Issuer by the Depositor of the Depositor's rights to payment due from the
related Seller for repurchases of Defective Loans (as such term is defined in
such Purchase Agreement) resulting from the breach of representations and
warranties under such Purchase Agreement.
Section 5.03. ADDITION OF NEW SELLERS. Loans sold to the Depositor by
a New Seller and sold by the Depositor to the Issuer may be Granted as Series
2002-1 Pledged Loans under the terms of Section 7.01 provided that the following
conditions have been met:
(i) The New Seller has entered into a Purchase Agreement with
the Depositor substantially in the form attached hereto as Exhibit F-1 but
with such revisions as shall be necessary to accommodate the type of Loans
and related assets of the New Seller;
(ii) The New Seller has entered into a Series 2002-1 Purchase
Supplement substantially in the form attached hereto as Exhibit F-2 but
with such
27
revisions as shall be necessary to accommodate the type of Loans and
related assets of the New Seller;
(iii) The Guaranty Agreement has been amended to included the
New Seller as a party whose performance is guarantied or the Performance
Guarantor shall have provided a new guaranty agreement under which the
Performance Guarantor guaranties the performance of the New Seller;
(iv) One or more of the Custodial Agreements shall have been
amended to provide that the New Seller may deliver Loan Files to the
Custodian to be held for the benefit of the Collateral Agent;
(v) The New Seller shall have provided a Lockbox Agreement
which provides for the receipt of Collections on the Series 2002-1 Pledged
Loans sold by such Seller and the delivery of such Collections to the
Collateral Agent;
(vi) The New Seller shall have provided to counsel for the Deal
Agent copies of search reports certified by parties acceptable to counsel
for the Deal Agent dated a date reasonably prior to the date on which the
entity becomes a New Seller (A) listing all effective financing statements
which name the New Seller (under its present name and any previous names)
as debtor or seller and which are filed with respect to the New Seller in
each relevant jurisdiction, together with copies of such financing
statements (none of which shall cover any portion of the Series 2002-1
Pledged Loans sold by such New Seller to the Depositor except as
contemplated by the Facility Documents);
(vii) Copies of proper UCC financing statement amendments (Form
UCC3), if any, necessary to terminate all security interests and other
rights of any Person previously granted by the New Seller in the Loans of
the New Seller to the extent such Loans are to become Series 2002-1 Pledged
Loans and the related Pledged Assets;
(viii) An Opinion of Counsel with respect to true sale and
federal bankruptcy matters similar in substance to the opinions delivered
to the Trustee on the Closing Date shall have been delivered to the
Trustee, the Class Agents, the Purchasers with respect to sales of the
Loans by the New Seller to the Depositor;
(ix) The Issuer shall have delivered to the Trustee and the
Collateral Agent and the Deal Agent copies of UCC financing statements with
respect to the sale of the Loans from the New Seller to the Depositor, from
the Depositor to the Issuer and the Grant to the Collateral Agent together
with Opinions of Counsel to the effect that such transfer or security
interests have been perfected and are of a first priority;
(x) Each of the items described in provisions (i) through (ix)
above shall have been reviewed by counsel to the Deal Agent and such
counsel shall have notified the Deal Agent that such items are in the
reasonable opinion of such counsel acceptable in form and substance to
permit the addition of Loans of the New Seller; and
28
(xi) Either:
(A) The New Seller shall have delivered to the Deal
Agent and Bank of America, N.A. documentation which documentation
shall, as to the method of calculating the information contained
therein and the quality of the information provided, be subject to the
approval of the Deal Agent and the Bank of America, N.A., which
approval will not be unreasonably withheld and such documentation
shall provide evidence that for a period of not less than five years
immediately preceding the date on which the entity becomes a New
Seller, the Extrapolated Cumulative Cancellation Rate is less than
17%; or
(B) the Deal Agent and Bank of America, N.A. have each
delivered to the Issuer its written consent to the addition of the New
Seller and the inclusion of Loans sold by such New Seller as Series
2002-1 Pledged Loans.
ARTICLE VI
PAYMENTS, SECURITY AND ALLOCATIONS
Section 6.01. PRIORITY OF PAYMENTS.
The Master Servicer shall apply, or by written instruction to the
Trustee shall cause the Trustee to apply on each Payment Date Available Funds
for that Payment Date on deposit in the Collection Account to make the following
payments and in the following order of priority:
FIRST, to the Trustee in payment of the Monthly Trustee Fees and
in reimbursement of the reasonable expenses of the Trustee under each
of the Facility Documents to which the Trustee is a party, provided
that such expenses relate to Series 2002-1; in the event of a Servicer
Default and the replacement of the Master Servicer with the Trustee or
a Successor Master Servicer, the actual costs and expenses of
replacing the Master Servicer shall be permitted expenses of the
Trustee; provided that such costs and expenses relate to Series
2002-1;
SECOND, if the Master Servicer is not Fairfield Acceptance
Corporation-Nevada or an affiliate of Cendant, to the Master Servicer,
in payment of the Monthly Master Servicer Fee and, whether or not
Fairfield Acceptance Corporation-Nevada or another affiliate of
Cendant is then the Master Servicer, to the Master Servicer in
reimbursement of any unreimbursed Master Servicer Advances;
THIRD, to the Hedge Provider under the Hedge Agreement, Net Hedge
Payments;
FOURTH, to each Noteholder, the Notes Interest for the current
Payment Date and NPA Costs payable to such Noteholder to the extent
due and payable and not included in the Monthly Interest and any
Overdue Interest from prior periods (and interest thereon);
29
FIFTH, if the Master Servicer is Fairfield Acceptance
Corporation-Nevada or another affiliate of Cendant, to the Master
Servicer, the Monthly Servicing Fee;
SIXTH, to the Noteholders, the Monthly Principal for such Payment
Date, as described in Section 6.02;
SEVENTH, if the amount on deposit in the Reserve Account is less
than the Required Reserve Amount, to the Reserve Account, all
remaining Available Funds until the amount on deposit in the Reserve
Account is equal to the Reserve Required Amount;
EIGHTH, during a Liquidity Reduction Amortization Period, with
respect to each Note to which a Liquidity Reduction Event has occurred
the lesser of (i) the aggregate outstanding principal amount of such
Note and (ii) such Notes' pro rata share of the remaining Available
Funds; for such purposes the pro rata share shall be determined on the
basis of the outstanding principal amounts of such Notes as of the
dates their respective Liquidity Reduction Amortization Period
commenced and the sum of the Notes Principal Amount of all Notes then
in a Liquidity Reduction Amortization Period calculated as of the
dates their respective Liquidity Reduction Amortization Periods
commenced; and
FINALLY, to the Issuer, any remaining amounts free and clear of
the lien of this Supplement.
Section 6.02. DETERMINATION OF MONTHLY PRINCIPAL. The amount of
Available Funds required to be distributed for the payment of principal on the
Notes on any Payment Date is the "MONTHLY PRINCIPAL" for that Payment Date and
shall be calculated as follows:
(i) so long as no Amortization Event has occurred and the Maturity
Date has not occurred, the Monthly Principal for any Payment Date shall be
an amount equal to the Principal Distribution Amount for that Payment Date;
(ii) on the Maturity Date of the Series 2002-1 Notes, the Monthly
Principal for such Payment Date shall be the Notes Principal Amount; and
(iii) if an Amortization Event has occurred or if the Liquidity
Termination Date has occurred, then for each Payment Date after the
occurrence of such Amortization Event or Liquidity Termination Date, the
Monthly Principal shall be equal to the entire amount of the remaining
Available Funds after making provision for the payments and distributions
required under clauses FIRST through FIFTH in the Priority of Payments.
Section 6.03. INFORMATION PROVIDED TO TRUSTEE. The Master Servicer
shall promptly provide the Trustee in writing with all information necessary to
enable the Trustee to make the payments and deposits required pursuant to
Section 6.01.
Section 6.04. PAYMENTS. On each Payment Date, the Trustee, as Paying
Agent, shall distribute to the Holders the amounts due and payable under this
Supplement and the Notes. Such payments shall be made as provided in subsection
4.06(d) hereof.
30
Section 6.05. COLLECTION ACCOUNT.
(a) COLLECTION ACCOUNT. The Trustee, for the benefit of the Series
2002-1 Noteholders, shall establish and maintain in the name of the Trustee, a
segregated account designated as the "Sierra Receivables Funding Company, LLC
Series 2002-1 Collection Account" bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Noteholders pursuant
to this Supplement.
(b) WITHDRAWALS. The Trustee shall have the sole and exclusive right
to withdraw or order a transfer of funds from the Collection Account, in all
events in accordance with the terms and provisions of this Supplement and the
information most recently delivered to the Trustee pursuant to Section 8.01;
provided, however, that the Trustee shall be authorized to accept and act upon
instructions from the Master Servicer regarding withdrawals or transfers of
funds from the Collection Account, in all events in accordance with the
provisions of this Supplement and the information most recently delivered
pursuant to Section 8.01. In addition, notwithstanding anything in the foregoing
to the contrary, the Trustee shall be authorized to accept instructions from the
Master Servicer on a daily basis regarding withdrawals or order transfers of
funds from the Collection Account, to the extent such funds either (i) have been
mistakenly deposited into the Collection Account (including without limitation
funds representing Assessments or dues payable by Obligors to POAs 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 Master Servicer shall provide the
Trustee with notice of such withdrawal or transfer, together with reasonable
supporting details, on the next Servicer's Monthly Report to be delivered by the
Master Servicer following the date of such withdrawal or transfer (or in such
earlier written notice as may be required by the Trustee from the Master
Servicer from time to time). Notwithstanding anything therein to the contrary,
the Trustee shall be entitled to make withdrawals or order transfers of funds
from the Collection Account, in the amount of all reasonable and appropriate
out-of-pocket costs and expenses incurred by the Trustee in connection with any
misdirected funds described in clause (i) and (ii) of the second foregoing
sentence. Within two Business Days of receipt, the Master Servicer shall
transfer all Collections processed by the Master Servicer to the Trustee for
deposit into the Collection Account. The Trustee shall deposit or cause to be
deposited into the Collection Account upon receipt all amounts in respect of
releases of Series 2002-1 Pledged Loans by the Issuer. On each Payment Date, the
Trustee shall apply amounts in the Collection Account to make the payments and
disbursements described in this Supplement.
(c) ADMINISTRATION OF THE COLLECTION ACCOUNT. Funds in the Collection
Account shall, at the direction of the Issuer, at all times be invested in
Permitted Investments; provided, however, that all Permitted Investments shall
mature on or before the next Payment Date, in order to ensure that funds on
deposit therein will be available on such Payment Date. The Trustee shall
maintain or cause to be maintained possession of the negotiable instruments or
securities evidencing the Permitted Investments from the time of purchase
thereof until the time of sale or maturity. Subject to the restrictions set
forth in the first sentence of this paragraph, the Issuer shall instruct the
Trustee in writing regarding the investment of funds on deposit in the
Collection Account. All investment earnings on such funds shall be deemed to be
available to the Trustee for the uses specified in this Supplement. The Trustee
shall be fully protected in following the investment instructions of the Issuer,
and shall have no obligation for keeping the
31
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 Issuer, the Trustee is authorized to invest
the funds in Permitted Investments described in clause (v) of the definition
thereof. In no event shall the Trustee be liable for any investment losses
incurred in connection with the investment of funds on deposit in the Collection
Account by the Trustee pursuant to this Agreement.
(d) IRREVOCABLE DEPOSIT. Any deposit made into the Collection Account
hereunder shall, except as otherwise provided herein, be irrevocable and the
amount of such deposit and any money, instrument, investment property or other
property on deposit in or credited to such Account hereunder and all interest
thereon shall be held in trust by the Trustee and applied solely as provided
herein.
(e) SOURCE. All amounts delivered to the Trustee shall be accompanied
by information in reasonable detail and in writing specifying the source and
nature of the amounts.
Section 6.06. RESERVE ACCOUNT.
(a) CREATION AND FUNDING OF THE RESERVE ACCOUNT. The Trustee shall
establish and maintain in the name of the Trustee, an Eligible Account
designated as the "Sierra Receivables Funding Company, LLC Series 2002-l Reserve
Account" bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Noteholders pursuant to this Supplement.
The Reserve Account shall be under the sole dominion and control of the Trustee;
however, if so directed by the Issuer, the Reserve Account may be an account in
the name of the Trustee opened at another financial institution. If, at any
time, the Reserve Account ceases to be an Eligible Account, the Trustee (or the
Master Servicer on its behalf) shall within ten (10) Business Days (or such
longer period, not to exceed thirty (30) calendar days, as to which the Deal
Agent may consent) establish a new Reserve Account as an Eligible Account and
shall transfer any property to such new Reserve Account. So long as the Trustee
is an Eligible Institution, the Reserve Account may be maintained with it in an
Eligible Account.
On the Closing Date the Issuer shall deposit or shall cause to be
deposited into the Reserve Account the sum of $8,403,837.12 as the initial
Reserve Required Amount and thereafter on each Payment Date if the amount on
deposit in the Reserve Account is less than the Required Reserve Amount, a
deposit shall be made to the Reserve Account to the extent of funds available as
provided in provision SEVENTH of Section 6.01.
(b) TRANSFER TO COLLECTION ACCOUNT. On or prior to each Payment Date,
prior to the allocation of funds pursuant to Section 6.01 on such Payment Date,
the Master Servicer shall direct the Trustee to withdraw from the Reserve
Account and deposit into the Collection Account to be included as Available
Funds such amount, if any, as shall be equal to the lesser of (A) the amount of
cash or other immediately available funds on deposit in the Reserve Account on
such Payment Date and (B) the amount, if any, by which (y) the amounts required
to be applied pursuant to Section 6.01 provisions FIRST through SIXTH on such
Payment Date and for any preceding Payment Date (to the extent not previously
paid) exceed (z) the Available Funds for that Payment Date (calculated without
regard to any amounts to be transferred from
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the Reserve Account). The Trustee shall withdraw such funds from the Reserve
Account and deposit them in the Collection Account as directed by the Master
Servicer.
(c) RELEASE OF RESERVE ACCOUNT EXCESS. 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
this Section 6.06; PROVIDED, THAT the Trustee shall be authorized to transfer
funds from the Reserve Account to the Collection Account at the direction of the
Master Servicer as provided in subsection (b) above and at the direction of the
Deal Agent pursuant to subsection (d) below and to accept and act upon
instructions from the Master Servicer to release to the Issuer, free and clear
of the lien of this Supplement, on the first Business Day following each Payment
Date, an amount of funds held in the Reserve Account equal to the excess (if
any) on such Business Day (the "RESERVE ACCOUNT EXCESS") of the then outstanding
balance of the Reserve Account over the Reserve Required Amount 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 on the
immediately preceding Payment Date). The Master Servicer, as a condition of
causing the release of funds from the Reserve Account, shall simultaneously
provide the Trustee and the Deal Agent with a certificate of a Servicing Officer
as to the existence and size of any Reserve Account Excess to which the Issuer
is entitled.
(d) APPLICATION AFTER AMORTIZATION EVENT. Notwithstanding anything
contained in the foregoing subsections to the contrary, on the first
Determination Date after the occurrence of an Amortization Event, the Trustee,
acting at the direction of the Deal Agent, shall withdraw all funds on deposit
in the Reserve Account and deposit such amounts into the Collection Account to
be used solely for the purposes set forth in and in accordance with the Priority
of Payments.
(e) TERMINATION OF RESERVE ACCOUNT. Any funds remaining in the
Reserve Account after all Notes (including both principal and interest thereon)
have been paid in full and in cash and all other obligations of the Issuer under
the Series 2002-1 Documents have been paid in full and in cash shall be remitted
by the Trustee to the Issuer free and clear of the lien of this Supplement.
(f) ADMINISTRATION OF THE RESERVE ACCOUNT. Funds in the Reserve
Account shall be invested in Permitted Investments as directed by the Issuer;
provided, however, that all Permitted Investments shall mature on or before the
next Payment Date. All such Permitted Investments shall be held by the Trustee.
Subject to the restrictions set forth in the first sentence of this subsection
(f), the Issuer shall instruct the Trustee in writing regarding the investment
of funds on deposit in the Reserve Account. For purposes of determining the
availability of balances in Reserve Account for withdrawal pursuant to this
Section 6.06, all investment earnings on such funds shall be deemed to be
available under this Supplement for the uses specified in such section. The
Trustee shall be fully protected in following the investment instructions of the
Issuer, 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
Issuer, the Trustee is authorized to invest the funds in Permitted Investments
described in clause (v) of the definition thereof. In no event shall the Trustee
be liable for any investment losses incurred in connection with the
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investment of funds on deposit in the Reserve Account by the Trustee pursuant to
this Supplement.
(g) DEPOSIT IRREVOCABLE. Any deposit made into the Reserve Account
hereunder shall, except as otherwise provided herein, be irrevocable and the
amount of such deposit and any money, instruments, investment property, or other
property credited to carried in, or deposited in the Reserve Account hereunder
and all interest thereon shall be held in trust by the Trustee and applied
solely as provided herein.
Section 6.07. HEDGE AGREEMENT. The Issuer shall at all times, so long
as any Notes remain unpaid, provide a Hedge Agreement with the terms described
in this Section 6.07. When all Notes have been paid in full, the Issuer shall
terminate the Hedge Agreement. The Hedge Agreement shall meet the following
requirements:
(a) the Hedge Agreement shall provide an interest rate cap for a
notional amount equal to 90% of the Notes Principal Amount and such notional
amount shall amortize on a monthly basis for a term equal to the actual
amortization schedule of payments on the Series 2002-1 Pledged Loans assuming a
schedule of payments and prepayments mutually determined by the Master Servicer,
the Issuer, the Deal Agent and Bank of America, N.A. at such time (which
schedule shall be based upon the historical amortization experience of Loans
owned or serviced by the Master Servicer and/or its Affiliates);
(b) the Issuer shall, as of each Payment Date, cause the notional
amount of the Hedge Agreement to be adjusted to reflect any increase or decrease
in the Notes Principal Amount as of such Payment Date so that the adjusted
notional amount of the Hedge Agreement shall on each Payment Date be an amount
equal to 90% of the Notes Principal Amount; the Issuer shall also, as of each
Payment Date adjust the Hedge Agreement to reflect the Required Cap Rate, the
termination date and the amortization schedule following the addition and
release of Series 2002-1 Pledged Loans as of each Payment Date; any additional
Premium due for the adjustments to the interest rate cap shall be paid as a Net
Hedge Payment under Provision THIRD of Section 6.01;
(c) the Hedge Agreement shall have a termination date equal to the
final maturity date of the latest maturing Series 2002-1 Pledged Loans; and
(d) the Hedge Agreement shall provide for a payment by the Hedge
Provider to the Trustee for deposit into the Collection Account on each Payment
Date if for the related Accrual Period the LIBOR Rate was greater than the
Required Cap Rate.
(e) References in this Section 6.07 or otherwise in this Supplement
to a notional amount equal to 90% of the Notes Principal Amount shall allow for
rounding to the nearest $1,000.
Section 6.08. REPLACEMENT OF HEDGE PROVIDER. The Issuer agrees that if
any Hedge Provider ceases to be a Qualified Hedge Provider, the Issuer shall
have five (5) days (x) to cause such Hedge Provider to assign its obligations
under the related Hedge Agreement to a new, Qualified Hedge Provider (or such
Hedge Provider shall have five (5) days to again become a Qualified Hedge
Provider) or (y) to obtain a substitute Hedge Agreement, together with the
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related Qualified Hedge Provider's acknowledgment of the Grant by the Issuer to
the Trustee of such Hedge Agreement.
ARTICLE VII
ADDITION, RELEASE AND SUBSTITUTION OF LOANS
Section 7.01. ADDITION OF SERIES 2002-1 COLLATERAL.
(a) TRANSFER OF ADDITIONAL LOANS. Subject to the limitations and
conditions specified in this Section 7.01, the Issuer may from time to time,
transfer additional Eligible Loans and related Series 2002-1 Pledged Assets to
the Collateral Agent for the benefit of the Trustee for the benefit of the
Series 2002-1 Noteholders and such Loans and related assets shall be included as
Series 2002-1 Collateral hereunder.
(b) The transfer of Additional 2002-1 Pledged Loans and the related
Series 2002-1 Pledged Assets shall be subject to the satisfaction of the
following conditions:
(i) at least two (2) Business Days preceding the proposed
Addition Date, the Issuer shall have delivered to the Deal Agent
a schedule of the Additional 2002-1 Pledged Loans to be
transferred on such Addition Date and each of the Additional
2002-1 Pledged Loans shall be a Loan sold by a Seller to the
Depositor under a Purchase Agreement and Series 2002-1 Purchase
Supplement;
(ii) the Issuer, the Master Servicer, the Trustee and the
Collateral Agent shall execute a Supplemental Grant in
substantially the form of Exhibit A to this Supplement and the
Master Servicer shall have delivered a signed copy of such
Supplemental Grant to the Collateral Agent;
(iii) the Liquidity Termination Date shall not have occurred and
no Amortization Event, Servicer Default, Event of Default,
Potential Amortization Event, Potential Servicer Default or
Potential Event of Default shall have occurred and be continuing
or would occur as a result of the addition of such Additional
2002-1 Pledged Loans;
(iv) On or immediately prior to the Addition Date the Custodian
has possession of each original Additional 2002-1 Pledged Loan
and the related Loan File and has acknowledged to the Trustee and
the Deal Agent such receipt and its undertaking to hold each such
original Additional 2002-1 Pledged Loan and the related Loan File
for purposes of perfection of the Collateral Agent's interests in
such original Additional 2002-1 Pledged Loans and the related
Loan File; provided that the fact that any document not required
to be in its respective Loan File pursuant to the applicable
Purchase Agreement is not in the possession of the Custodian in
its respective Loan File does not constitute a failure to satisfy
this condition;
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(v) the Issuer shall have taken any actions necessary or
advisable to maintain the Collateral Agent's perfected security
interest in the Series 2002-1 Collateral (including in the
Additional 2002-1 Pledged Loans) for the benefit of the Trustee
for the benefit of the Noteholders;
(vi) each Additional 2002-1 Pledged Loan shall be an Eligible
Loan;
(vii) if any of the Additional 2002-1 Pledged Loans are New
Seller Loans, the conditions set forth in Section 5.03 of this
Supplement have been satisfied with respect to the Seller of such
Loans;
(viii) if any of the Additional 2002-1 Pledged Loans are New
Seller Loans and after the addition of such Loans, the Principal
Balance of the Series 2002-1 Pledged Loans which are New Seller
Loans sold by one New Seller to the Depositor would exceed 10% of
the Series 2002-1 Adjusted Loan Balance, then the addition of
such New Seller Loans shall be subject to the prior written
consent of the Deal Agent and Bank of America, N.A.;
(ix) if any of the Additional 2002-1 Pledged Loans are New
Seller Loans and after the addition of such Loans, the Principal
Balance of all the Series 2002-1 Pledged Loans which are New
Seller Loans is greater than 15% of the Series 2002-1 Adjusted
Loan Balance, then the addition of such New Seller Loans shall be
subject to the prior written consent of all Class Agents; and
(x) if any of the Additional 2002-1 Pledged Loans are Acquired
Portfolio Loans and after the addition of such Loans, (a) the
Principal Balance of all Series 2002-1 Pledged Loans which are
Acquired Portfolio Loans acquired as part of one portfolio is
less than 10% of the Series 2002-1 Adjusted Loan Balance, then
the addition of such Loans shall be subject to the prior written
consent of the Deal Agent and Bank of America, N.A. or (b) if the
Principal Balance of all Series 2002-1 Pledged Loans which are
Acquired Portfolio Loans acquired as part of one portfolio is 10%
or more of the Series 2002-1 Adjusted Loan Balance, then the
addition of such Loans shall be subject to the prior written
consent of all Class Agents.
(c) In addition to the conditions set forth in (b) above, on the
first date on which Trendwest Loans are included in the Additional 2002-1
Pledged Loans and on the first date on which EFI Loans are included in the
Additional 2002-1 Pledged Loans, it shall be a condition to the addition of such
Additional 2002-1 Pledged Loans that the conditions set forth in Section
2(b)(iv) of the Series 2002-1 Pool Purchase Supplement be met to the
satisfaction of counsel to the Deal Agent.
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Section 7.02. RELEASE OF DEFECTIVE LOANS.
(a) OBLIGATION WITH RESPECT TO DEFECTIVE LOANS. If a Seller is
required to repurchase a Defective Loan under the terms of the applicable
Purchase Agreement and Series 2002-1 Purchase Supplement, the Issuer shall, on
the same Payment Date as the Seller is required to repurchase the Defective
Loan, be required either (i) to pay the Release Price of such Defective Loan and
obtain the release of the Defective Loan from the Lien of this Supplement or
(ii) substitute one or more Qualified Substitute Loans for such Series 2002-1
Pledged Loan as provided in subsection 7.02(c) and obtain the release of the
Defective Loan.
(b) PAYMENTS. The Issuer shall provide written notice to the Trustee
and the Collateral Agent of any release pursuant to subsection 7.02(a) not less
than two Business Days prior to the Payment Date on which such release is to be
effected, specifying the Defective Loan and the Release Price therefor. Upon the
release of a Defective Loan pursuant to subsection 7.02(a) the Issuer shall
deposit or cause to be deposited the Release Price in the Collection Account no
later than 12:00 noon,
New York time, on the Payment Date on which such release
is made (the "Release Date").
(c) SUBSTITUTION. If the Issuer elects to substitute a Qualified
Substitute Loan or Qualified Substitute Loans for a Defective Loan pursuant to
this subsection 7.02(c), the Issuer shall Grant such Qualified Substitute Loan
in the same manner as other Additional 2002-1 Pledged Loans and shall include
such Qualified Substitute Loans in the Additional 2002-1 Pledged Loans described
in a Supplemental Grant. The Qualified Substitute Loan or Qualified Substitute
Loans will not be selected in a manner adverse to the Noteholders, and the
aggregate principal balance of the Qualified Substitute Loans will not be less
than the principal balance of the Defective Loans for which the substitution
occurs. In connection with the substitution for one or more Qualified Substitute
Loans for one or more Defective Loans, the Issuer shall deposit an amount, if
any, equal to the related Substitution Adjustment Amount in the Collection
Account on the date of substitution without any reimbursement therefor. The
Issuer shall cause the Master Servicer to amend the Series 2002-1 Loan Schedule
to reflect the removal of such Defective Loan and the substitution of the
Qualified Substitute Loan or Qualified Substitute Loans and the Issuer shall
cause the Master Servicer to deliver the amended Series 2002-1 Loan Schedule to
the Issuer and the Trustee and Collateral Agent.
(d) Upon each release of a Series 2002-1 Pledged Loan under this
Section 7.02, the Collateral Agent and the Trustee shall automatically and
without further action release, sell, transfer, assign, set over and otherwise
convey to the Issuer, without recourse, representation or warranty, all of the
Collateral Agent's and the Trustee's right, title and interest in and to such
Defective Loan and the Series 2002-1 Pledged Assets related thereto, all monies
due or to become due with respect thereto and all Collections with respect
thereto (including payments received from Obligors from and including the last
day of the Due Period next preceding the date of release) free and clear of the
lien of this Supplement. The Collateral Agent and the Trustee shall execute such
documents, releases and instruments of transfer or assignment and take such
other actions as shall reasonably be requested by the Issuer or Depositor to
effect the release of such Defective Loan and the related Series 2002-1 Pledged
Assets pursuant to this subsection 7.02. Promptly after the occurrence of a
Release Date and after the payment for and
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release of or substitution for Defective Loans, the Issuer shall direct the
Master Servicer to delete such Defective Loans from the Series 2002-1 Loan
Schedule.
(e) The obligation of the Issuer to deposit the Release Price or
provide a Qualified Substitute Loan for any Defective Loan shall constitute the
sole remedy against the Issuer with respect to any breach of the representations
and warranties set forth in 5.01(b) of this Supplement or the representations of
the Seller assigned to the Trustee pursuant to Section 5.02.
Section 7.03. RELEASE OF DEFAULTED LOANS. If any Series 2002-1 Pledged
Loan becomes a Defaulted Loan during any Due Period, the Issuer may obtain a
release of such Series 2002-1 Pledged Loan from the lien of this Supplement on
any Payment Date thereafter. To obtain such release the Issuer shall be required
to pay the Release Price of such Defaulted Loan to the Trustee for deposit into
the Collection Account. The Issuer shall provide written notice to the Trustee
and the Collateral Agent of any release pursuant to this Section 7.03 not less
than two Business Days prior to the Payment Date on which such release is to be
effected, specifying the Defaulted Loan and the Release Price therefor. The
Issuer shall pay the Release Price to the Trustee for deposit into the
Collection Account not later than 12:00 noon,
New York City time, on the Payment
Date on which such release is made.
Upon each release of a Series 2002-1 Pledged Loan under this Section
7.03, the Collateral Agent and the Trustee shall automatically and without
further action release, sell, transfer, assign, set over and otherwise convey to
the Issuer, without recourse, representation or warranty, all of the Collateral
Agent's and Trustee's right, title and interest in and to such Defaulted Loan
and the Series 2002-1 Pledged Assets related thereto, all monies due or to
become due with respect thereto and all Collections with respect thereto free
and clear of the Lien of this Supplement. The Collateral Agent and the Trustee
shall execute such documents, releases and instruments of transfer or assignment
and take such other actions as shall reasonably be requested by the Issuer to
effect the release of such Defaulted Loans and the related Series 2002-1 Pledged
Assets pursuant to this Section 7.03. Promptly after the occurrence of a Release
Date and after the payment for and release of a Defaulted Loan, in respect to
which the Release Price has been paid the Issuer shall direct the Master
Servicer to delete such Defaulted Loans from the Series 2002-1 Loan Schedule.
Section 7.04. RELEASE UPON TRANSFER TO NEW SERIES. If a new Series is
issued as provided in Section 4.10 of this Supplement, the Collateral Agent and
the Trustee shall upon receipt by the Trustee of the proceeds of the sale of the
new Series in an amount agreed by the Issuer and the Deal Agent and the
satisfaction of the conditions set forth in the following paragraph, release
from the Lien of this Supplement those Series 2002-1 Pledged Loans and the
related Series 2002-1 Pledged Assets which are to be granted by the Issuer as
collateral for the new Series. For such purposes, the Deal Agent and the Issuer
shall agree upon and provide to the Collateral Agent and the Trustee a list of
the Series 2002-1 Pledged Loans which are to be released and shall direct the
Master Servicer to delete such Loans from the Series 2002-1 Pledged Loan
Schedule.
In addition to receipt by the Trustee of the proceeds of the sale of a
new Series as provided in the preceding paragraph, the following conditions
shall be met before the Lien is released under this Section 7.04:
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(i) After giving effect to such release, no Borrowing Base
Shortfall shall exist and no Amortization Event or Event of Default
shall exist; and
(ii) Each of the Issuer and the Master Servicer shall have
delivered to the Deal Agent a certificate to the effect that the
Series 2002-1 Pledged Loans to be released from the Lien of this
Supplement were not selected in a manner involving any adverse
selection procedures and that the release of such Loans would not
reasonably be expected to cause a Potential Amortization Event or an
Amortization Event.
Section 7.05. RELEASE UPON OPTIONAL SUBSTITUTION. (a) Under the terms
of the Pool Purchase Agreement, the Depositor may, with respect to Loans which
are Schedule 1-A Pool Loans, as described in the Pool Purchase Agreement, remove
Loans from such Schedule 1-A and substitute other Loans. If the Depositor elects
to substitute a Loan for a Schedule 1-A Pool Loan which is a Series 2002-1
Pledged Loan, then the Issuer may, as provided in (b) below, obtain a release of
such Loan from the Lien of this Supplement and substitute in place of such
released Series 2002-1 Pledged Loan a Qualified Substitute Loan or Qualified
Substitute Loans.
(b) SUBSTITUTION. Any such substitution of a Qualified Substitute
Loan or Qualified Substitute Loans under this Section 7.05 shall be accomplished
in the same manner as the Grant of other Additional 2002-1 Pledged Loans and the
Issuer shall include such Qualified Substitute Loans in the Additional 2002-1
Pledged Loans described in a Supplemental Grant. The Qualified Substitute Loan
or Qualified Substitute Loans will not be selected in a manner adverse to the
Noteholders, and the aggregate principal balance of the Qualified Substitute
Loans will not be less than the principal balance of the Loans released and for
which the substitution occurs. In connection with the substitution for one or
more Qualified Substitute Loan or Qualified Substitute Loans, the Issuer shall
deposit an amount, if any, equal to the related Substitution Adjustment Amount
in the Collection Account on the date of substitution without any reimbursement
therefor. The Issuer shall cause the Master Servicer to amend the Series 2002-1
Loan Schedule to reflect the removal of such Schedule 1-A Pool Loan and the
substitution of the Qualified Substitute Loan or Qualified Substitute Loans and
the Issuer shall cause the Master Servicer to deliver the amended Series 2002-1
Loan Schedule to the Issuer and the Trustee and Collateral Agent.
(c) RELEASE TO ISSUER. Upon each release of a Series 2002-1 Pledged
Loan under this Section 7.05, the Collateral Agent and the Trustee shall
automatically and without further action release, sell, transfer, assign, set
over and otherwise convey to the Issuer, without recourse, representation or
warranty, all of the Collateral Agent's and the Trustee's right, title and
interest in and to such released Schedule 1-A Pool Loan and the Series 2002-1
Pledged Assets related thereto, all monies due or to become due with respect
thereto and all Collections with respect thereto (including payments received
from Obligors from and including the last day of the Due Period next preceding
the date of release) free and clear of the lien of this Supplement. The
Collateral Agent and the Trustee shall execute such documents, releases and
instruments of transfer or assignment and take such other actions as shall
reasonably be requested by the Issuer or Depositor to effect the release of such
Schedule 1-A Pool Loan and the related Series 2002-1 Pledged Assets pursuant to
this subsection 7.05. Promptly after the occurrence of a Release Date and after
the substitution for the Schedule 1-A Pool Loan, the
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Issuer shall direct the Master Servicer to delete such Loans from the Series
2002-1 Loan Schedule.
Section 7.06. RELEASE UPON PAYMENT IN FULL. At such time as the Series
2002-1 Notes have been paid in full, all fees and expenses of the Trustee and
the Collateral Agent with respect to Series 2002-1 have been paid in full and
all obligations relating to the Series 2002-1 Documents have been paid in full,
then, the Collateral Agent shall, upon the written request of the Issuer,
release all liens and assign to Issuer (without recourse, representation or
warranty) all right, title and interest of the Collateral Agent in and to the
Series 2002-1 Collateral, and all proceeds thereof. The Collateral Agent and the
Trustee shall execute and deliver such instruments of assignment, in each case
without recourse, representation or warranty, as shall be reasonably requested
by the Issuer to release the security interest of the Collateral Agent in the
Series 2002-1 Collateral.
ARTICLE VIII
REPORTS TO TRUSTEE AND NOTEHOLDERS
Section 8.01. MONTHLY REPORT TO TRUSTEE. On or before the
Determination Date prior to each Payment Date the Master Servicer shall transmit
to the Trustee in a form or forms acceptable to the Trustee information
necessary to make payments and transfer funds as provided in Sections 6.01 and
6.06, and the Master Servicer shall produce the Settlement Statement for such
Payment Date. Transmission of such information to the Trustee shall be deemed to
be a representation and warranty by the Master Servicer to the Trustee and the
Noteholders that such information is true and correct in all material respects.
At the option of the Master Servicer, the Settlement Statement may be combined
with the Servicer's Monthly Report described in Section 8.02 and delivered to
the Trustee as one report.
Section 8.02. MONTHLY SERVICING REPORT. On each Determination Date,
the Master Servicer shall deliver to the Trustee and the Issuer the Servicer's
Monthly Report in the form set forth in Exhibit D to this Supplement 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 D,
certifying the accuracy of such report and that no Event of Default or event
that with the giving of notice or lapse of time or both would become an Event of
Default has occurred, or if such event has occurred and is continuing,
specifying the event and its status. Such certificate shall also identify which,
if any, Series 2002-1 Pledged Loans have become Defective Loans, Defaulted Loans
or Deferred Loans during the preceding Due Period.
Section 8.03. DELIVERY OF REPORTS TO NOTEHOLDERS. The Master Servicer
shall on each date it delivers a report to the Trustee under Section 8.01 or
8.02 above deliver a copy of each such report to the Deal Agent.
Section 8.04. 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 the Issuer for federal income tax purposes.
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ARTICLE IX
AMORTIZATION EVENTS
Section 9.01. AMORTIZATION EVENTS. If one or more of the following
events shall occur and be continuing:
(a) the Issuer fails to pay in full the interest due and payable on
the Series 2002-1 Notes on any Payment Date and such failure continues for two
Business Days; PROVIDED, HOWEVER, that if the Issuer has made deposits of
Collections to the Collection Account in an amount sufficient to make such
interest payment when due in accordance with the Priority of Payments, but the
payment cannot be made in a timely manner as a result of a circumstances beyond
the Issuer's control, the grace period shall be extended to three Business Days;
(b) the Issuer fails to pay in full the principal of the Series
2002-1 Notes on or before the Maturity Date and such failure continues for two
Business Days; PROVIDED, HOWEVER, that if the Issuer has made deposits of
Collections to the Collection Account in an amount sufficient to make such
payment in accordance with the Priority of Payments, but such payment cannot be
timely made as a result of a circumstances beyond the Issuer's and the Master
Servicer's control, the grace period shall be extended to three Business Days;
(c) any Event of Default occurs under this Supplement;
(d) a Servicer Default occurs under the Agreement or this Supplement;
(e) the amount on deposit in the Reserve Account is less than the
Required Reserve Amount for any three consecutive Business Days;
(f) the Consolidated Extrapolated Cumulative Cancellation Rate at any
time exceeds 14%.
(g) the Three Month Rolling Average Delinquency Ratio as calculated
for any Payment Date exceeds 2.5%;
(h) the Gross Excess Spread for any Due Period ending on or prior to
August 31, 2003, is less than 3.50% for any Due Period; for Due Periods ending
after August 31, 2003 this provision shall not apply; except that if any
Alternate Investor or Conduit does not extend its Liquidity Termination Date on
or before August 31, 2003, this provision shall continue to apply;
(i) a Change of Control occurs without the written consent of the
Required Class Agents;
(j) if (i) any Trendwest Loans are then included in the Series 2002-1
Pledged Loans and (ii) (A) WorldMark voluntarily incurs or at any time becomes
voluntarily liable for any Debt (other than customary trade payables), (B) any
of WorldMark's property becomes subject to any Liens, other than utility or
other easements or licenses unrelated to any debt of WorldMark or Liens that do
not exceed, in the aggregate, $100,000 or (C) WorldMark involuntarily incurs or
is liable for any debt or its property becomes involuntarily subject to any
41
Liens (other than utility or similar easements or licenses unrelated to any debt
of WorldMark) that individually or in the aggregate (with respect to all such
Debt and the obligations secured by all such Liens) exceed $1,000,000;
(k) the amount of the Borrowing Base at the end of any Due Period is
less than the Notes Principal Amount on that date and the Issuer fails on the
following Payment Date to pay in full the amount of principal on the Notes
required to reduce the Notes Principal Amount to the Borrowing Base or to
increase the Borrowing Base to the Notes Principal Amount; provided, however,
that, for such purposes, if the Cendant Ratings Requirement is not met as of
such Payment Date, the Borrowing Base, as it was calculated on the last day of
the preceding Due Period, shall be reduced to remove from the Borrowing Base the
Loan Balances of all Series 2002-1 Pledged Loans which are Green Loans.
(l) an Insolvency Event occurs with respect to Cendant; and
(m) Cendant fails to perform under the terms of the Performance
Guaranty or the Performance Guaranty shall cease to be in full force and effect;
(n) The Notes Principal Amount shall at any time exceed the Series
2002-1 Adjusted Loan Balance;
(o) Failure on the part of the Depositor duly to observe or perform
any covenants or agreements of the Depositor set forth in any of the Facility
Documents to which the Depositor is a party and such failure continues
unremedied for a period of 30 days after the earlier of the date on which the
Depositor has actual knowledge of the failure and the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
to the Depositor by the Issuer, the Trustee or any Noteholder;
(p) Any representation and warranty made by the Depositor in any
Facility Document shall prove to have been incorrect in any material respect
when made and the Depositor is not in compliance with such representation or
warranty within 30 days after the earlier of the date on which the Depositor has
actual knowledge of such breach and the date on which written notice of such
breach requiring that such breach be remedied, shall have been given to the
Depositor by the Issuer, the Trustee or any Noteholder.
then, in the case of an event described in any clause except clause (c) of the
Events of Default in Section 10.01, or clause (l) above, the Deal Agent at the
direction of the Majority Facility Investors, or, with respect to an event
described in clause (j) or (k), the Deal Agent, at the direction of any Class
Agent or, with respect to clause (h) if such provision applies after August 31,
2003, the Deal Agent at the direction of the Class Agent or Class Agents which
have not extended their Liquidity Termination Dates to a date on or after August
31, 2003, by notice given in writing to the Issuer, the Master Servicer and the
Trustee, may declare that an Amortization Event has occurred as of the date of
such notice and, in the case of any event described in clause (c) of the Events
of Default in Section 10.01, or clause (l) of this Section 9.01, an Amortization
Event will occur immediately upon the occurrence of such event without any
notice or other action on the part of the Deal Agent, the Trustee or any other
entity.
42
For purposes of determining the Consolidated Extrapolated Cumulative
Cancellation Rate, the Deal Agent and the Master Servicer shall calculate the
"Extrapolated Cumulative Cancellation Rate" or "ECCR." In calculating the ECCR
for a Seller, the Deal Agent and the Master Servicer will be permitted to use
static pool information reported by the Seller in the manner to which such
Seller is accustomed. The Extrapolated Cumulative Cancellation Rate or ECCR
means, for any Seller, the weighted average of the Original Principal Balances
for each period included in the calculation, multiplied for each period by a
fraction (stated as a percentage) the numerator of which is (A) the sum of the
Current Principal Balances for all Loans originated by such Seller or any of its
Subsidiaries which have become Cancelled Loans, divided by the Original
Principal Balance for all Loans originated by such Seller or any of its
Subsidiaries during the period, and the denominator of which is (B) one minus
the ratio of its Current Principal Balance divided by its Original Principal
Balance.
The ECCR for any entity will be calculated using the oldest 20
consecutive quarters of data from the preceding 28 quarters. The process of
adding the most recent quarter of eligible data, and subtracting the oldest
quarter of formerly eligible data will be accomplished by weight-averaging the
static pool data from the year being added, and the year being subtracted, by
whole increments of 25% that add to 100% and correspond with the number of
quarters that would be necessary to calculate the oldest 20 consecutive quarters
of the preceding 28 quarters.
The methodology to be used by the Deal Agent and Master Servicer to
calculate a Seller's ECCR on a quarterly basis shall be as shown on Exhibit E.
In case of any dispute with respect to the calculation of the ECCR, the Deal
Agent and Master Servicer will jointly determine the appropriate calculation.
For any Seller,
CCR
ECCR = ------------
1- (CPB/OPB)
Where,
ECCR = Extrapolated Cumulative Cancellation Rate
CCR = Cumulative Cancellation Rate
CPB = Current Principal Balance
OPB = Original Principal Balance
"CUMULATIVE CANCELLATION RATE" means for any Seller, the outstanding
principal balance at the time of cancellation for all Loans that have become
Cancelled Loans divided by the Original Principal Balance for all Loans
originated by the Seller or any of its subsidiaries (other than the Depositor or
the Issuer).
"CURRENT PRINCIPAL BALANCE" means with respect to any origination
period, the current principal balance as of the date of calculation of all Loans
originated by such Seller or any of its subsidiaries (other than the Depositor
or the Issuer) still outstanding at that time.
43
"ORIGINAL PRINCIPAL BALANCE" means with respect to any origination
period, the original principal balance of all Loans originated by such Seller or
any of its subsidiaries (other than the Depositor or the Issuer) during that
period.
ARTICLE X
EVENTS OF DEFAULT
Section 10.01. EVENTS OF DEFAULT.
(a) Failure on the part of the Issuer (1) to make or cause to be made
any payment or deposit required by the terms of the Agreement, this Supplement
or any other Series 2002-1 Document on or before the date such payment or
deposit is required to be made and such failure remains unremedied for two
Business Days (provided, however, that if the Issuer is unable to make a payment
or deposit when due and such failure is as a result of circumstances beyond the
Issuer's control, the grace period shall be extended to three Business Days),
(2) failure on the part of the Issuer to provide a Hedge Agreement meeting the
requirements of Section 6.07 of this Supplement and such failure continues for
five Business Days or the Hedge Provider ceases to be a Qualified Hedge Provider
and the Issuer fails to provide a Qualified Hedge Provider by one of the methods
set forth in Section 6.08 within the five days provided in Section 6.08 and such
failure continues for five Business Days beyond the period allowed in Section
6.08, or (3) duly to observe or perform or cause to be observed or performed any
covenant or agreement of the Issuer set forth in the Agreement, this Supplement
or any other Series 2002-1 Document or other Facility Document to which the
Issuer is a party (other than these events caused in clause (1) or (2) of this
subsection), which continues unremedied for a period of 30 days (or five
Business Days, in the case of subsection 4.1(b), (f), (g)(2) or (g)(3) or
4.2(a), (c), (d), (e), (i), (l), (n), (o) or (p) of the Agreement) 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 an officer of the Issuer by the
Trustee or any Noteholder or (bb) the date on which an officer of the Issuer has
actual knowledge thereof;
(b) any representation or warranty made by the Issuer with respect to
itself in the Agreement or this Supplement shall prove to have been incorrect in
any material respect when made and has a material adverse effect on the
Trustee's or the Collateral Agent's interest in the Series 2002-1 Pledged Loans
and other related Series 2002-1 Pledged Assets and the Issuer is not in
compliance with such representation or warranty within ten Business Days after
the earlier of the date on which the Issuer or a Responsible Officer of the
Trustee has actual knowledge of such breach and the date on which written notice
of such breach requiring that such breach be remedied, shall have been given to
the Issuer by the Trustee or any Noteholder;
(c) an Insolvency Event shall occur with respect to any Seller of
Series 2002-1 Loans, the Depositor, the Issuer or Cendant;
(d) the Issuer shall become an "investment company" or shall become
under the control of an "investment company" within the meaning of the
Investment Company Act; or
44
(e) the Master Servicer shall have been terminated following a
Servicer Default, and a Successor Master Servicer shall not have been appointed
or such appointment shall not have been accepted within five Business Days after
the date of the termination stated in the Termination Notice and the Trustee is
not acting as Master Servicer.
THEN, in the case of the event described in subparagraph (a)(3), after the
applicable grace period, if any, set forth in such subparagraphs, the Deal Agent
acting upon instructions of the Majority Facility Investors by notice given in
writing to the Issuer (and to the Trustee if given by the Noteholders) may
declare that an event of default with respect to Series 2002-1 (an "Event of
Default") has occurred as of the date of such notice, and in the case of any
event described in subparagraph (a)(l), (a)(2), (b), (c), (d) or (e), an Event
of Default with respect to Series 2002-1 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
Required Purchasers of the Series 2002-1 Notes.
Section 10.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
(a) If an Event of Default described in paragraph (a), (b), (d) or
(e) of Section 10.1 should occur and be continuing, then and in every such case
the Majority Facility Investors may declare all the Series 2002-1 Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Trustee if declared by Noteholders), and upon any such declaration the unpaid
principal amount of the Series 2002-1 Notes, together with accrued or accreted
and unpaid interest thereon through the date of acceleration, shall become
immediately due and payable. If an Event of Default described in paragraph (c)
of Section 10.1 should occur then and in every such case the Series 2002-1 Notes
together with accrued or accreted and unpaid interest through the date of
acceleration, shall become automatically and immediately due and payable.
(b) If an Event of Default has occurred and the maturity of the
Series 2002-1 Notes has been accelerated, such acceleration may be rescinded or
annulled the Majority Facility Investors by written notice to the Issuer and the
Trustee may, but are not required to rescind and annul such acceleration.
Section 10.03. AUTHORITY TO INSTITUTE PROCEEDINGS AND DIRECT REMEDIES.
If an Event of Default has occurred and is continuing, the Majority Facility
Investors shall have the right to direct the Trustee as provided in Section 9.15
of the Agreement.
Section 10.04. DISTRIBUTIONS OF AMOUNTS COLLECTED. If the Indenture
Trustee collects any money or property pursuant to this Article X following the
acceleration of the maturities of the Notes (so long as such declaration shall
not have been rescinded or annulled), it shall pay out the money or property in
the following order:
FIRST, to the Trustee in payment of the Monthly Trustee Fees and
in reimbursement of permitted expenses of the Trustee under each of
the Facility Documents to which the Trustee is a party, provided that
such permitted expenses relate to Series 2002-1; in the event of a
Servicer Default and the replacement of the Master Servicer with the
Trustee or a Successor Master Servicer, the costs and
45
expenses of replacing the Master Servicer shall be permitted expenses
of the Trustee;
SECOND, if the Master Servicer is not Fairfield Acceptance
Corporation-Nevada or an affiliate of Cendant, to the Master Servicer,
in payment of amounts due and unpaid of the Master Servicer Fee and,
whether or not Fairfield Acceptance Corporation-Nevada or another
affiliate of Cendant is then the Master Servicer, to the Master
Servicer in reimbursement of any unreimbursed Master Servicer
Advances;
THIRD, to Series 2002-1 Noteholders for interest according to the
amounts due and unpaid on such Series 2002-1 Notes for interest and
all other amounts (other than principal of the Notes) due to the
Noteholders under the Series 2002-1 Documents;
FOURTH, if the Master Servicer is Fairfield Acceptance
Corporation-Nevada or another affiliate of Cendant, to the Master
Servicer, in payment of amounts due and unpaid of the Master Servicer
Fee;
FIFTH, to the Series 2002-1 Noteholders in payment of unpaid
principal on the Series 2002-1 Notes; provided, however, that, upon
the direction of 100% of the Noteholders, any amounts otherwise due to
the Noteholders under this provision FIFTH, shall not be applied to
reduce principal, but shall be applied by the Trustee to purchase a
Hedge Agreement in the amount and manner specified by the Noteholders;
SIXTH, to the hedge provider or hedge providers under the Hedge
Agreement or Hedge Agreements any termination payments due under any
Hedge Agreement; and
FINALLY, to Issuer, any remaining amounts free and clear of the
lien of this Supplement.
Section 10.05. SALE OF DEFAULTED LOANS AFTER AN EVENT OF DEFAULT. If
an Event of Default has occurred and is continuing, the Master Servicer will not
sell, assign, transfer or otherwise dispose of any Defaulted Loan or any
interest therein, or any Collateral securing a Defaulted Loan, without the prior
written consent of the Deal Agent.
ARTICLE XI
PROVISIONS RELATING TO THE MASTER SERVICER
Section 11.01. MASTER SERVICER ADVANCES. On or before each
Determination Date the Master Servicer may deposit into the Collection Account
an amount equal to the aggregate amount of Master Servicer Advances, if any,
with respect to Scheduled Payments on Series 2002-1 Pledged Loans for the
preceding Due Period which are not received on or prior to such Payment Date.
Such Master Servicer Advances shall be included as Available Funds. Neither
46
the Master Servicer, any Successor Master Servicer nor the Trustee, acting as
Master Servicer, shall have any obligation to make any Master Servicer Advance
and may refuse to make a Master Servicer Advance for any reason or no reason.
The Master Servicer shall not make any Master Servicer Advance that, after
reasonable inquiry and in its sole discretion, it determines is unlikely to be
ultimately recoverable from subsequent payments or collections or otherwise with
respect to the Series 2002-1 Pledged Loan with respect to which such Master
Servicer Advance is proposed to be made.
Section 11.02. ADDITIONAL EVENTS OF SERVICER DEFAULTS. In addition to
the events constituting a Servicer Default as set forth in Section 10.1 of the
Agreement, so long as any Series 2002-1 Notes remain outstanding, each of the
following shall also constitute a Servicer Default:
(a) Cendant permits on the last day of any fiscal quarter its Debt to
Capitalization Ratio (as defined in the Amended and Restated Credit Agreement
dated as of October 5, 2001 among Cendant as borrower, the lenders referred to
therein, The Chase Manhattan Bank, as Administrative Agent, The Bank of Nova
Scotia, Credit Lyonnais
New York Branch and Citibank N.A., as co-documentation
agents, Bank of America, N.A., as syndication agent and ▇.▇. ▇▇▇▇▇▇ Securities
Inc. as lead arranger, as such agreement, subject to the terms of Section 12.04
may be further amended and supplemented from time to time (as so amended and
supplemented from time to time, the "CREDIT AGREEMENT")) to be greater than
0.5:1;
(b) Cendant permits its Interest Coverage Ratio (as defined in the
Credit Agreement) for any Rolling Period (as defined in the Credit Agreement) to
be less than 3.0:1;
(c) any Indebtedness (as defined in the Credit Agreement) of Cendant
or any of its Subsidiaries (as defined in the Credit Agreement, including with
respect to the calculation of the ratios included in clauses (a) and (b) above,
but in no event including the Depositor, the Issuer or any other securitization
entity (of the type described in the definition of Securitization Entity in the
Credit Agreement)) exceeding $50,000,000 in the aggregate, is accelerated after
default beyond any applicable grace period provided with respect thereto (each
reference in clause (a) or (b) above or this clause (c) to a term defined in the
Credit Agreement shall be to that term as amended from time to time if the
amendments are made in accordance with Section 12.05 of this Supplement);
(d) the Master Servicer fails to deliver reports to the Deal Agent in
accordance with Section 8.03 of this Supplement and such failure remains
unremedied for five (5) Business Days.
(e) failure on the part of the Master Servicer duly to observe or
perform any other covenants or agreements of the Master Servicer set forth in
the Note Purchase Agreement and such failure continues unremedied for a period
of 20 days after the earlier of the date on which the Master Servicer has actual
knowledge of the failure and the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Master Servicer
by the Deal Agent; or
47
(f) any representation and warranty made by the Master Servicer in
the Note Purchase Agreement shall prove to have been incorrect in any material
respect when made and has a material and adverse impact on the Trustee's
interest in the Series 2002-1 Pledged Loans and other Series 2002-1 Pledged
Assets and the Master Servicer is not in compliance with such representation or
warranty within ten Business Days after the earlier of the date on which the
Master Servicer has actual knowledge of such breach and the date on which
written notice of such breach requiring that such breach be remedied, shall have
been given to the Master Servicer by the Deal Agent.
Section 11.03. ADDITIONAL CONDITIONS TO MASTER SERVICER TRANSFER. In
addition to the conditions to the transfer of the Master Servicer function as
provided in Section 5.12(b) of the Agreement, the following conditions must be
satisfied before the transfer will be permitted:
(a) The entity resigning as Master Servicer and the entity becoming
Master Servicer shall deliver to the Trustee and to the Deal Agent a certificate
to the effect that the resignation of the existing Master Servicer and
replacement will not cause a Material Adverse Effect and as of the date of the
substitution, there has been no material adverse change with respect to the
servicing business of the new Master Servicer which will have a Material Adverse
Effect (within the meaning of (d) or (e) of the definition thereof) with respect
to it;
(b) The Performance Guaranty shall have been amended or a new
Performance Guaranty delivered to the Trustee which amendment or new agreement
guaranties the performance of the new Master Servicer on the same terms as the
guaranty which related to the resigning Master Servicer; and
(c) If at such time the Cendant Rating Requirement is not met, the
Deal Agent must deliver to the Trustee its written consent to the change.
Section 11.04. FAIR MARKET VALUE OF DEFAULTED LOANS. For the purpose
of Section 5.5(f) of the Agreement, no Series 2002-1 Pledged Loan or Collateral
related thereto shall be sold to any Seller or Originator unless the cash
proceeds of such sale are at least equal to the fair market value of such Series
2002-1 Pledged Loan. For this purpose, "fair market value" shall mean initially,
an amount equal to 25% of the original sale price of the related Timeshare
Property and, in the event either the Issuer or the applicable Seller or
Originator shall determine that such percentage is not reflective of the fair
market value of the applicable Series 2002-1 Pledged Loan or Collateral related
thereto, the Issuer and the applicable Seller or Originator shall determine the
fair market value of such Series 2002-1 Pledged Loan or Collateral related
thereto, as a percentage of the original sale price of the related Timeshare
Property. Prior to any such determination of a revised fair market value,
written notice of such determination including, in reasonable detail, the
calculation thereof, shall be given by the Master Servicer to each Class Agent.
Any such determination shall be based on the historical inventory cost of the
applicable Seller or Originator consistent with the cost of goods sold.
48
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. RATIFICATION OF AGREEMENT. As supplemented by this
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Supplement shall be read, taken and
construed as one and the same instrument.
Section 12.02. COUNTERPARTS. This Supplement 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 shall constitute one and the same
instrument.
Section 12.03. GOVERNING LAW. THIS SUPPLEMENT IS GOVERNED BY AND SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 12.04. NOTICES TO DEAL AGENT AND BANK OF AMERICA, N.A.. All
communications and notices hereunder given to the Deal Agent or Bank of America,
N.A. 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 or where permitted to be
delivered electronically herein, to the e-mail address provided:
If to the Deal Agent:
FLEET SECURITIES, INC.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(or such other address as may hereafter be furnished to the Issuer, the
Trustee, the Master Servicer and Bank of America, N.A.).
If to Bank of America, N.A.:
BANK OF AMERICA, N.A.
Bank of America Corporate Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(or such other address as may hereafter be furnished to the Issuer, the
Trustee, the Master Servicer and the Deal Agent).
49
Section 12.05. CHANGES TO CREDIT AGREEMENT. For purposes of the
Servicer Defaults set forth in Section 11.02 of this Supplement any changes to
the definitions included in the Credit Agreement which affect the numerical
calculations of the ratios provided in Section 11.02 (a) or (b) thereof will be
recognized for purposes of Section 11.02 only if the amendment is entered into
with the consent of the majority of the Class Agents. Notwithstanding the
preceding sentence, no consent of the Class Agents or the Deal Agent will be
required for any amendment or modification which is solely in the nature of
correcting typographical errors or drafting ambiguities in the definitions of
terms used in connection with the ratios provided in clauses (a) or (b) of
Section 11.02 or the related calculations, and which in each case do not have
the effect of changing the numerical result obtained in any calculation
performed in connection with such ratios (when such definitional change is
applied on a pro forma basis to the current fiscal period and to the immediately
preceding four fiscal periods). In any case where consent of the majority of the
Class Agents is required under this Section 12.05, if the proposed amendment is
delivered in writing to the Deal Agent and each Class Agent and less than a
majority of the Class Agents objects in writing to the amendment within five
Business Days of receipt of the notice, then a majority of the Class Agents
shall be conclusively determined to have given their consent to the proposed
amendment.
Section 12.06. NONPETITION COVENANT. Each Noteholder hereby recognizes
and agrees to the provisions of Section 13.15 of the Agreement and specifically
agrees that by accepting a Series 2002-1 Note, it covenants and agrees that it
will not at any time institute against the Issuer or the Depositor, or join in
instituting against the Issuer or the Depositor, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other proceedings under
any Debtor Relief Law.
Section 12.07. SATISFACTION OF RATING AGENCY CONDITION. It is agreed
by the parties hereto, that, any action which, under the terms of the Agreement,
is subject to the satisfaction of the Rating Agency Condition, shall also be
subject to the condition that such action shall not be taken unless the Deal
Agent has given its prior written consent to the action.
Section 12.08. AMENDMENT TO DOCUMENTS. The Issuer shall not enter into
any amendment to any of the Facility Documents to which it is a party without
the prior written consent of the Majority Facility Investors.
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IN WITNESS WHEREOF, the Issuer, the Master Servicer, the Trustee and
the Collateral Agent have caused this Supplement to be duly executed by their
respective officers thereunto duly authorized, all as of the day and year first
above written.
SIERRA RECEIVABLES FUNDING COMPANY, LLC,
as Issuer
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Treasurer
FAIRFIELD ACCEPTANCE
CORPORATION-NEVADA,
as Master Servicer
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Treasurer
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Trustee
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Collateral Agent
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
[Signature page for Series 2002-1 Supplement]