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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
COMMISSION FILE NO. 1-10308

CENDANT CORPORATION
(Exact name of Registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of
incorporation or organization)		   06-0918165
(I.R.S. Employer
Identification Number)
9 WEST 57TH STREET
NEW YORK, NY		   10019
(Address of principal executive office)   (Zip Code)
212-413-1800
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

TITLE OF EACH CLASS
 
NAME OF EACH EXCHANGE
ON WHICH REGISTERED
CD Common Stock, Par Value $.01   New York Stock Exchange
Upper DECS (sm)   New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

73/4% Notes due 2003
6.875% Notes due 2006
37/8% Convertible Senior Debentures due 2011
Zero Coupon Senior Convertible Contingent Notes due 2021
Zero Coupon Convertible Debentures due 2021

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes /x/    No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / /

The aggregate market value of the Common Stock issued and outstanding and held by nonaffiliates of the Registrant, based upon the closing price for the Common Stock on the New York Stock Exchange on March 15, 2002 was $18,334,910,460. All executive officers and directors of the registrant have been deemed, solely for the purpose of the foregoing calculation, to be "affiliates" of the registrant.

The number of shares outstanding of the Registrant's common stock was 982,020,341 as of March 15, 2002.


DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement to be mailed to stockholders in connection with our annual stockholders meeting held May 21, 2002 (the "Annual Proxy Statement") are incorporated by reference into Part III hereof.


DOCUMENT CONSTITUTING PART OF SECTION 10(A) PROSPECTUS
FOR FORM S-8 REGISTRATION STATEMENTS

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.


TABLE OF CONTENTS

Item
   Description
   Page

 
 
PART I
 
 
1   Business   3
2   Properties   28
3   Legal Proceedings   30
4   Submission of Matters to a Vote of Security Holders   33

 
 
PART II
 
 
5   Market for the Registrant's Common Equity and Related Stockholder Matters   34
6   Selected Financial Data   35
7   Management's Discussion and Analysis of Financial Condition and Results of Operations   36
7a   Quantitative and Qualitative Disclosures about Market Risk   67
8   Financial Statements and Supplementary Data   68
9   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   68

 
 
PART III
 
 
10   Directors and Executive Officers of the Registrant   68
11   Executive Compensation   69
12   Security Ownership of Certain Beneficial Owners and Management   69
13   Certain Relationships and Related Transactions   69
14   Controls and Procedures    

 
 
PART IV
 
 
15   Exhibits, Financial Statement Schedules and Reports on Form 8-K   69

 
 
Signatures
 
 
    Certifications    

2


PART I

ITEM 1. BUSINESS

Except as expressly indicated or unless the context otherwise requires, the "Company", "Cendant", "we", "our" or "us" means Cendant Corporation, a Delaware corporation, and its subsidiaries.

We are one of the foremost providers of travel and real estate services in the world. Our businesses provide a wide range of consumer and business services and are intended to complement one another and create cross-marketing opportunities both within and among our following five business segments:

* * *

We seek organic growth augmented, on a selected basis, by the acquisition and integration of complementary businesses. As a result, from time to time we engage in preliminary discussions concerning possible acquisitions. The purchase price for any possible transaction may be paid in cash, stock, other securities, borrowings, or a combination thereof. Prior to consummating any transaction, we will need to, among other things, initiate and satisfactorily complete our due diligence investigations; negotiate the financial and other terms (including price) and conditions of such transactions; obtain appropriate board of directors, regulatory and shareholder or other necessary consents and approvals; and, if necessary, secure financing. No assurance can be given with respect to the timing, likelihood or business effect of any possible transaction. In the past, we have been involved in both relatively small and significant acquisitions.

In addition, we continually review and evaluate our portfolio of existing businesses to determine if they continue to meet our business objectives. As part of our ongoing evaluation of such businesses, we intend

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from time to time to explore and conduct discussions with regard to joint ventures, divestitures and related corporate transactions. However, we can give no assurance with respect to the magnitude, timing, likelihood or financial or business effect of any possible transaction. We also cannot predict whether any divestitures or other transactions will be consummated or, if consummated, will result in a financial or other benefit to us. We intend to use a portion of the proceeds from any such dispositions and cash from operations to retire indebtedness, make acquisitions and for other general corporate purposes.

This 10-K/A Report includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in global economic, business, competitive, market and regulatory factors. Please refer to "Management's Discussion and Analysis of Results of Operations" for additional factors and assumptions that could cause actual results to differ from the forward-looking statements contained in this 10-K/A Report.

We were created through the merger of HFS Incorporated into CUC International, Inc. in December 1997 with the resultant corporation being renamed Cendant Corporation. Our principal executive office is located at 9 West 57th Street, New York, New York 10019 (telephone number: (212) 413-1800).

SEGMENTS

REAL ESTATE SERVICES SEGMENT (22%, 34% and 24% of revenue for 2001, 2000 and 1999, respectively)

Real Estate Franchise Business (8%, 14% and 10% of revenue for 2001, 2000 and 1999, respectively)

We are the world's largest real estate brokerage franchisor. We franchise real estate brokerage businesses under the following franchise systems:

Service and marketing fees on commissions from real estate transactions comprise the primary component of revenue for our real estate franchise business. We also offer service providers an opportunity to market their products to our brokers through our Preferred Alliancesm program. To participate in this program, service providers generally pay us an up-front fee, commissions or both.

Each of our brands has a consumer Web site that offers real estate listing contacts and services. century21.com, coldwellbanker.com, coldwellbankercommercial.com and era.com are the official Web sites for the CENTURY 21, Coldwell Banker, Coldwell Banker Commercial and ERA real estate franchise systems, respectively. In addition, all of the aggregated listings of our CENTURY 21, Coldwell Banker and ERA national real estate franchises are available through the Realtor.com® Web site.

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Growth.    We market real estate brokerage franchises primarily to independent, unaffiliated owners of real estate brokerage companies as well as individuals who are interested in establishing real estate brokerage businesses. We believe that our existing franchisee base represents another source of potential growth, as franchisees seek to expand their existing business geographically. Therefore, our sales strategy focuses on maintaining the satisfaction of our franchisees by providing services such as training, ongoing support, volume discounts and increasing brand awareness by providing each brand with a dedicated marketing staff. Our real estate brokerage franchise systems employ a national franchise sales force, compensated primarily by commissions on sales, consisting of approximately 100 sales personnel.

Competition.    Competition among the national real estate brokerage brand franchisors to grow their franchise systems is intense. Our chief competitors in this industry include the Prudential®, GMAC Real Estatesm and RE/MAX® real estate brokerage brands. In addition, a real estate broker may choose to affiliate with a regional chain or choose not to affiliate with a franchisor but to remain independent. We believe that competition for the sale of franchises in the real estate brokerage industry is based principally upon the perceived value and quality of the brand and services offered to franchisees.

The ability of our real estate brokerage franchisees to compete in the industry is important to our prospects for growth. The ability of an individual franchisee to compete may be affected by the location and real estate agent service quality of its office, the number of competing offices in the vicinity, its affiliation with a recognized brand name, community reputation and other factors. A franchisee's success may also be affected by general, regional and local economic conditions. The potential negative effect of these conditions on our results of operations is generally reduced by virtue of the diverse geographical locations of our franchisees, although 2001 did have year-over-year declines in California. At December 31, 2001, the combined real estate franchise systems had approximately 8,200 franchised brokerage offices in the United States and approximately 12,400 offices worldwide. The real estate franchise systems have offices in 50 countries and territories in North and South America, Europe, Asia, Africa and Australia.

NRT Relationship.    NRT Incorporated, the largest real estate brokerage firm in the United States, was originally organized as a joint venture between us and Apollo Management, L.P. Apollo owned 100% of the common stock of NRT and we owned all of NRT's preferred stock, a portion of which was convertible into an equal equity ownership with Apollo. The convertible preferred stock entitled us to preferred dividends at rates of 5% to 9% of our investment, rates which we negotiated with NRT and Apollo. We exercised our option to purchase the NRT common stock held by Apollo on April 17, 2002. The purchase price was approximately $230 million which we satisfied by delivering 11.5 million shares of CD common stock. We also repaid approximately $320 million of NRT's debt. Prior to our acquisition of the NRT common stock, NRT was the largest real estate franchisee in our brokerage system based on gross commission income and represented approximately 42% of the Real Estate Franchise Business revenue for 2001. NRT's strategy is to grow through the acquisition of independent real estate brokerages which it then converts to one of our brands. Prior to our acquisition of the NRT common stock, NRT operated its offices under two 50-year franchise agreements for our brands that were similar to those utilized by our other real estate franchisees, except for the term and lack of royalty rebate provision. These agreements were recorded as an asset on our balance sheet. During 2001, we received from NRT approximately $220 million in royalties for the use of our real estate trademarks based on the volume of real estate commissions earned by NRT. Additionally, during 2001, we received $16 million of other fees from NRT, which included a fee paid in connection with the termination of a franchise agreement under which NRT operated our Century 21 real estate brand. During 2001, we also received $37 million of real estate referral fees from NRT in connection with clients referred to NRT by our relocation business. These fees are based on a standard real estate brokerage agreement, in which the franchisor receives approximately 40% of the commission. These fees are also paid to us by all other real estate brokerages (both affiliates and non-affiliates) who receive referrals from our relocation business. At December 31, 2001, NRT had $291 million in debt, which was non-recourse to us and, as noted above, the outstanding balance of such debt was repaid at the time of our acquisition of the NRT common stock. NRT has informed us, for the twelve months ended September 30, 2001, its leverage ratio (debt/EBITDA as defined in its credit agreement)

5


was 2.6 to 1. Certain officers of Cendant serve on the Board of Directors of NRT. Immediately subsequent to our acquisition of NRT, NRT acquired Clearwater, Florida-based Arvida Realty Services for approximately $160 million in cash. Arvida offices have been converted to Coldwell Banker and will be integrated with our NRT Coldwell Banker operations in Florida.

In September 2002, NRT acquired all of the outstanding common stock of The DeWolfe Companies, Inc. at a price of approximately $146 million in cash. DeWolfe provides residential real estate brokerage, mortgage banking, insurance, moving and relocation services primarily in New England.

Relocation Business (5%, 10% and 7% of revenue for 2001, 2000 and 1999, respectively)

Cendant Mobilitysm is the leading provider of employee relocation services in the world and assists more than 128,000 affinity customers, transferring employees and global assignees annually, including over 23,000 employees internationally each year in over 125 countries.

We offer corporate and government clients employee relocation services, such as the evaluation, inspection, selling or purchasing of a transferee's home, the issuance of home equity advances to employees permitting them to purchase a new home before selling their current home (these advances are generally guaranteed by the corporate client), certain home management services, assistance in locating a new home, immigration support, intercultural and language training and repatriation counseling. We also provide clients with relocation-related accounting services. Our services allow clients to outsource their relocation programs.

Clients pay a fee for the services performed and/or permit Cendant Mobility to retain referral fees collected from brokers. The majority of our clients pay interest on home equity advances and reimburse all costs associated with our services, including, if necessary, repayment of home equity advances and reimbursement of losses on the sale of homes purchased. This limits our exposure on such items to the credit risk of our corporate clients and not on the potential changes in value of residential real estate. We believe such risk is minimal due to the credit quality of our corporate clients. In transactions where we assume the risk for losses on the sale of homes (primarily government clients), which comprise less than 3% of net revenue for our relocation business, we control all facets of the resale process, thereby limiting our exposure.

Our group move management service provides coordination for moves involving a large number of employees over a short period of time. Our moving service, with over 72,000 shipments annually, provides support for all aspects of moving an employee's household goods. We also handle insurance and claim assistance, invoice auditing and quality control of van line, driver, and overall service.

Our affinity services provide real estate and relocation services, including home buying and selling assistance, as well as mortgage assistance and moving services, to organizations, such as insurance and airline companies that have established members. Often these organizations offer our affinity services to their members at no cost. This service helps the organizations attract new members and retain current members. Personal assistance is provided to over 50,000 individuals, with approximately 26,000 real estate transactions annually.

Growth.    Our strategy is to grow by generating business from corporations and government agencies seeking to outsource their relocation function due to downsizing, cost containment initiatives and increased need for expense tracking. Our growth strategy has been driven by domestic and international acquisitions and market expansion, and we continually explore acquisitions and other strategic corporate transactions that would complement our relocation business.

Competition.    Competition is based on service, quality and price. We are a leader in the United States, United Kingdom, and Australia/Southeast Asia for outsourced relocations. In the United States, we compete with in-house relocation solutions and with numerous providers of outsourced relocation services, the largest of which are GMAC Relocation Services and Prudential Relocation Management. Internationally, we compete with in-house solutions, local relocation providers and the international accounting firms.

6


Mortgage Business (9%, 10% and 7% of revenue for 2001, 2000 and 1999, respectively)

We originate, sell and service residential first mortgage loans in the United States. For 2001, Cendant Mortgagesm was the second largest purchase lender of retail originated residential mortgages, and the sixth largest retail lender of residential mortgages in the United States. Cendant Mortgage is a centralized mortgage lender conducting its business in all 50 states.

We market our mortgage products to consumers through:

Cendant Mortgage customarily sells all mortgages it originates to investors (which include a variety of institutional investors) either as individual loans, mortgage-backed securities or participation certificates issued or guaranteed by Fannie Mae Corp., the Federal Home Loan Mortgage Corporation or the Government National Mortgage Association. Cendant Mortgage earns revenue from the sale of the mortgage loans to investors, as well as on the servicing of the loans for investors. Mortgage servicing consists of collecting loan payments, remitting principal and interest payments to investors, holding escrow funds for payment of mortgage related expenses such as taxes and insurance, and administering our mortgage loan servicing portfolio.

Growth.    Our strategy is to increase sales by expanding all of our sources of business with emphasis on purchase mortgage volume through our teleservices and Internet programs. The Phone In, Move In program was developed in 1997 and has been established in over 5,600 real estate offices.

We will also expand our volume of mortgage originations resulting from corporate employee relocations by working with financial institutions which desire to outsource their mortgage origination operations through increased linkage with Cendant Mobility. Each of these growth opportunities is driven by our low cost teleservices platform. The competitive advantage of using a centralized, efficient and high quality teleservices platform allows us to more cost effectively capture a greater percentage of the highly fragmented mortgage marketplace.

Competition.    Competition is based on service, quality, products and price. Cendant Mortgage has increased its share of retail mortgage originations in the United States to 4.4% in 2001 from 2.1% in 2000. According to Inside Mortgage Finance, the industry leader for 2001 reported a 12.4% share in the United States. Competitive conditions can also be impacted by shifts in consumer preference for variable rate mortgages from fixed rate mortgages, depending upon the current interest rate market.

Real Estate Services Seasonality

The principal sources of revenue for our real estate franchise and mortgage businesses are based upon the timing of residential real estate sales, which are generally lower in the first calendar quarter each year. The principal sources of revenue for our relocation business are based upon the timing of transferee moves, which are generally lower in the first and last quarter of each year.

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Real Estate Services Trademarks and Intellectual Property

The trademarks "CENTURY 21®", "Coldwell Banker®", "Coldwell Banker Commercial®", "ERA®", "Cendant Mobility®", and "Cendant Mortgage" and related trademarks and logos are material to our real estate franchise, relocation and mortgage businesses, respectively. Our franchisees and subsidiaries in our real estate services business actively use these marks and all of the material marks are registered (or have applications pending for registration) with the United States Patent and Trademark Office as well as major countries worldwide where these businesses have significant operations and are owned by us.

Real Estate Services Employees

The businesses that make up our Real Estate Services segment employed approximately 8,893 persons as of December 31, 2001.

HOSPITALITY SEGMENT    (18%, 21% and 16% of revenue for 2001, 2000 and 1999, respectively)

Lodging Franchise Business (5%, 11% and 8% of revenue for 2001, 2000 and 1999, respectively)

We are the world's largest hotel franchisor, operating nine lodging franchise systems.

The lodging industry can be divided into four broad sectors based on price and services: upper upscale, with room rates above $110 per night; upscale, with room rates between $80 and $110 per night; middle market, with room rates generally between $55 and $79 per night; and economy, with room rates generally less than $55 per night. The following is a summary description of our lodging franchise systems properties that are open and operating as of December 31, 2001, including the average occupancy rate, average room rate and total room revenue divided by total available rooms for each property. We do not own or operate hotel properties. Information regarding such properties is derived from information we receive from our franchisees.

Brand
   Primary Domestic
Sector Served
   Avg. Rooms
Per Property
   # of
Properties
   # of
Rooms
   Location*
   Average
Occupancy Rate
   Average Room Rate
   Total Room Revenue/Available Rooms
AmeriHost   Middle Market   68   86   5,827   U.S. Only   55.50 % $ 58.91   $ 32.70
Days Inn   Upper Economy   84   1,946   164,092   U.S. and International(1)   50.50 % $ 50.47   $ 25.49
Howard Johnson   Middle Market   99   503   49,831   U.S. and International(2)   50.30 % $ 59.89   $ 30.12
Knights Inn   Lower Economy   80   227   18,145   U.S. and International(3)   45.50 % $ 37.70   $ 17.15
Ramada   Middle Market   123   978   120,515   U.S. Only(4)   47.50 % $ 61.00   $ 28.98
Super 8 Motel   Economy   61   2,054   125,016   U.S. and International(5)   57.20 % $ 46.97   $ 26.87
Travelodge   Upper Economy   80   598   47,688   U.S. and International(6)   46.80 % $ 53.53   $ 25.05
Villager   Lower Economy   101   120   12,177   International(7)   47.80 % $ 29.80   $ 14.24
Wingate Inn   Upper Middle Market   94   112   10,480   U.S. and International(8)   55.70 % $ 71.85   $ 40.02
           
 
                   
Total           6,624   553,771   Total Average:             $ 27.11
           
 
               
*
Description of rights owned or licensed.
(1)
73 properties located in Canada and 49 properties located in China, Colombia, Czech Republic, Egypt, England, Hungary, India, Jordan, Mexico, Philippines, South Africa, Scotland and Uruguay.
(2)
38 properties located in Canada, and 33 properties located in Argentina, China, Dominican Republic, Ecuador, England, Israel, Jordan, Lebanon, Malta, Mexico, Oman, Venezuela and United Arab Emirates.
(3)
Five properties located in Canada.
(4)
Limited to the Continental U.S., Alaska and Hawaii.
(5)
88 properties located in Canada.
(6)
105 properties located in Canada and two properties located in Mexico.
(7)
Two properties located in Canada and one property located in Mexico.
(8)
One property located in Canada.

8

Our Lodging Franchise business derives substantially all of its revenue from initial franchise fees and continuing franchise fees, which are comprised of royalty and marketing/reservation fees and are normally charged as a percentage of the franchisee's gross room revenue. The royalty fee is intended to cover our operating expenses and the cost of the trademark, such as expenses incurred for franchise services, including group purchasing, administrative support and design and construction advice, and to provide the franchisor with operating profits. The marketing/reservation fee is intended to reimburse the franchisor for expenses associated with providing such franchise services as a central reservation system, national advertising and marketing programs and certain training programs. Since we do not own or operate hotel properties (we derive our revenue for this business from franchise fees), we do not incur renovation expenditures. Renovation costs are the obligation of each franchisee.

Our lodging franchisees are dispersed geographically, which minimizes our exposure to any one hotel owner or geographic region. Of the more than 6,600 properties and 4,900 franchisees in our lodging systems, no individual hotel owner accounts for more than 2% of our franchised lodging properties.

On March 1, 2002, we entered into a venture with Marriott International, Inc. where we contributed our domestic Days Inn trademark and an amended license agreement relating to the Days Inn trademarks and Marriott contributed the domestic Ramada trademarks and the amended master license agreements relating to Cendant's licenses of the Ramada trademarks. As a result of the transaction, we have a 50.0001% interest in the venture and Marriott has a 49.9999% interest in the venture. Pursuant to the terms of the venture, we will share income from the venture with Marriott on a substantially equal basis. We currently expect the venture to redeem Marriott's interest for approximately $200 million, the projected fair market value, in March 2004. We expect to loan the venture approximately $200 million in March 2004 to meet its obligations to Marriott. Upon such redemption, we will own 100% of the venture. Under the terms of the venture agreement, we control the venture and therefore we will consolidate the venture into our results of operations, financial position and cash flows beginning on March 1, 2002. The venture has no third party liabilities.

Growth.    The sale of long-term franchise agreements to operators of existing and newly constructed hotels is the leading source of revenue and earnings growth in our lodging franchise business. We also continue to seek opportunities to acquire or license additional hotel franchise systems, including established brands in the upper upscale and upscale sectors, where we are not currently represented.

We market franchises principally to independent hotel and motel owners, as well as to owners who have the right to terminate franchise affiliations of their properties with other hotel brands. We believe that our existing franchisees also represent a significant potential growth opportunity because many own, or may own in the future, other hotels, which can be converted to our brand names. Accordingly, a significant factor in our sales strategy is maintaining the satisfaction of our existing franchisees by providing quality services. We employ a national franchise sales force, compensated primarily through commissions, consisting of approximately 90 sales personnel.

We seek to expand our franchise systems on an international basis through license agreements with developers and franchisors based outside the United States. As of December 31, 2001, our franchising subsidiaries (other than Ramada and AmeriHost) have entered into international licensing agreements for part or all of approximately 24 countries on five continents.

In 2001, we repurchased master licenses for the Howard Johnson and Days Inn brands covering the United Kingdom. We assumed the obligations to existing franchisees and commenced a direct franchising program for these brands in the United Kingdom and Ireland similar to our direct franchise program in the United States. We established an office in London and a reservation center in Cork, Ireland to support this activity.

Central Reservation Systems.    The lodging business is characterized by remote purchasing through travel agencies and through the use by consumers of toll-free telephone numbers and the Internet. We maintain five reservation centers that are located in: Knoxville and Elizabethton, Tennessee; Aberdeen, South Dakota; Saint John, New Brunswick, Canada; and Cork, Ireland. In 2001, our brand Web sites had approximately 222 million page views and booked an aggregate of approximately 2.0 million roomnights

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from Internet booking sources, compared with approximately 134 million page views and 1.3 million roomnights booked in 2000, increases of 66% and 54%, respectively.

Competition.    Competition among the national lodging brand franchisors to grow and maintain their franchise systems is intense. Our primary national lodging brand competitors are the Holiday Inn® and Best Western® brands and Choice Hotels, which franchises seven brands, including the Comfort Inn®, Quality Inn® and Econo Lodge® brands. Our Days Inn, Travelodge and Super 8 brands principally compete with Comfort Inn, Red Roof Inn® and Econo Lodge in the economy sector. The chief competitors of our Ramada, Howard Johnson, Wingate Inn and AmeriHost Inn brands are Holiday Inn® and Hampton Inn® in the middle market sector. Our Knights Inn and Travelodge brands compete with Motel 6® properties. In addition, a lodging facility owner may choose not to affiliate with a franchisor but to remain independent.

We believe that competition for the sale of franchises in the lodging industry is based principally upon the perceived value and quality of the brand and services offered to franchisees. We believe that prospective franchisees value a franchise based upon their view of the relationship between affiliation and conversion costs and future charges to the potential for increased revenue and profitability and the reputation of the franchisor. We also believe that the perceived value of brand names to prospective franchisees is, to some extent, a function of the success of the brand's existing franchisees.

The ability of an individual franchisee to compete may be affected by the location and quality of its property, the number of competing properties in the vicinity, its affiliation with a recognized brand name, community reputation and other factors. A franchisee's success may also be affected by general, regional and local economic conditions. The potential negative effect of these conditions on our results of operations is substantially reduced by virtue of the diverse geographical locations of our franchised properties.

Timeshare Exchange Business    (6%, 10% and 8% of revenue for 2001, 2000 and 1999, respectively)

Our Resort Condominiums International LLC ("RCI") subsidiary is the world's largest provider of timeshare vacation exchange opportunities and services for approximately 2.9 million timeshare members from more than 3,700 resorts in nearly 100 countries around the world. Our RCI® business consists primarily of the operation of two exchange programs for owners of condominium timeshares or whole units at affiliated resorts both in and outside the U.S., the publication of magazines and other periodicals related to the vacation and timeshare industry, travel-related services, resort management, and consulting services. RCI has significant operations in North America, Europe, the Middle East, Latin America, Africa, Australia and the Pacific Rim. RCI charges its members an annual membership fee and an exchange fee for each exchange resulting in fees totaling approximately $390 million during 2001.

Growth.    The timeshare exchange industry has experienced significant growth over the past decade. We believe that the factors driving this growth include the demographic trend toward older, more affluent Americans who travel more frequently; the entrance of major hospitality and entertainment companies into timeshare development; a worldwide acceptance of the timeshare concept; and an increasing focus on leisure activities, family travel and a desire for value, variety and flexibility in a vacation experience. We believe that future growth of the timeshare exchange industry will be determined by general economic conditions both in the United States and worldwide, the public image of the industry, improved approaches to marketing and sales and a greater variety of products and price points. Accordingly, we cannot predict if future growth trends will continue at rates comparable to those of the recent past. Most RCI members are acquired through developers; only a small percentage of members are acquired through our direct solicitation activities. As a result, the growth of the timeshare exchange business is dependent on the sale of timeshare units by affiliated resorts. RCI affiliates consist of international brand names and independent developers, owners' associations and vacation clubs.

Competition.    The global timeshare exchange industry is comprised of a number of entities, including resort developers and owners. RCI's competitors include Interval International Inc., formerly our wholly owned subsidiary, as well as vacation club products and internal exchange programs offered by the Walt

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Disney Co., Marriott, Starwood, Hilton and Hyatt. RCI also competes with regional and local time share exchange companies and developers.

Timeshare Sales and Marketing Business (6% of revenue for 2001)

We acquired Fairfield Resorts, Inc. (formerly known as Fairfield Communities, Inc.) in April 2001. Fairfield Resorts is one of the largest vacation ownership companies in the United States in terms of property owners, vacation units constructed and revenue from sales of vacation ownership interests. Fairfield sells and markets vacation products that provide quality recreational experiences to its more than 365,000 property owners. As of December 31, 2001, our portfolio of resorts consisted of 35 resorts located in 12 states. Of those resorts which are in various stages of development, 25 are located in destination areas with popular vacation attractions and 10 are located in scenic locations. We also provide consumer financing to individuals purchasing vacation ownership interests.

We derive revenue from the sale of vacation ownership interests and from the interest income earned on notes receivable and contracts receivable generated by providing financing to purchasers of those vacation ownership interests.

On February 11, 2002, we acquired Equivest Finance, Inc. Equivest is a timeshare vacation services company that develops, markets and sells vacation services and vacation ownership interests to consumers at 29 resorts and will be integrated into Fairfield Resorts.

On April 30, 2002, we acquired approximately 90% of the outstanding common stock of Trendwest Resorts, Inc. for approximately $849 million, including $20 million of estimated transaction costs and expenses and $25 million related to the conversion of Trendwest employee stock options into CD common stock options. The acquisition consideration was funded through a tax-free exchange of approximately 42.6 million shares of CD common stock then valued at approximately $804 million. We purchased the remaining 10% of the oustanding Trendwest shares through a short form merger on June 3, 2002 for approximately $87 million, which was funded through a tax-free exchange of approximately 4.8 million shares of CD common stock then valued at approximately $87 million. Trendwest, through its WorldMark Club, markets, sells, and finances vacation ownership interests and will provide significant geographic diversification to our company, as our existing timeshare operations, Fairfield Resorts and Equivest, are principally located in the eastern United States. Trendwest's 48 properties are located primarily in the western United States, British Columbia, Mexico, Hawaii and the South Pacific.

Growth.    The growth strategy for our timeshare sales and marketing business is driven primarily by acquisitions and further development. We also continually explore strategic corporate alliances and other transactions that would complement our timeshare sales and marketing business. We also plan to continue to further develop our existing destination resorts as well as develop additional resort locations.

Competition.    The timeshare sales and marketing industry is highly competitive and is comprised of a number of companies specializing primarily in timeshare development, sales and marketing. In addition, a number of national hospitality chains develop and sell vacation ownership interests to consumers. Our primary competitors are Disney, Marriott, Starwood, Hilton and Hyatt.

Relationship with FFD Development Company, LLC.    Prior to our acquisition of Fairfield Resorts, Fairfield's internal development function, consisting of property, acquisition, planning design and construction, and much of its inventory were contributed to a new, separate company, FFD Development Company, LLC ("FFD"). Fairfield received convertible preferred interests in FFD that may be converted into FFD's common equity interest and a warrant to purchase additional common equity interests in exchange for approximately $60 million of vacation ownership units and $4 million of cash. In connection with our acquisition of Fairfield in April 2001, through our Fairfield subsidiary, we now own the preferred equity interest, which approximated $59 million as of December 31, 2001, and the warrant to purchase a common equity interest in FFD. If we exercise our preferred interests and warrant, we will own approximately 75% of FFD, on a fully diluted basis. During 2001, we received $6 million in preferred equity as a dividend on

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our preferred equity interest in FFD. FFD's common equity is held by an independent trust. FFD is our primary acquirer and developer of timeshare inventory. Fairfield Resorts utilizes FFD to develop new resorts or expand existing units as required by Fairfield or Equivest. We are only obligated to purchase the resort upon completion to the contractual specifications, upon delivery of a certificate of occupancy and when clear title is obtained. As of December 31, 2001, subject to FFD's completion of the construction of timeshare inventory in accordance with the contractual specifications and delivery of a certificate of occupancy with clear title, we would be obligated to purchase approximately $98 million of timeshare inventory from FFD. Certain officers of Cendant serve on the Board of Directors of FFD.

FFD has its own $125 million syndicated bank facility which is non-recourse to us. At December 31, 2001, $4 million was outstanding under the facility. We anticipate that FFD will increase its borrowings in 2002. Subsequent to December 31, 2001, as is customary in "build to suit" agreements, when we contract with FFD for the development of a property, we will issue a letter of credit for up to 20% of our purchase price for such property. Drawing under all letters of credit will only be permitted if we fail to meet our payment obligations with respect to any such property. As of June 30, 2002, we had issued approximately $42 million of these letters of credit.

Vacation Home Rental Business

In January 2001, we acquired Holiday Cottages Group Ltd. ("Holiday Cottages"), a leading marketer of vacation rental homes in Europe, promoted under eight brands. Holiday Cottages has relationships with over 9,000 independent property owners in the United Kingdom, France and Ireland. These property owners contract annually with Holiday Cottages on an exclusive basis to market their rental properties. In 2001, Holiday Cottages sold approximately 175,000 rental weeks on behalf of vacation property owners. Holiday Cottages also markets boat rentals in the UK, the Netherlands and France. This acquisition was not material to Cendant.

In September, 2001, we acquired Cuendet Cie SpA, a leading Italian brand specializing in the marketing and renting of over 3,500 private vacation homes in Italy, France, Spain and Portugal. Our acquisition of Cuendet increased our vacation home rental portfolio to approximately 15,000 properties. Cuendet markets its properties through tour operators and travel agents in Italy, France, Germany and North America. This acquisition was not material to Cendant.

In April 2002, we acquired Novasol A.S., which specializes in the marketing of privately owned holiday properties for rent principally across Denmark, Norway, Sweden, Germany and Eastern Europe. This acquisition added 17,000 properties to our portfolio. This acquisition was not material to Cendant.

In June 2002, we acquired Welcome Holidays Limited, which markets privately owned holiday properties for rent in the U.K., France and Ireland. This acquisition added approximately 3,700 properties to our portfolio. This acquisition was not material to Cendant.

In October, 2002, we acquired The International Life Group Limited which specializes in the provision of holiday rentals of cottages, villas, apartments and mobile homes based in France to UK and Irish consumers. This acquisition was not material to Cendant.

Our strategy is to provide sophisticated brand marketing and reservations for the benefit of owners of vacation home accommodations. We intend to increase our contract property portfolio and to make all contract inventory in our portfolio available to the global marketplace. Marketing strategies include establishing an optimal balance between direct partner and travel agent marketing.

Hospitality Trademarks and Intellectual Property

The service marks "Days Inn," "Ramada," "Howard Johnson," "Super 8," "Travelodge," "Wingate Inn," "Villager," "Knights Inn," "AmeriHost Inn", "RCI", "Resort Condominiums International", "Fairfield" and related trademarks and logos are material to our hospitality businesses. The subsidiaries that operate our timeshare businesses and our franchisees actively use the marks which are registered (or have applications

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pending) with the United States Patent and Trademark Office as well as major countries worldwide where our hospitality business has significant operations. We own all the marks listed above other than the "Ramada" and "Days Inn" marks. In connection with the creation of a venture with Marriott International in March 2002, in which we own a 50.0001% interest, we contributed to the venture our "Days Inn" marks and Marriott contributed its domestic "Ramada" marks. We now license the "Ramada" and "Days Inn" marks from the venture. Prior to March 2002, we licensed the "Ramada" marks from Marriott. We are limited to using the Ramada marks in the Continental U.S., Alaska and Hawaii market. During 2001, we received approximately $44 million in royalties from Ramada franchisees and paid $24 million in licensing fees to Marriott. We own the Travelodge mark only in North America.

Hospitality Seasonality

Our lodging franchise business generates higher revenue during the summer months because of increased leisure travel. Therefore, any occurrence that disrupts travel patterns during the summer period could have a material adverse effect on our lodging franchisee's annual performance and consequently our annual performance. A principal source of timeshare exchange revenue relates to exchange services to members. Since members have historically shown a tendency to plan their vacations in the first quarter of the year, revenues are generally slightly higher in the first quarter. In timeshare sales, we rely upon tour flow in order to generate timeshare sales, consequently, sales volume tends to increase in the summer months as increased tourist travel results in additional increased tour flow. We cannot predict whether these trends will continue in the future as the timeshare sales business expands outside of the United States and Europe, and as global travel patterns shift with the aging of the world population.

Hospitality Employees

The businesses that make up our Hospitality segment employed approximately 13,724 persons as of December 31, 2001.

VEHICLE SERVICES SEGMENT (39%, 5% and 19% of revenue for 2001, 2000 and 1999, respectively)

With the acquisition of Avis Group Holdings, Inc. on March 1, 2001, the Vehicle Services Segment now consists of the car rental operations and fleet management services business of Avis Group in addition to the Avis franchise system and our parking facility business.

Car Rental Operations and Franchise Businesses (24%, 5%, 4% of revenue for 2001, 2000 and 1999, respectively)

We operate and/or franchise portions of the Avis® car rental system (the "Avis System"), which represents the second largest general use car rental brand in the world, based on total revenue and volume of rental transactions. The Avis System is comprised of approximately 4,800 rental locations (of which 1,713 are operated and/or franchised by us), including locations at some of the largest airports and cities in the United States and foreign countries. We operate 867 Avis car rental locations in both airport and non-airport (downtown and suburban) locations in the United States, Canada, Puerto Rico, the U.S. Virgin Islands, Argentina, Australia and New Zealand. For the period March 1, 2001, the date we acquired Avis, through December 31, 2001, our Avis car rental operations had an average fleet of approximately 216,000 vehicles and generated total vehicle rental revenue of approximately $2.0 billion, of which 90% (or $1.8 billion) was derived from U.S. operations.

We also franchise the Avis System to individual business owners in approximately 846 locations including locations in the United States, Latin America, Central America, South America and the Pacific region. Approximately 99.7% of the Avis System rental revenues in the United States are received from locations operated by us either directly or under agency arrangements, with the remainder being received from locations operated by independent franchisees. Independent franchisees pay fees based either on total time and mileage charges or total revenue. The Avis System in Europe, Africa, part of Asia and the Middle East is operated under franchise by Avis Europe Ltd., an unaffiliated third party.

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The Avis System provides franchisees and our corporate locations access to the benefits of a variety of services, including: (i) the "Avis Cares®" driver and travel safety program, (ii) a standardized system identity for rental location presentation and uniforms; (iii) a training program, business policies, quality of service standards and data designed to monitor service commitment levels; (iv) marketing/advertising/public relations support for national consumer promotions including Frequent Flyer/Frequent Stay programs and the avis.com site; and (v) brand awareness of the Avis System through the familiar "We Try Harder®" service announcements.

Avis System franchisees have access to the Wizard® System, which provides (i) global reservations processing, (ii) rental agreement generation and administration and (iii) fleet accounting and control. Franchisees pay a fee for each use of the Wizard System. We also offer Avis InterActive®, which provides corporate customers real-time access to aggregated information on car rental expenses to better manage their car rental expenditures.

Growth.    The existing rental patterns of our business cause us to have excess capacity from Friday through Sunday. We intend to increase business during this period through a combination of advertising, targeted marketing programs to associations and customers of other Cendant brands and increased presence in the online arena. Our own Internet site, avis.com, as well as other Internet travel sites, including our cheaptickets. com Web site, present good opportunities to grow our business and improve our profitability through enhanced utilization of our fleet. We also intend to continue to grow our share of the corporate market through normal contract negotiations and by seeking clients that may be affected by fleet constraints of certain of our competitors.

On August 22, 2002, we announced that we had entered into a definitive agreement to acquire substantially all of the assets of Budget Group, Inc. ("Budget"), a general car and truck rental company in the United States, for approximately $110 million in cash plus transaction costs and expenses. As part of the acquisition, we will assume certain contracts and trade payables, as well as refinance approximately $2.6 billion in Budget asset-backed vehicle related debt. The acquisition is subject to certain conditions, including bankruptcy court and regulatory approval outside the United States. The acquisition has received clearance under U.S. antitrust regulations. Subject to the satisfaction of these conditions, we currently expect to complete the acquisition during the fourth quarter of 2002.

Fleet Management.    With respect to the car rental operations owned and operated by us, we participate in a variety of vehicle purchase programs with major domestic and foreign manufacturers, principally General Motors Corporation. Under the terms of our agreement with GM, which expires in 2004, we are required to purchase a certain number of vehicles from GM and maintain at least 51% GM vehicles in our U.S. fleet. Our current operating strategy is to maintain an average fleet age of approximately six months. For model year 2001, approximately 99% of our domestic fleet vehicles were subject to repurchase programs. Under these programs, subject to certain conditions, such as mileage and vehicle condition, a manufacturer is required to repurchase those vehicles at a pre-negotiated price thereby eliminating our risk on the resale of the vehicles. In 2001, approximately 3% of repurchase program vehicles did not meet the conditions for repurchase.

Marketing.    In 2001, approximately 75% of vehicle rental transactions generated from our owned and operated car rental locations were generated in the United States by travelers who used the Avis System under contracts between the Company and the travelers' employers or organizations of which they are members (such as AAA). Unaffiliated business travelers are solicited by direct mail, telesales and advertising campaigns.

Travel agents can make Avis System reservations by telephone, via our Web site, or through all major global distribution systems and can obtain access through these systems to our rental location, vehicle availability and applicable rate structures. An automated link between these systems and the Wizard System gives them the ability to reserve and confirm rentals directly through these systems. We also maintain strong links to the travel industry. We have arrangements with frequent traveler programs of airlines such as Delta®, American®, Continental® and United®, and of hotels including the Hilton Corporation, Hyatt Corporation, Best Western, and Starwood Hotels and Resorts. These arrangements provide various incentives to all program participants and cooperative marketing opportunities for Avis and the partner. We also have an arrangement with our

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lodging brands whereby lodging customers who are making reservations by telephone will be transferred to Avis if they desire to rent a vehicle.

Internationally, we utilize a multi-faceted approach to sales and marketing throughout our global network by employing teams of trained and qualified account executives to negotiate contracts with major corporate accounts and leisure and travel industry partners. In addition, we utilize centralized telemarketing and direct mail initiatives to continuously broaden our customer base. Sales efforts are designed to secure customer commitment and support customer requirements for both domestic and international car rental needs. Our international operations maintain close relationships with the travel industry including participation in several airline frequent flyer programs, such as those operated by Air Canada®, Varig® Brazilian Airlines, as well as participation in Avis Europe programs with British Airways®, Lufthansa® and other carriers.

Avis.com.    Avis has a strong brand presence on the Internet through our Web site, www.avis.com. A steadily increasing number of Avis vehicle rental customers obtain rate, location and fleet information and then reserve their Avis rentals directly on the avis.com Web site. In addition, customers electing to use other Internet services such as Expedia®, Travelocity® and America Online® for their travel plans also have access to Avis reservations. During 2001, reservations through Internet sources increased to 9.5% of total reservations from 7.4% in the prior year for our owned operations.

Competition.    The vehicle rental industry is characterized by intense price and service competition. In any given location, we and our franchisees may encounter competition from national, regional and local companies, many of which, particularly those owned by the major automobile manufacturers, have greater resources than the Avis System. Nationally, our principal competitor is The Hertz Corporation, however, we also compete with Budget Rent A Car Corporation, National Car Rental System, Inc., Alamo Rent-A-Car, LLC, Dollar Rent A Car System, Inc. and Thrifty Rent-A-Car System, Inc. In addition, we compete with a large number of regional and local smaller vehicle rental companies throughout the country.

Competition in the U.S. vehicle rental operations business is based primarily upon price, reliability, ease of rental and return and other elements of customer service. In addition, competition is influenced strongly by advertising and marketing. In part, because of the Wizard System and Avis Interactive, we have been particularly successful in competing for commercial accounts.

Fleet Management Services Business (15% and 15% of revenue for 2001 and 1999, respectively)

Through our acquisition of Avis Group Holdings in March 2001, we acquired a portion of the fleet management business we had previously sold to Avis in June 1999. As a result, we generated no revenue in this business in 2000. PHH Vehicle Management Services LLC (d/b/a PHH Arval), a leader in the fleet management services business, and Wright Express LLC, a leading proprietary fuel card service provider in the United States comprise our fleet management services business.

We provide corporate clients and government agencies the following services and products for which we are generally paid a monthly fee:

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Growth.    We intend to focus our efforts for growth on the large fleet segment and middle market fleets as well as fee based services to new and existing clients. We also intend to increase cross marketing the products offered by Wright Express and PHH Arval to our customers.

Competition.    The principal factors for competition in vehicle management services are service, quality and price. We are competitively positioned as a fully integrated provider of fleet management services with a broad range of product offerings. Among providers of outsourced fleet management services, we rank second in North America in the number of leased vehicles under management and first in the number of proprietary fuel and maintenance cards for fleet use in circulation. There are four other major providers of outsourced fleet management services in the United States, GE Capital Fleet Services, Wheels Inc. Automotive Resources International (ARI), and CitiCapital, hundreds of local and regional competitors, and numerous niche competitors who focus on only one or two products and do not offer the fully integrated range of products provided by us. In the United States, it is estimated that only 50% of fleets are leased by third-party providers. The unpenetrated demand and the continued focus by corporations on cost efficiency and outsourcing will provide the growth platform in the future.

Discontinued Operation    

Parking Facility Business.    On May 22, 2002, we announced that we had completed the sale of our National Car Parks subsidiary for total consideration of £820 million (approximately $1.2 billion) in cash.

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Vehicle Services Trademarks and Intellectual Property

The service mark "Avis," related marks incorporating the word "Avis", and related logos are material to our car rental business. Our subsidiaries and franchisees, actively use these marks. All of the material marks used in the Avis business are registered (or have applications pending for registration) with the United States Patent and Trademark Office as well as major countries worldwide where Avis franchises are in operation. We own the marks used in the Avis business. The service marks "Wright Express," "WEX," "PHH" and related trademarks and logos are material to our fleet services business. Wright Express, PHH Arval and their licensees actively use these marks. All of the material marks used by Wright Express and PHH Arval are registered (or have applications pending for registration) with the United States Patent and Trademark Office. All of the material marks used by PHH Arval are also registered in major countries throughout the world where the fleet management services are offered by Arval PHH. We own the marks used in Wright Express' and PHH Arval's business.

Vehicle Services Seasonality

For our Avis vehicle rental business, the third quarter of the year, which covers the summer vacation period, represents the peak season for vehicle rentals. Any occurrence that disrupts travel patterns during the summer period could have a material adverse effect on Avis' annual performance. The fourth quarter is generally the weakest financial quarter for the Avis System. In 2001, our average monthly rental fleet, excluding franchisees, ranged from a low of 184,000 vehicles in November to a high of 244,000 vehicles in August. Rental utilization, which is based on the number of hours vehicles are rented compared to the total number of hours vehicles are available for rental, ranged from 66.7% in December to 82.6% in August and averaged 74.4% for all of 2001.

The fleet management services businesses are generally not seasonal.

Vehicle Services Employees

The businesses that make up our Vehicle Services segment employed approximately 18,234 persons as of December 31, 2001.

TRAVEL DISTRIBUTION SEGMENT (5%, 2% and 2% of revenue for 2001, 2000 and 1999, respectively)

With the acquisitions of Galileo International, Inc. and Cheap Tickets, Inc. in October 2001, we added a new Travel Distribution segment which is comprised of (i) our global distribution services business through Galileo International, (ii) our travel agency business, including Cheap Tickets, and (iii) our reservations processing, connectivity and information management services business through Wizcom. For 2000 and 1999, revenue included in this segment was generated from our travel agency business, which is conducted by RCI Travel and Cendant Travel, and our electronic reservations business, which is conducted by our WizCom subsidiary. The results of these businesses were previously included in our Hospitality Segment.

Global Distribution Services Business    (4% of revenue for 2001)

In October 2001, we acquired Galileo International, Inc. for approximately $1.9 billion, $1.5 billion of which was funded through the issuance of 117 million shares of Cendant common stock, and the remainder of which was funded from available cash. As part of the acquisition, we assumed approximately $586 million of Galileo's debt.

We provide, through Galileo, electronic global distribution and computer reservation services ("GDS") for the travel industry utilizing a computerized reservation system. Through our Apollo® and Galileo® computerized reservation systems, our GDS subsidiary provides travel agencies and other subscribers at approximately 45,000 locations, numerous Internet travel sites, as well as corporations and consumers who use our self-booking products, with the ability to access schedule and fare information, book reservations and issue tickets for more than 500 airlines. Our GDS subsidiary also provides subscribers with information and booking capabilities covering approximately 30 car rental companies and more than 200 hotel companies with approximately 52,000 properties throughout the world. Since our acquisition of Galileo, our GDS subsidiary completed approximately 60.4 million bookings. Our GDS subsidiary operates in 118 countries. Approximately 59% of our distribution revenues are generated outside the United States.

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Effective November 1, 2001, we entered into a ten-year, $1.4 billion information technology services arrangement with IBM Global Services, pursuant to which IBM Global Services will manage information technology services for our various business units, including the Galileo GDS. Such services include managing our data center, which was relocated from Garden City, New York to Denver, Colorado, and operating our 1,400-plus computer servers. IBM has also assumed responsibility for information technology services and data operations of third-party companies that had contracted with us to provide those functions. IBM also provides help desk and desk-top support services to some of our employees. As a result of this agreement, approximately 500 of our employees were hired by IBM.

Substantially all of our electronic GDS revenue is derived from booking fees paid by travel suppliers, such as airlines, car rental companies and hotel companies. Travel suppliers store, display, manage and sell their services through our systems. Airlines and other travel suppliers are offered varying levels of functionality at which they can participate in our systems. Our Apollo system is utilized in North America and Japan, and our Galileo system is utilized in the rest of the world. In 2001, approximately 93% of our booking fee revenues were generated from airlines. United Airlines is the largest single travel supplier utilizing our systems, generating revenues that accounted for approximately 12% of our total GDS revenues in 2001.

Travel agencies access our systems using hardware and software typically provided by us or by independent national distribution companies ("NDCs"), although travel agencies can choose to purchase their own hardware and certain software. We, internally or through our NDCs, also provide technical support and other assistance to travel agencies. Multinational travel agencies constitute an important category of subscribers due to the high volume of business that can be generated through a single relationship. Bookings generated by our five largest travel agency customers constituted 20% of the bookings made through our systems in 2001.

Product Distribution.    We distribute our products to subscribers primarily through our internal sales and marketing organization. We also distribute our products through our relationships with independent NDCs. NDC's are third party distributors who receive a commission for the sale and servicing of Galileo and Apollo technology to travel agents. Our local sales and marketing groups distribute our products in North America, the United Kingdom, Belgium, France, Germany, Spain, Portugal, the Netherlands, Switzerland, Sweden, Finland, Norway, Russia, Australia, New Zealand, Hong Kong, Singapore, the Philippines, Brazil and Venezuela. Bookings made in these countries collectively accounted for approximately 69% of our 2001 bookings.

In regions not supported directly by our sales and marketing organization, we provide services through our relationships with independent NDCs through distribution agreements entered into with Galileo. The NDC is responsible for cultivating the relationship with subscribers in its territory, installing subscribers' computer equipment, maintaining the hardware and software supplied to the subscribers and providing ongoing customer support. The NDC earns a share of the booking fees generated in the NDC's territory, as well as all subscriber fees billed in that marketplace. NDCs, which are typically owned or operated by the national airline of the relevant country or a local travel-related business, accounted for approximately 31% of our booking volume in 2001.

Growth.    In order to grow our GDS business, we intend to capitalize on our competitive strengths, the key elements of which are: (i) Cendant's business to business expertise and relationships, (ii) a diversified global presence, (iii) established relationships with a diverse group of travel suppliers and subscribers, (iv) a comprehensive offering of innovative products, and (v) new product initiatives with unique appeal to travel consumers, agencies and suppliers. We believe that the distribution network established through our independent NDCs provides us with a local presence in countries throughout the world. In addition, we continue to strengthen our presence in developing and emerging economies that provide future growth opportunities, such as Eastern Europe, Africa, the Middle East and Asia. We believe that in-depth knowledge of the local travel economies in which we distribute our products is essential to developing and strengthening our ties to travel suppliers and the local travel agencies that generate significant booking volumes.

We will continue to assess opportunities to acquire distributors in mature, highly automated markets, where we can realize attractive economic returns and enhance our customer service. Consistent with this

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strategy, in April 2001, prior to our acquisition of Galileo, Galileo acquired Southern Cross Distribution Systems Pty Limited, its NDC for Australia and New Zealand, from an entity owned by the Qantas Airways group, Ansett Airlines and Air New Zealand. This acquisition raised the number of wholly owned sales and marketing organizations to 19, representing approximately 69% of our distribution.

We intend to continue to pursue opportunities to further open up our computerized reservation system to distribute travel through a variety of means and to continue to develop leading technologies, integrate additional travel content into our products, further strengthen our relationships with our agency and supplier customers and maintain our position as a leading player in the integrated electronic travel distribution marketplace. In October 2001, we acquired Highwire, Inc., a developer of corporate Internet travel tools and technology, which we expect will complement our product offerings and create new opportunities in the corporate online channel. The acquisition of HighWire was not material to Cendant.

Information Services.    We currently provide fare quotation services through our GlobalFares™ quotation system to approximately 68 airlines worldwide. GlobalFares is used in conjunction with each airline's internal reservation system and provides pricing information.

We also provide internal reservation services to United Airlines pursuant to a computer services agreement which terminates at the end of 2004. Such services include the display of schedules and availability, the reservation, sale and ticketing of travel services and the display of other travel-related information to United Airlines' airport offices, city ticket offices and reservation centers internationally. In addition, we provide certain other internal management services to United Airlines, including network management, departure control, availability displays, inventory management, database management and software development.

On August 12, 2002, we acquired all of the issued and outstanding equity securities of InterNETWORK Publishing Corporation and certain of its affiliates (collectively, "IPC"), which operate online hotel reservation travel sites, including Lodging.com. IPC is expected to broaden our marketing of discounted hotel rooms to consumers and travel agencies. The acquisition of IPC is not material to Cendant.

Competition.    Our competitors include the three major global distribution system companies: Sabre®, Amadeus® and Worldspan®, the regional reservation systems including Abacus®, Axesssm, Infinism and Topassm, other travel infrastructure companies such as Pegasus Systems and Datalex, firms that operate in the virtual travel services sector such as Expedia®, Travelocity® and Orbitzsm and alternative channels by which travel products and services are distributed.

Competition to attract and retain travel agency subscribers is intense. As a result, we and other computerized reservation system service providers offer incentives to travel agency subscribers if certain productivity or booking volume growth targets are achieved. Although continued expansion of the use of such incentive payments could adversely affect our profitability, our failure to continue to make such incentive payments could result in the loss of some travel agency subscribers.

Travel Agency Services Business (1%, 2% and 2% of revenue for 2001, 2000 and 1999, respectively)

We provide travel services, through our travel agency subsidiaries RCI Travel, LLC, Cendant Travel, Inc. and Cheap Tickets, Inc. We are a full service travel agency operation providing airline, car rental, hotel and other travel reservation and fulfillment services. Such services are provided to members of Resort Condominiums International, LLC, our timeshare exchange company, as well as in connection with the travel programs offered through Trilegiant Corporation, an individual membership business, and Trip Network, Inc., an independent affiliate of Cendant and the operator of the cheaptickets.comsm and Trip.comsm travel Web sites. On October 5, 2001, we acquired Cheap Tickets, Inc. for approximately $313 million primarily in cash.

We work directly with travel suppliers, such as airlines, car rental companies, hotel companies and tour and cruise operators to secure both non-published and regularly available fares, rates and tariffs to supply the best possible rates and discounted travel to our customers. Cheap Tickets' non-published fares are not available to consumers directly from the airlines. Rates are made available to customers through our call centers and through our branded sites, cheaptickets.com and trip.com, which are operated by Trip Network, Inc. See "Relationship with Trip Network, Inc." discussion below. Transactions are booked via

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global distribution service and fulfilled through our call center network and ticketing operations. As of December 31, 2001, we maintained a total of nine call centers located in: Lakeport, California, Colorado Springs, Denver and Englewood, Colorado, Tampa, Florida, Honolulu, Hawaii, Indianapolis (Carmel) Indiana, Moore, Oklahoma and Nashville, Tennessee.

Competition.    As we provide services to our RCI members and to Trilegiant members through an outsourcing agreement, our primary competitors consist of other membership related travel services providers such as Memberworks, Quest, Encore Marketing and Damark. In addition, we compete with a large number of leisure travel agencies, including Liberty Travel, American Express Travel and AAA Travel Services, and Internet travel Web sites, such as Orbitz, Expedia, Travelocity, Priceline and Hotwire.

Relationship with Trip Network, Inc.    Trip Network, Inc. ("TNI") was established in 2001 to develop and launch an Internet travel portal initiative, and is expected to significantly expand the Internet presence of our travel brands for the benefit of certain of our current and future franchisees. TNI was established with a $20 million contribution of assets by us in return for all of the common stock and preferred stock of Trip Network. We transferred all the common shares of Trip Network to an independent technology trust that is controlled by three independent trustees who are not officers, directors or employees of Cendant or relatives of officers, directors or employees of Cendant. The preferred stock is convertible at an exercise price of $0.01 per share into approximately 80% of TNI's common stock beginning on March 31, 2003 or earlier upon a change of control of TNI. Additionally, we also funded TNI in the first quarter of 2001 with approximately $85 million, including $45 million in cash and 1.5 million shares of Homestore common stock, then valued at $34 million. Following our acquisitions of Galileo and Cheap Tickets, TNI licensed the rights for the online businesses, Trip.com and Cheaptickets.com, respectively, which combined provide access to 20 million registered users. TNI currently operates these online travel businesses and we provide TNI with call center, supplier relationship management and GDS services. TNI is developing Trip.com as its primary consumer portal and released a new version of Trip.com in December 2001 as a "soft launch." It is anticipated TNI will launch an extensive Trip.com marketing campaign later this year as TNI further develops Trip.com with improved technology, greater discounted travel inventory and personalized customer services.

At December 31, 2001, TNI had no debt outstanding nor are we contingently liable for any debt which TNI may incur. Certain officers of Cendant serve on the Board of Directors of TNI.

WizCom Business

Our wholly-owned WizCom subsidiary is a global provider of electronic reservations processing, connectivity and computerized reservation system services for the travel industry. WizCom provides hotels, car rental businesses and tour/leisure travel operators, including Internet travel companies, with electronic distribution to the Global Distribution Systems (such as our Galileo GDS), Internet or other travel reservations systems, linking customers to all the major travel networks on six continents through telephone lines and satellite communications. These products allow for real time processing for travel agents, corporate travel departments and consumers. In addition, WizCom offers information management services that permit customers to maintain current information on property, vehicle or tour packages (such as rental rates and room amenity descriptions) and deliver the most current data to external distribution systems. Revenues are generated from services provided by WizCom to its customers and are primarily comprised of up-front implementation fees and ongoing transaction and support fees.

Growth.    WizCom expects to increase its Internet distribution reach, allowing hotel and car rental companies to further optimize their sales mix. WizCom is also planning enhancements to its product and service portfolio aimed at the hospitality sector. For example, WizCom will launch a new product to enable hotels to reduce rate description management resources and generate revenue growth for WizCom.

Competition.    In providing electronic distribution services to hotel customers, WizCom competes with third party connectivity providers such as Pegasus Solutions, and also with supplier direct connection technology. WizCom competes with many companies to provide computerized reservation system services to hotel customers, including other hotels. Some of our competitors include Hotel Data Systems, Synix and Micros Systems.

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Travel Distribution Trademarks and Intellectual Property

The trademarks and service marks "Galileo," "Apollo," "Cheap Tickets," "Trip.com" and "WizCom" and related trademarks and logos are material to the businesses in our travel distribution segment. Galileo, Cheap Tickets, Trip.com, WizCom and their subsidiaries and licensees actively use these marks. All of the material marks used by Galileo, Cheap Tickets, Trip.com and WizCom are registered (or have applications pending for registration) with the United States Patent and Trademark Office as well as major countries throughout the world where these businesses operate. We own the marks used in the travel distribution segment.

Travel Distribution Seasonality

We experience a seasonal pattern in our operating results, with the fourth quarter typically having the lowest total revenues and operating income due to early bookings by customers for holiday travel and a decrease in business travel during the holiday season.

Travel Distribution Employees

The businesses that make up our Travel Distribution segment employed approximately 6,022 persons as of December 31, 2001.

FINANCIAL SERVICES SEGMENT (16%, 32% and 26% of our revenue for 2001, 2000 and 1999, respectively)

Insurance/Wholesale Business (5%, 10% and 7% of our revenue for 2001, 2000 and 1999, respectively)

Our insurance/wholesale business provides (i) enhancement packages for financial institutions through Progeny Marketing Innovation, (ii) marketing for accidental death and dismemberment insurance and certain other insurance products through FISI and BCI and (iii) marketing for long term care insurance products through LTPC. With nearly 39 million customers, we offer the following products and services:

Enhancement Package Service.    We sell enhancement packages for financial institution consumer and business checking and deposit account holders primarily through our Progeny subsidiary. Progeny's financial institution clients select a customized package of our products and services and then usually add their own services (such as unlimited check writing privileges, personalized checks, cashiers' or travelers' checks without issue charge, or discounts on safe deposit box charges or installment loan interest rates). With our marketing and promotional assistance, the financial institution then offers the complete package of enhancements to its checking account holders as a special program for a monthly fee. Most of these financial institutions choose a standard enhancement package, which generally includes $10,000 of common carrier insurance and travel discounts. Others may include Trilegiant's shopping and credit card registration services, a travel newsletter or pharmacy, eyewear or entertainment discounts as enhancements. The common carrier coverage is underwritten under group insurance policies with two referral underwriters. We generally charge a financial institution client an initial fee to implement this program and monthly fees thereafter based on the number of customer accounts participating in that financial institution's program. In January 2001, Progeny acquired the customer lists and all contracts of MarketTrust, Inc. that were necessary to provide checking account enhancement packages to over 320 financial institutions located accross the United States and other related intellectual property. The acquisition of such assets of MarketTrust was not material to the Company.

AD&D Insurance.    Through our Progeny and BCI subsidiaries, we serve as an agent and third-party administrator for marketing accidental death and dismemberment insurance throughout the country to the customers of financial institutions. These products are primarily marketed through direct mail solicitations which generally offer $1,000 of accidental death and dismemberment insurance at no cost to the customers and the opportunity to choose additional coverage of up to $250,000. The annual premium generally ranges from $10 to $250. BCI also acts as an administrator for, and markets, term life and hospital accident insurance. Progeny's and BCI's insurance products and other services are offered to customers of banks, credit unions, credit card issuers and mortgage companies.

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Long Term Care Insurance.    Through our LTPC subsidiary, we are one of the largest independent marketers of long term care insurance products in the United States representing five national underwriters. LTPC's sales efforts are supported by over 350 captive agents and 1,300 brokers across the United States.

Distribution Channels.    We market our products to consumers: (i) of financial institutions or other associations through direct marketing; (ii) of financial institutions or other associations through a direct sales force, participating merchants or general advertising; and (iii) through companies and various other entities.

Growth.    Primary growth drivers include expanding our customer base to include larger financial institutions and targeted non-financial partners. In addition, we are expanding the array of products and services sold through the direct marketing channels to existing clients.

Competition.    Our checking account enhancement services compete with similar services offered by other companies, including insurance companies and other third-party marketers. In larger financial institutions, we may also compete with a financial institution's own marketing staff. Competition for the offering of our insurance products through financial institutions is growing and intense. Our competitors include other third-party marketers and large national insurance companies with established reputations that offer products with rates, benefits and compensation similar to ours. The long term care insurance industry is highly competitive. Our competition primarily includes large national insurance companies, such as General Electric Financial Assurance Company.

Loyalty Solutions (2%, 4% and 3% of our revenue for 2001, 2000 and 1999, respectively)

Our Cims subsidiary has developed customer loyalty solutions and insurance products for the benefit of financial institutions and businesses in other industries. The primary customer loyalty solution offered to Cims clients is the loyalty package. Loyalty packages provide targeted consumers of client organizations with a "package" of benefits and services for the purpose of improving customer retention, attracting consumers to become customers of the client organization and encouraging them to buy additional services. For example, packages include discounted travel services such as discounts on vacation rentals, car rentals, travel insurance, timeshare weeks, cruises, hotels and airlines. As of December 31, 2001, Cims has expanded its clients' membership and customer base to approximately 15.3 million individuals. Cims clients include over 50 financial institutions throughout Europe, South Africa and Asia. Cims offers travel and real estate benefits and other services within its loyalty packages for the benefit of consumers. Cims also leverages its internal insurance competencies and strategic relationships to provide insurance benefits to consumers. We also have exclusive licensing agreements covering the use of our merchandising systems in Australia, Japan and certain other Asian countries under which licensees pay initial license fees and agree to pay royalties to us based on membership fees, access fees and merchandise service fees paid to them.

Growth.    The primary growth drivers for Cims are (i) to increase the number of consumers, from within our existing client base, who participate in loyalty programs for their particular financial institution, (ii) to increase the number of financial institutions we partner with for their respective loyalty marketing programs, (iii) to develop marketing relationships with clients in other industries (wireless providers for example) and (iv) to offer multiple loyalty solutions to our clients.

Competition.    Cims represents an outsourcing alternative to marketing departments of large retail organizations. Cims competes with certain other niche loyalty solution providers throughout Europe.

Tax Preparation Business (1%, 1% and 1% of our revenue for 2001, 2000 and 1999, respectively)

Our Jackson Hewitt Inc. subsidiary ("Jackson Hewitt") is the second largest tax preparation service system in the United States. The Jackson Hewitt® franchise system is comprised of a 47-state network (and the District of Columbia) with approximately 3,800 offices operating under the trade name and service mark "Jackson Hewitt Tax Service®." Office locations range from stand-alone store front offices to kiosk offices within Wal-Mart® and Kmart® stores. Through the use of proprietary interactive tax preparation software, we are engaged in the preparation and electronic filing of federal and state individual income tax returns. During 2001, Jackson Hewitt prepared over 2.2 million tax returns, which represented an increase

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of 22.0% from the approximately 1.8 million tax returns prepared during 2000. To complement our tax preparation services, we also offer accelerated check refunds and refund anticipation loans to our tax preparation customers through a designated bank. Franchisees pay a minimum initial fee and royalty and marketing fees.

H&R Block's recent shift to an owner/operator business model has resulted in Jackson Hewitt becoming the leading franchisor of tax preparation services.

Growth.    We believe revenue and share growth in the tax preparation industry will come primarily from selling new franchises, the application of proven management techniques for existing franchise systems, and new product and service offerings.

During 1999, Jackson Hewitt, in conjunction with two of its largest franchisees, created an independent joint venture, Tax Services of America, Inc. ("TSA"), to maximize Jackson Hewitt's ability to add independent tax preparation firms to its franchise system. Jackson Hewitt initially contributed approximately 80 company-owned stores and as of December 31, 2001 had an approximate 89% interest in the form of preferred stock. The two other parties to the joint venture contributed a total of 40 stores in exchange for common stock in TSA. On January 18, 2002, Jackson Hewitt purchased all of the then outstanding common stock of TSA for approximately $4.0 million. TSA currently has over 400 offices and is expected to prepare over 350,000 tax returns in 2002. TSA's objective is to grow by acquiring independent tax preparation firms in areas where TSA is licensed to operate and convert them to the Jackson Hewitt system.

Competition.    Tax preparation businesses are highly competitive. There are a substantial number of tax preparation firms and accounting firms that offer tax preparation services. Commercial tax preparers are highly competitive with regard to price, service and reputation for quality. Our largest competitor, H&R Block, is a nationwide tax preparation service with approximately 9,000 locations.

Individual Membership Business (8%, 17% and 15% of our revenue for 2001, 2000 and 1999, respectively)

The individual membership business markets various clubs and services to individuals through client proprietary lists (such as banks, financial institutions, retailers, oil companies and internet service providers) for a membership fee. The membership period is typically on an annual basis although we do have some members that join on a monthly basis. Members have the ability to cancel their membership at any time during the membership period for a full or partial refund.

On July 2, 2001, we entered into 40-year outsourcing and licensing agreements with Trilegiant Corporation, a direct marketing company established by former management of our Cendant Membership Services and Cendant Incentives subsidiaries. All of Trilegiant's common stock is owned by the executives and senior management of Trilegiant, many of whom are former employees of our individual membership business. As of July 2, 2001, no common stockholder of Trilegiant was an officer, director or employee of Cendant. However, such former employees continue to hold vested Cendant stock options granted during their employment with Cendant. We continue to receive membership fees from, and are obligated to provide membership benefits to, existing members as of July 2, 2001, including their renewals, and Trilegiant provides fulfillment services (including cash collection, paying commissions, processing refunds, providing membership services and benefits) to these members in exchange for a servicing fee. Trilegiant collects the membership fees from, and is obligated to provide membership benefits to, those new members who join the membership based clubs and programs and all other incentive programs subsequent to July 2, 2001. Beginning in the third quarter of 2002 and throughout the remainder of the 40 year term of the licensing agreements, we will receive a royalty fee (initially 5% increasing to approximately 16% over ten years) from Trilegiant in connection with those new members. Certain of our officers serve on the Board of Directors of Trilegiant to oversee our interest in Trilegiant. Trilegiant's Board of Directors is comprised of three directors elected by the Trilegiant management (as the common shareholders) and three directors elected by us (as the sole preferred shareholder).

As of December 31, 2001, Trilegiant serviced approximately 23.8 million memberships, 18.9 million of which consist of our existing memberships. Trilegiant provides members with access to a variety of discounted products and services in such areas as retail shopping, travel, personal finance and auto and

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home improvement. Trilegiant also affiliates with business partners such as leading financial institutions, retailers, and oil companies to offer membership as an enhancement to their credit card, charge card or other customers. Participating institutions generally receive commissions on initial and renewal memberships, based on a percentage of the net membership fees. Individual membership programs offer consumers discounts on many brand categories by providing shop at home convenience in areas such as retail shopping, travel, automotive, dining and home improvement.

Trilegiant offers the following membership programs from which we receive a royalty on sales to new members: Shoppers Advantage®, a discount shopping program; Travelers Advantage®, a discount travel service program; The AutoVantage® Service, a program which offers preferred prices on new cars and discounts on maintenance, tires and parts; AutoVantage Gold®, a program which provides a premium version of the AutoVantage® Service; Credit Card Guardian® and "Hot-Line", services which enable consumers to register their credit and debit cards to keep the account numbers securely in one place; The PrivacyGuard® and Credentials®, services which provide monitoring of a member's credit history, driving records and medical files; The Buyers Advantage®, a service which extends manufacturer's warranties; CompleteHome®, a service designed to save members time and money in maintaining and improving their homes; The Family FunSaver Club®, a program which provides the opportunity to purchase family travel services and other family related products at a discount; and The HealthSaversm, a program which provides discounts on prescription drugs, eyewear, eye care, dental care, selected health-related services and fitness equipment.

Investment in Trilegiant.    We own preferred stock which is convertible at any time at our option, into approximately 20% of Trilegiant's common stock. We also advanced approximately $100 million in cash and $33 million of prepaid assets to support Trilegiant's marketing activities. In addition, we have provided Trilegiant with a $35 million revolving line of credit under which advances are at our sole and unilateral discretion. At December 31, 2001, there were no advances outstanding under this line of credit. We are not obligated or contingently liable for any debt incurred by Trilegiant.

In connection with marketing agreements entered into with a third party, we provided a $75 million loan facility to Trilegiant under which we will advance funds to Trilegiant for marketing performed by Trilegiant on behalf of the third party. Under the terms of the agreements, Trilegiant will provide certain services to the third party in exchange for commissions. As part of our royalty arrangement with Trilegiant, we will participate in those commissions. Trilegiant will repay borrowings under this facility as commissions are received by Trilegiant from the third party. As of December 31, 2001, the outstanding balance under this loan facility was $24 million.

Competition.    The membership services industry is highly competitive. Competitors include membership services companies, as well as large retailers, travel agencies, insurance companies and financial service institutions, some of which have financial resources, product availability, technological capabilities or customer bases that may be greater than ours.

Financial Services Trademarks and Other Intellectual Property.

The service marks "Jackson Hewitt" and "Jackson Hewitt Tax Service" and related marks and logos are material to Jackson Hewitt's business. We, through our franchisees, actively use these marks. The trademarks and logos are registered (or have applications pending for registration) with the United States Patent and Trademark Office. We own the marks used in the Jackson Hewitt business. The individual membership business trademarks and service marks listed above and related logos are material to the individual membership business. In connection with the Trilegiant outsourcing arrangement, we license the individual membership business trademarks and service marks listed above to Trilegiant in exchange for the licensing fee mentioned above. Individual membership business trademarks and logos are registered (or have applications pending for registration) with the United States Patent and Trademark Office, unless otherwise indicated above. We own the marks used in the individual membership business.

Financial Services Seasonality.

Our direct marketing and individual membership businesses are generally not seasonal. However, since most of our franchisees' customers file their tax returns during the period from January through April of

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each year, substantially all franchise royalties are received during the first and second quarters of each year. As a result, Jackson Hewitt operates at a loss for the remainder of the year. Historically, such losses primarily reflect payroll of year-round personnel, the update of tax software and other costs and expenses relating to preparation for the following tax season.

Financial Services Employees

The businesses that make up our Financial Services segment employed approximately 2,470 persons as of December 31, 2001.

GEOGRAPHIC SEGMENTS

Financial data for geographic segments are reported in Note 26 to our Consolidated Financial Statements included in Item 8 of this Form 10-K/A.

REGULATION

Franchise Regulation.    The sale of franchises is regulated by various state laws, as well as by the Federal Trade Commission (the "FTC"). The FTC requires that franchisors make extensive disclosure to prospective franchisees but does not require registration. Although no assurance can be given, proposed changes in the FTC's franchise rule should have no adverse impact on our franchised businesses. A number of states require registration or disclosure in connection with franchise offers and sales. In addition, several states have "franchise relationship laws" or "business opportunity laws" that limit the ability of the franchisor to terminate franchise agreements or to withhold consent to the renewal or transfer of these agreements. While our franchising operations have not been materially adversely affected by such existing regulation, we cannot predict the effect of any future federal or state legislation or regulation.

Real Estate Regulation.    The federal Real Estate Settlement Procedures Act (RESPA) and state real estate brokerage laws restrict payments which real estate and mortgage brokers and other parties may receive or pay in connection with the sales of residences and referral of settlement services (e.g., mortgages, homeowners insurance, title insurance). Such laws may to some extent restrict preferred alliance arrangements involving our real estate brokerage franchisees, mortgage business and relocation business. Our mortgage business is also subject to numerous federal, state and local laws and regulations, including those relating to real estate settlement procedures, fair lending, fair credit reporting, truth in lending, federal and state disclosure and licensing. Currently, there are local efforts in certain states which could limit referral fees to our relocation business.

It is a common practice for online mortgage and real estate related companies to enter into advertising, marketing and distribution arrangements with other Internet companies and Web sites, whereby the mortgage and real estate related companies pay fees for advertising, marketing and distribution services and other goods and facilities. The applicability of RESPA's referral fee prohibitions to the compensation provisions of these arrangements is unclear and the Department of Housing and Urban Development has provided no guidance to date on the subject.

Timeshare Exchange Regulation.    Our timeshare exchange business is subject to foreign, federal, state and local laws and regulations including those relating to taxes, consumer credit, environmental protection and labor matters. In addition, we are subject to state statutes in those states regulating timeshare exchange services, and must prepare and file annually certain disclosure guides with regulators in states where required. While our timeshare exchange business is not subject to those state statutes governing the development of timeshare condominium units and the sale of timeshare interests, such statutes directly affect both our timeshare sales and marketing business (see below) and the other members and resorts that participate in the RCI exchange programs. Therefore, the statutes indirectly impact our timeshare exchange business.

Timeshare Sales and Marketing Regulation.    Our timeshare sales and marketing business is subject to extensive regulation by the states in which our resorts are located and in which its vacation ownership interests are marketed and sold. In addition, we are subject to federal legislation, including without limitation, the Federal Trade Commission Act; the Fair Housing Act; the Truth-in-Lending Act and

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Regulation Z promulgated thereunder, which require certain disclosures to borrowers regarding the terms of their loans; the Real Estate Settlement Procedures Act and Regulation X promulgated thereunder which require certain disclosures to borrowers regarding the settlement and servicing of loans; the Equal Credit Opportunity Act and Regulation B promulgated thereunder, which prohibit discrimination in the extension of credit on the basis of age, race, color, sex, religion, marital status, national origin, receipt of public assistance or the exercise of any right under the Consumer Credit Protection Act, the Telemarketing and Fraud and Abuse Prevention Act, and the Civil Rights Acts of 1964, 1968 and 1991.

Many states have laws and regulations regarding the sale of vacation ownership interests. The laws of most states require a designated state authority to approve a timeshare public report, a detailed offering statement describing the resort operator and all material aspects of the resort and the sale of vacation ownership interests. In addition, the laws of most states in which we sell vacation ownership interests grant the purchaser of such an interest the right to rescind a contract of purchase at any time within a statutory rescission period, which generally ranges from three to ten days. Furthermore, most states have other laws that regulate our timeshare sales and marketing activities, such as real estate licensing laws, travel sales licensing laws, anti-fraud laws, telemarketing laws, prize, gift and sweepstakes laws, labor laws and various regulations governing access and use of our resorts by disabled persons.

Internet Regulation.    Although our business units' operations on the Internet are not currently regulated by any government agency in the United States beyond regulations discussed above and applicable to businesses generally, it is likely that a number of laws and regulations may be adopted governing the Internet. In addition, existing laws may be interpreted to apply to the Internet in ways not currently applied. Regulatory and legal requirements are subject to change and may become more restrictive, making our business units' compliance more difficult or expensive or otherwise restricting their ability to conduct their businesses as they are now conducted.

Vehicle Rental and Fleet Leasing Regulation.    We are subject to federal, state and local laws and regulations including those relating to taxing and licensing of vehicles, franchising, consumer credit, environmental protection and labor matters. The principal environmental regulatory requirements applicable to our vehicle and rental operations relate to the ownership or use of tanks for the storage of petroleum products, such as gasoline, diesel fuel and waste oils; the treatment or discharge of waste waters; and the generation, storage, transportation and off-site treatment or disposal of solid or liquid wastes. We operate 271 locations at which petroleum products are stored in underground or aboveground tanks. We have instituted an environmental compliance program designed to ensure that these tanks are in compliance with applicable technical and operational requirements, including the replacement and upgrade of underground tanks to comply with the December 1998 EPA upgrade mandate and periodic testing and leak monitoring of underground storage tanks. We believe that the locations where we currently operate are in compliance, in all material respects, with such regulatory requirements.

We may also be subject to requirements related to the remediation of, or the liability for remediation of, substances that have been released to the environment at properties owned or operated by us or at properties to which we send substances for treatment or disposal. Such remediation requirements may be imposed without regard to fault and liability for environmental remediation can be substantial.

We may be eligible for reimbursement or payment of remediation costs associated with future releases from its regulated underground storage tanks and have established funds to assist in the payment of remediation costs for releases from certain registered underground tanks. Subject to certain deductibles, the availability of funds, compliance status of the tanks and the nature of the release, these tank funds may be available to us for use in remediating future releases from its tank systems.

A traditional revenue source for the vehicle rental industry has been the sale of loss damage waivers, by which rental companies agree to relieve a customer from financial responsibility arising from vehicle damage incurred during the rental period. Approximately 3.2% of our vehicle operations revenue during 2001 was generated by the sale of loss damage waivers. Approximately 40 states have considered legislation affecting the loss damage waivers. To date, 24 states have enacted legislation which requires disclosure to each customer at the time of rental that damage to the rented vehicle may be covered by the customer's personal automobile insurance and that loss damage waivers may not be necessary. In addition, in the late

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1980's, New York enacted legislation which eliminated our right to offer loss damage waivers for sale and limited potential customer liability to $100. Moreover Nevada has capped rates for loss damage waivers at $15.00 per day. California has capped these rates at either $9.00 per day for cars with an MSRP of $19,000 or less, or $15.00 per day for cars with an MSRP of $19,000 to $34,999, but there is no cap for cars with an MSRP of $35,000 or more.

We are also subject to regulation under the insurance statutes, including insurance holding company statutes, of the jurisdictions in which its insurance company subsidiaries are domiciled. These regulations vary from state to state, but generally require insurance holding companies and insurers that are subsidiaries of insurance holding companies to register and file certain reports including information concerning their capital structure, ownership, financial condition and general business operations with the state regulatory authority, and require prior regulatory agency approval of changes in control of an insurer and intercorporate transfers of assets within the holding company structure. Such insurance statutes also require that we obtain limited licenses to sell optional insurance coverage to our customers at the time of rental.

The payment of dividends to us by our insurance company subsidiaries is restricted by government regulations in Colorado, Bermuda and Barbados affecting insurance companies domiciled in those jurisdictions.

Marketing Regulation.    Primarily through our insurance/wholesale business, we market our products and services via a number of distribution channels, including direct mail, telemarketing and online. These channels are regulated on the state and federal levels and we believe that these activities will increasingly be subject to such regulation. Such regulation may limit our ability to solicit new members or to offer one or more products or services to existing members. In addition to direct marketing, our insurance/wholesale business is subject to various state and local regulations including, as applicable, those of state insurance departments. While we have not been adversely affected by existing regulations, we cannot predict the effect of any future federal, state or local legislation or regulation.

In November 1999, the Federal Gramm-Leach-Bliley Act became law. This Act and its implementing regulations modernized the regulatory structure affecting the delivery of financial services to consumers and provided for new requirements and limitations relating to direct marketing by financial institutions to their customers. Compliance with the Act was required beginning July 1, 2001, and we have taken various steps to ensure our compliance; however, since specific aspects of the implementing regulations relating to this Act remain to be clarified, it is unclear what conclusive effect, if any, such regulations might have on our business.

We are also aware of, and are actively monitoring the status of, certain proposed privacy-related state legislation that might be enacted in the future; it is unclear at this point what effect, if any, such state legislation might have on our businesses.

Global Distribution Services Regulation.    Our global distribution services business is subject to regulation primarily in the United States, the European Union and Canada. Each jurisdiction's rules are largely based on the same set of core premises: that a computerized reservation system must treat all participating airlines equally, whether or not they are owners of the system; that airlines owning computerized reservations systems must not discriminate against the computerized reservation systems they do not own; and that computerized reservation system relationships with travel agencies should not be an impediment to competition from other computerized reservation systems or to the provision of services to the traveler. While each jurisdiction has focused on the computerized reservation system industry's role in the airline industry, the United States' and EC rules have the greatest impact on us because of the volume of business transacted by us in the United States and the European Union. Neither jurisdiction currently seeks to regulate computerized reservation system relationships with non-airline participants such as hotel and car rental companies, although the EC rules allow computerized reservation systems to incorporate rail services into computerized reservation system displays and such rail services are therefore subject to certain sections of the EC rules.

Both the United States and the European Union require systems to provide airline displays for travel agencies that are ordered on the basis of neutral principles and that all airlines must be charged the same

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fees for the same level of participation. The EC rules go further and require that fees must be reasonably structured and reasonably related to the cost of the service provided and used. Moreover, under the EC rules, airlines have the ability to disallow certain types of bookings, unless they have already been accepted.

Both the United States and European Union regulators seek to redress the potential that a computerized reservation system used for internal reservation purposes would offer a travel agency subscriber superior access to the hosted airline and inferior access to all other airlines. The EC rules require a GDS to ensure that its distribution facilities are separated from any carrier's private inventory hosted on the system. If a connection between distribution facilities and private inventory is permitted by an application interface, any such interface must be available to all carriers on a non-discriminatory basis. While the United States rules contain several principles outlining the requirement of unbiased displays, the EC rules prescribe a specific formula that a computerized reservation system must use to order its display of flights. U.S. regulations also require functional equivalence between the functionality offered to airlines whose internal reservation systems are hosted in the computerized reservation system and those provided to all other airlines. The EC rules require the owner airlines to provide the same data, and accept and confirm bookings with equal timeliness in all computerized reservation systems, when requested to do so. U.S. regulations contain no counterpart to the European requirement that subscribers be offered access to the computerized reservation system on a nondiscriminatory basis. Although U.S. regulations extend only to use of computerized reservation systems by travel agencies, European and Canadian rules apply to all subscriber uses of computerized reservation systems, whether by travel agencies, individuals or corporate travel departments. To the extent rules relating to computerized reservation systems are proposed or adopted by other countries, we expect they will be similar to the existing rules in other jurisdictions.

Travel Agency Regulation.    The products and services we provide are subject to various federal, state and local regulations. We must comply with laws and regulations relating to our sales and marketing activities, including those prohibiting unfair and deceptive advertising or practices. Our travel service is subject to laws governing the offer and/or sale of travel products and services, including laws requiring us to register as a "seller of travel," to comply with disclosure. In addition, many of our travel suppliers and global distribution systems are heavily regulated by the United States and other governments and we are indirectly affected by such regulation.

EMPLOYEES

As of December 31, 2001, we employed approximately 50,000 people. Management considers our employee relations to be satisfactory.

ITEM 2. PROPERTIES

Our principal executive offices are located in leased space at 9 West 57th Street, New York, NY 10019 with a lease term expiring in 2013. Many of our general corporate functions are conducted at leased offices at One Campus Drive, 1 Sylvan Way and 10 Sylvan Way and one owned facility located at 6 Sylvan Way, Parsippany, New Jersey 07054. Executive offices are also located at Landmark House, Hammersmith Bridge Road, London, England W69EJ.

Our lodging franchise business leases space for its reservations centers and data warehouse in Aberdeen, South Dakota; Phoenix, Arizona; Knoxville and Elizabethton, Tennessee; St. John, New Brunswick, Canada pursuant to leases that expire in 2004, 2007, 2004, 2002, and 2009 respectively. In addition, our lodging and real estate businesses share approximately four leased office spaces within the United States.

Our timeshare exchange business has three properties which we own; a 200,000 square foot facility in Carmel, Indiana, which serves as an administrative office; a 200,000 square foot call center in Cork, Ireland and a property located in Kettering, UK, which is RCI's European office. Our timeshare exchange business also has approximately 10 leased offices located within the United States and approximately 38 additional leased spaces in various countries outside the United States.

Our timeshare sales and marketing business owns a 60,500 square foot facility in Little Rock, Arkansas and leases space for call center and administrative functions in Las Vegas, Nevada and Orlando, Florida,

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pursuant to leases expiring in 2006 and 2011, respectively. In addition, approximately 33 marketing and sales offices are leased throughout the United States.

Our relocation business has its main corporate operations in three leased buildings in Danbury, Connecticut with lease terms expiring in 2004, 2005, and 2008. There are also three regional offices located in Mission Viejo, California; Chicago, Illinois; and Irving, Texas, which provide operation support services. We own the office in Mission Viejo and the others we operate pursuant to leases that expire in 2004 and 2003 respectively. International offices are located in Hammersmith, Wexham and Swindon, United Kingdom; Melbourne and Brisbane, Australia; Hong Kong; and Singapore pursuant to leases that expire in 2012, 2012, 2013, 2005, 2003, 2002 and 2002, respectively.

Our mortgage business has centralized its operations to one main area occupying various leased offices in Mt. Laurel, New Jersey for a total of approximately 848,000 square feet. The lease terms expire over the next three years. Our mortgage business has recently entered into a lease for a new building expected to be completed in the beginning of 2003. This new building is expected to add 47,500 square feet to, and replace approximately 127,500 square feet at, the Mt. Laurel location. The lease for this new building expires in 2013. Regional sales offices are located in Englewood, Colorado; Jacksonville, Florida and Santa Monica, California, pursuant to leases that expire in 2002, 2005 and 2005, respectively.

Our vehicle services segment owns a 158,000 square foot facility in Virginia Beach, Virginia, which serves as a satellite administrative and reservations facility for WizCom and Avis rental car operations. Our Vehicle Services segment also leases space for its car reservations center in Tulsa, Oklahoma and Fredericton, New Brunswick, Canada pursuant to leases that expire in 2006 and 2009, respectively. In addition, there are approximately 19 leased office locations in the United States.

WizCom operates out of leased space in Garden City, New York.

We lease or have vehicle rental concessions relating to space at 676 locations in the United States and 191 locations outside the United States utilized in connection with our vehicle rental operation. Of those locations, 224 in the United States and 82 outside the United States are airports. Typically, an airport receives a percentage of vehicle rental revenues, with a guaranteed minimum. Because there is a limit to the number of vehicle rental locations in an airport, vehicle rental companies frequently bid for the available locations, usually on the basis of the size of the guaranteed minimums.

PHH Arval leases office space and marketing centers in eight locations in the United States and Canada, with approximately 102,000 square feet in the aggregate. PHH Arval maintains a 200,000 square foot regional/processing office in Hunt Valley, Maryland. In addition, Wright Express leases approximately 187,000 square feet of office space in two domestic locations.

Our insurance/wholesale business leases five domestic office spaces in Brentwood and Franklin, Tennessee with lease terms ending in 2002, 2003, and 2009. In addition, there are ten leased locations internationally that function as sales and administrative office for Cims with the main office located in Portsmouth, UK.

Our leased space in Parsippany, New Jersey also supports our tax preparation business.

Our travel distribution business has three properties, which we own; a 256,000 square foot data center in Greenwood, Colorado; a 32,000 square foot facility in Atlanta, Georgia and a 20,000 square foot facility in Lakeport, California. The travel distribution business also leases 121,000 square feet of office space in Rosemont, Illinois; 256,000 square feet of office space among six locations in the Denver, Colorado area; approximately 20 additional properties within the United States and 50 leased spaces in various countries outside the United States.

Our travel operations have leased locations in Aurora, Colorado; Nashville, Tennessee; Arlington, Texas and Moore, Oklahoma. They occupy a total of approximately 152,000 square feet pursuant to leases expiring in 2006, 2006, 2002 and 2003, respectively.

We believe that such properties are sufficient to meet our present needs and we do not anticipate any difficulty in securing additional space, as needed, on acceptable terms.

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ITEM 3. LEGAL PROCEEDINGS

A. CLASS ACTION AND OTHER LITIGATION AND GOVERNMENT INVESTIGATIONS

After the April 15, 1998 announcement of the discovery of accounting irregularities in the former CUC business units, and prior to the date of this Annual Report on Form 10-K, approximately 70 lawsuits claiming to be class actions, three lawsuits claiming to be brought derivatively on our behalf and several other lawsuits and arbitration proceedings were filed in various courts against us and other defendants.

In re Cendant Corporation Litigation, Master File No. 98-1664 (WHW) (D.N.J.) (the "Securities Action"), is a consolidated class action consisting of over sixty constituent class action lawsuits. The Securities Action is brought on behalf of all persons who acquired securities of the Company and CUC, except our PRIDES securities, between May 31, 1995 and August 28, 1998. Named as defendants are the Company; twenty-eight current and former officers and directors of the Company, CUC and HFS; and Ernst & Young LLP, CUC's former independent accounting firm.

The Amended and Consolidated Class Action Complaint in the Securities Action alleges that, among other things, the lead plaintiffs and members of the class were damaged when they acquired securities of the Company and CUC because, as a result of accounting irregularities, the Company's and CUC's previously issued financial statements were materially false and misleading, and the allegedly false and misleading financial statements caused the prices of the Company's and CUC's securities to be inflated artificially. The Amended and Consolidated Complaint alleges violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the "Securities Act") and Sections 10(b), 14(a), 20(a), and 20A of the Securities Exchange Act of 1934 (the "Exchange Act").

On January 25, 1999, the Company answered the Amended Consolidated Complaint and asserted Cross-Claims against Ernst & Young alleging that Ernst & Young failed to follow professional standards to discover, and recklessly disregarded, the accounting irregularities, and is therefore liable to the Company for damages in unspecified amounts. The Cross-Claims assert claims for breaches of Ernst & Young's audit agreements with the Company, negligence, breaches of fiduciary duty, fraud, and contribution.

On March 26, 1999, Ernst & Young filed Cross-Claims against the Company and certain of the Company's present and former officers and directors, alleging that any failure to discover the accounting irregularities was caused by misrepresentations and omissions made to Ernst & Young in the course of its audits and other reviews of the Company's financial statements. Ernst & Young's Cross-Claims assert claims for breach of contract, fraud, fraudulent inducement, negligent misrepresentation and contribution. Damages in unspecified amounts are sought for the costs to Ernst & Young associated with defending the various shareholder lawsuits and for harm to Ernst & Young's reputation.

On December 7, 1999, we announced that we had reached an agreement to settle the Securities Action for approximately $2.85 billion in cash which was fully funded on May 24, 2002. (See "Litigation Settlements" below and Note 14 to the Consolidated Financial Statements).

Welch & Forbes, Inc. v. Cendant Corp., et al., No. 98-2819 (WHW) (the "PRIDES Action"), is a consolidated class action filed on June 15, 1998 on behalf of purchasers of the Company's PRIDES securities between February 24 and August 28, 1998. Named as defendants are the Company; Cendant Capital I, a statutory business trust formed by the Company to participate in the offering of PRIDES securities; seventeen current and former officers and directors of the Company, CUC and HFS; Ernst & Young; and the underwriters for the PRIDES offering, Merrill Lynch & Co.; Merrill Lynch, Pierce, Fenner & Smith Incorporated; and Chase Securities Inc.

The allegations in the Amended Consolidated Complaint in the PRIDES Action are substantially similar to those in the Securities Action. The PRIDES Action states claims under Sections 11, 12(a)(2) and 15 of the Securities Act and Sections 10(b) and 20(a) of the Exchange Act, and seeks damages in an unspecified amount. In January 2000, we announced a partial settlement of the PRIDES Action. (See Litigation Settlements below and Note 14 to the Consolidated Financial Statements).

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Semerenko v. Cendant Corp., et al., Civ. Action No. 98-5384 (D.N.J.), and P. Schoenfield Asset Management LLC v. Cendant Corp., et al., Civ. Action No. 98-4734 (D.N.J.) (the "ABI Actions"), were initially commenced in October and November of 1998, respectively, on behalf of a putative class of persons who purchased securities of American Bankers Insurance Group, Inc. ("ABI") between January 27, 1998 and October 13, 1998. Named as defendants are the Company, four former CUC officers and directors and Ernst & Young. The complaints in the ABI actions, as amended on February 8, 1999, assert violations of Sections 10(b), 14(e) and 20(a) of the Exchange Act. The plaintiffs allege that they purchased shares of ABI common stock at prices artificially inflated by the accounting irregularities after we announced a cash tender offer for 51% of ABI's outstanding shares of common stock in January 1998. Plaintiffs also allege that after the disclosure of the accounting irregularities, we misstated our intention to complete the tender offer and a second step merger pursuant to which the remaining shares of ABI stock were to be acquired by us. Plaintiffs seek, among other things, unspecified compensatory damages. On April 30, 1999, the United States District Court for the District of New Jersey dismissed the complaints on motions of the defendants. In an opinion dated August 10, 2000, the United States Court of Appeals for the Third Circuit vacated the District Court's judgment and remanded the ABI Actions for further proceedings. On December 15, 2000, we filed a motion to dismiss those claims based on ABI purchases after April 15, 1998, and the District Court granted this motion on May 7, 2001. The plaintiffs subsequently moved for leave to file a Second Amended Complaint to reallege claims based on ABI purchases between April 16, 1998 and October 13, 1998. That motion was denied on August 15, 2002.

B. OTHER LITIGATION

Prior to April 15, 1999, actions and other proceedings making substantially similar allegations to the allegations in the Securities Action were filed by various plaintiffs on their own behalf. Set forth below are summaries of certain of these matters.

Deutch v. Silverman, et al., No. 98-1998 (WHW) (the "Deutch Action"), is a shareholder derivative action, purportedly filed on behalf of, and for the benefit of the Company. The Deutch Action was commenced on April 27, 1998 in the District of New Jersey against certain of the Company's current and former directors and officers; and, as a nominal defendant, the Company. The complaint in the Deutch Action alleges that individual officers and directors of the Company breached their fiduciary duties by selling shares of the Company's stock while in possession of non-public material information concerning the accounting irregularities, and by, among other things, causing and/or allowing the Company to make a series of false and misleading statements regarding the Company's financial condition, earnings and growth; entering into an agreement to acquire ABI and later paying $400 million to ABI in connection with termination of that agreement; re-pricing certain stock options previously granted to certain Company executives; and entering into certain severance and other agreements with Walter Forbes, the Company's former Chairman, under which Mr. Forbes received approximately $51 million from the Company pursuant to an employment agreement we had entered into with him in connection with the merger of HFS and CUC. Damages are sought on behalf of Cendant in unspecified amounts. (See Litigation Settlements below)

Resnik v. Silverman, et. al., No. 18329 (NC) (Del. Ch.) (the "Resnik Action"), is a purported derivative action filed in the Court of Chancery for the State of Delaware on or about September 19, 2000. The Complaint names as defendants those current and former members of Cendant's Board of Directors (the "Director Defendants") who were both named as defendants in, and approved the settlement of, the Securities Action (the "Settlement"). The Complaint alleges that the decision of the Director Defendants to approve the Settlement constituted a breach of their fiduciary duties of loyalty and good faith, and seeks a monetary judgment in an unspecified amount in favor of nominal defendant Cendant. On or about November 16, 2000, Cendant moved to dismiss the Resnik Action on the grounds that any challenge to the Director Defendants' decision to approve the Settlement is not ripe because Cendant has not yet incurred any liability under the Settlement, and may never do so if the District Court's approval of the Settlement is not affirmed on appeal. Also on or about November 16, 2000, the Director Defendants moved to stay the Resnik Action pending resolution of the Deutch Action. The plaintiff in the Resnik Action has not yet responded to either of these motions. (See Litigation Settlements below)

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The SEC and the United States Attorney for the District of New Jersey conducted investigations relating to accounting irregularities. The investigation of the SEC as to Cendant concluded on June 14, 2000 when Cendant consented to an entry of an Order Instituting Public Administration Proceedings in which the SEC found that Cendant had violated certain record-keeping provisions of the federal securities laws, Sections 13(a) and 13(b) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, 13b2-1, and ordered Cendant to cease and desist from committing or causing any violation and any future violation of those provisions.

C. LITIGATION SETTLEMENTS.

Settlement of Common Stock Class Action Litigation

On December 7, 1999, the Company announced that it reached an agreement in principle to settle the Securities Action pending against the Company in the United States District Court for the District of New Jersey. In a settlement agreement executed March 17, 2000, the Company agreed to pay the class members approximately $2.85 billion in cash. On August 15, 2000, the District Court approved the settlement and the plan of allocation of the settlement proceeds and awarded fees and expenses to counsel for the Class. Certain parties who objected to the settlement, the plan of allocation or the award of attorneys' fees and expenses appealed the District Court's orders to the United States Court of Appeals for the Third Circuit. In August 2001, the Third Circuit affirmed the District Court's order approving the settlement and plan of allocation. On January 2, 2002, one party who had objected to the plan of allocation before the District Court and unsuccessfully appealed the District Court's approval of the plan of allocation filed a petition for a writ of certiorari in the United States Supreme Court seeking review of the Third Circuit's decision affirming the approval of the plan of allocation. The Supreme Court denied the petition in an order dated March 18, 2002.

As of December 31, 2001, we had made payments totaling $1.41 billion to a fund established for the benefit of the plaintiffs in this lawsuit. We made an additional payment of $250 million during March 2002 and completed making payments to the fund on May 24, 2002.

Partial Settlement of PRIDES Class Action Litigation

On March 17, 1999, we entered into an agreement to settle the claims of those Class members in the PRIDES Action who purchased their securities on or prior to April 15, 1998 ("eligible persons"). The settlement did not resolve claims based upon purchases of PRIDES after April 16, 1998 and, as of December 31, 2001, other than Welch & Forbes, Inc. v. Cendant Corp., et al., which is previously discussed, no purchasers of PRIDE securities after April 16, 1998 have instituted proceedings against us. Under the settlement, each eligible person was entitled to receive a new security—a Right—for each PRIDES held on April 15, 1998. On June 15, 1999, the United States District Court for the District of New Jersey approved the settlement.

In April 2000, The Chase Manhattan Bank ("Chase"), acting as custodian of three mutual funds that sought a total of 2,020,000 Rights, filed a motion seeking relief from an order of the District Court that rejected the claims filed by Chase on behalf of the mutual funds. On June 7, 2000, the District Court denied Chase's motion, but on December 1, 2000 the Third Circuit vacated that order and remanded the case to the District Court for further proceedings. In August 2001, the District Court issued a decision that again rejected Chase's claims. Chase has appealed again to the Third Circuit. As the Rights expired on February 14, 2001, if Chase's claim is successful it will be satisfied with approximately 1.2 million shares of our CD Common Stock.

Pursuant to the settlement, we distributed 24,107,038 Rights to eligible persons. The Rights provided that we issue two New PRIDES to every person who delivered to us by February 14, 2001 three rights and two original PRIDES. The terms of the New PRIDES were the same as the original PRIDES, except that the conversion rate was revised so that, at the time the Rights were distributed, each of the New PRIDES had a value equal to $17.57 more than each original PRIDES, based upon a generally accepted valuation

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model. We issued approximately 15,485,000 New PRIDES upon exercise of Rights. Under the terms of the New PRIDES, each holder of a New PRIDES was required to purchase 2.3036 shares of our Common Stock on February 16, 2001. In connection with this mandatory purchase, we distributed approximately 14,745,000 more shares of our Common Stock on February 16, 2001 than we otherwise would have under the terms of the original PRIDES.

In connection with the settlement, we recorded a charge of approximately $351 million ($228 million, after tax) in the fourth quarter of 1998. Such charge was reduced by $14 million ($9 million, after tax) and $41 million ($26 million, after tax) during 2001 and 2000, respectively, resulting from adjustments to the original estimate of the number of rights to be issued.

The settlements do not encompass all litigation asserting claims against us associated with the accounting irregularities. We do not believe that it is feasible to predict or determine the final outcome or resolution of these unresolved proceedings. An adverse outcome from such unresolved proceedings could be material with respect to earnings in any given reporting period. However, we do not believe that the impact of such unresolved proceedings should result in a material liability to us in relation to our consolidated financial position or liquidity.

Settlement of the Deutch and Resnick Actions

On July 9, 2002, we entered into a settlement agreement providing for payment to Cendant of $54 million, less such attorneys fees and expenses as may be awarded by the Court, which are not expected to exceed $12 million, by certain director and officer liability insurers in settlement of claims against several current and former directors and officers of Cendant who are named as defendants. The settlement is subject to approval by the District Court, and a hearing on the settlement was held on October 21, 2002.

Other Settlements

On March 6, 2002, we entered into an agreement to settle the claims under a pending arbitration proceeding filed on December 17, 1998, by Janice G. and Robert M. Davidson, former majority shareholders of a California-based computer software firm acquired by the Company in a July 1996 stock merger (the "Davidson Merger"). The Davidsons' Demand for Arbitration asserted claims against Cendant based upon allegations that the value of the Company securities they acquired in the Davidson Merger and through a May 1997 settlement agreement settling all disputes arising out of the Davidson Merger was artificially inflated due to the accounting irregularities. We entered into a Settlement Agreement dated as of March 6, 2002 with Janice G. Davidson, Robert M. Davidson and various trusts of which one or both of them are trustees (collectively, the "Davidsons"). Pursuant to the Settlement Agreement, we issued 2,986,857 shares of our common stock to the Davidsons. Pursuant to the Settlement Agreement, we also reduced the exercise price of (a) options authorizing the Davidsons to buy 1.6 million shares of our common stock from $20.50 per share to $9.8125 per share, which options initially were granted to the Davidsons in connection with a 1997 settlement agreement with CUC International Inc. ("CUC"); and (b) options authorizing each of Janice G. Davidson and Robert M. Davidson to buy 75,000 shares of our common stock from $22.33 per share to $9.8125 per share, which options were granted pursuant to employment agreements entered into in 1996 with CUC in connection with CUC's acquisition of Davidson & Associates, Inc. In the Settlement Agreement, the Davidsons agreed to remain in the class certified in the Securities Action and to pay to us an amount equal to the sum they receive in settlement of the Securities Action. We currently believe that the amount to be distributed to the Davidsons in connection with settlement of the Securities Action will be approximately $15 million. In connection with the settlement, we recorded a charge of approximately $48 million ($31 million, after tax) in the fourth quarter of 2001.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Price on Common Stock

Our common stock is listed on the New York Stock Exchange ("NYSE") under the symbol "CD". At March 15, 2002 the number of stockholders of record was approximately 10,093. The following table sets forth the quarterly high and low sales prices per share of CD common stock as reported by the NYSE for 2001 and 2000.

2001
   High
   Low
First Quarter   $ 14.760   $ 9.625
Second Quarter     20.370     13.890
Third Quarter     21.530     11.030
Fourth Quarter     19.810     12.040
2000
   High
   Low
First Quarter   $ 24.313   $ 16.188
Second Quarter     18.750     12.156
Third Quarter     14.875     10.626
Fourth Quarter     12.563     8.500

On March 15, 2002, the last sale price of our CD common stock on the NYSE was $18.86 per share.

Dividend Policy

We expect to retain our earnings for the development and expansion of our businesses and the repayment of indebtedness and do not anticipate paying dividends on common stock in the foreseeable future.

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ITEM 6. SELECTED FINANCIAL DATA

 
   At or For the Year Ended
December 31,
  
 
   2001
   2000
   1999
   1998
   1997
  
 
   (In millions, except per share data)

  
Results of Operations                                
Net revenues   $ 8,613   $ 4,320   $ 5,755   $ 6,364   $ 5,429  
   
 
 
 
 
 
Income (loss) from continuing operations   $ 342   $ 569   $ (307 ) $ 114   $ 66  
Income (loss) from discontinued operations, net of tax     81     91     252     426     (26 )
Extraordinary (loss) gain, net of tax     —     (2 )   —     —     26  
Cumulative effect of accounting changes, net of tax     (38 )   (56 )   —     —     (283 )
   
 
 
 
 
 
Net income (loss)   $ 385   $ 602   $ (55 ) $ 540   $ (217 )
   
 
 
 
 
 
Per Share Data                                
CD Common Stock                                
Income (loss) from continuing operations:                                
  Basic   $ 0.37   $ 0.79   $ (0.41 ) $ 0.13   $ 0.08  
  Diluted     0.36     0.77     (0.41 )   0.13     0.08  
Cumulative effect of accounting changes:                                
  Basic   $ (0.05 ) $ (0.08 ) $ —   $ —   $ (0.35 )
  Diluted     (0.04 )   (0.08 )   —     —     (0.35 )
Net income (loss):                                
  Basic   $ 0.42   $ 0.84   $ (0.07 ) $ 0.64   $ (0.27 )
  Diluted     0.41     0.81     (0.07 )   0.61     (0.27 )
Financial Position                                
Total assets   $ 33,544   $ 15,153   $ 15,412   $ 20,230   $ 14,073  
Total long-term debt, excluding Upper DECS     6,132     1,948     2,845     3,363     1,246  
Upper DECS     863     —     —     —     —  
Assets under management and mortgage
programs		     11,868     2,861     2,726     7,512     6,444  
Debt under management and mortgage
programs		     9,844     2,040     2,314     6,897     5,603  
Mandatorily redeemable preferred interest in a subsidiary     375     375     —     —     —  
Mandatorily redeemable preferred securities issued by subsidiary holding solely senior debentures issued by the Company     —     1,683     1,478     1,472     —  
Stockholders' equity     7,068     2,774     2,206     4,836     3,921  

See Notes 4 and 7 to the Consolidated Financial Statements for a detailed discussion of net gains (losses) on dispositions of businesses and impairment of investments and other charges recorded for the years ended December 31, 2001, 2000 and 1999.

During 1998, we recorded restructuring and other unusual charges of $838 million ($545 million, after tax or $0.62 per diluted share) primarily associated with the termination of a proposed acquisition and the PRIDES litigation settlement.

During 1997, we recorded restructuring and other unusual charges of $704 million ($505 million, after tax or $0.58 per diluted share) primarily associated with the merger of HFS Incorporated and CUC International Inc. and the merger with PHH Corporation in April 1997.

Income (loss) from discontinued operations, net of tax includes the after tax results of discontinued operations and the gain on disposal of discontinued operations.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our Consolidated Financial Statements and accompanying Notes thereto included elsewhere herein. Unless otherwise noted, all dollar amounts are in millions and those relating to our results of operations are presented before taxes.

We are one of the foremost providers of travel and real estate services in the world. Our businesses provide a wide range of consumer and business services and are intended to complement one another and create cross-marketing opportunities both within and among our following five business segments. Our Real Estate Services segment franchises our three real estate brands, provides home buyers with mortgages and facilitates employee relocations; our Hospitality segment franchises our nine lodging brands, facilitates the sale and exchange of vacation ownership intervals and markets vacation rental properties in Europe; our Vehicle Services segment operates and franchises the Avis car rental brand, provides fleet management and fuel card services and operates car parking facilities in the United Kingdom; our Travel Distribution segment provides global distribution, computer reservation and travel agency services and our Financial Services segment provides enhancement products, insurance-based products and loyalty solutions, franchises tax preparation services and provides a variety of membership programs.

We seek organic growth augmented by the acquisition and integration of complementary businesses and routinely review and evaluate our portfolio of existing businesses to determine if they continue to meet our current objectives. As a result, we are currently engaged in a number of preliminary discussions concerning possible acquisitions, divestitures, joint ventures and related corporate transactions. We intend to continually explore and conduct discussions with regard to such transactions.

On April 30, 2002, we acquired approximately 90% of the outstanding common stock of Trendwest Resorts, Inc. for $849 million, including $20 million of estimated transaction costs and expenses and $25 million related to the conversion of Trendwest employee stock options into CD common stock options. The acquisition consideration was funded through a tax-free exchange of approximately 42.6 million shares of CD common stock then-valued at $804 million. As part of the acquisition, we assumed $89 million of Trendwest debt, which was subsequently repaid. We purchased the remaining 10% of the outstanding Trendwest shares through a short form merger on June 3, 2002 for approximately $87 million, which was funded through a tax-free exchange of approximately 4.8 million shares of CD common stock then-valued at $87 million. Trendwest markets, sells and finances vacation ownership interests and is now part of our Hospitality segment. Management believes that this acquisition will provide us with significant geographic diversification and global presence in the timeshare industry.

On April 17, 2002, we acquired all of the outstanding common stock of NRT, the largest residential real estate brokerage firm in the United States, for a total purchase price of approximately $230 million. The purchase was effected through issuing approximately 11.5 million shares of our common stock. As part of the acquisition, we also assumed approximately $320 million of NRT debt, which was subsequently repaid. On April 17, 2002, we also acquired all of the outstanding common stock of Arvida Realty Services, the largest residential real estate brokerage firm in Florida, for approximately $160 million in cash. Management believes that NRT and Arvida as wholly-owned subsidiaries will be a more efficient acquisition vehicle, experience greater opportunities to enhance mortgage and title penetration and achieve greater financial and operational synergies.

On March 1, 2002, we entered into a venture with Marriott International, Inc. whereby we contributed our domestic Days Inn trademark and an amended license agreement relating to such trademark and Marriott contributed the Ramada trademark and the amended master license agreements relating to such trademark. We received a 50.0001% interest in the venture and Marriott received 49.9999% interest in the venture. Pursuant to the terms of the venture, we will share income from the venture with Marriott on a substantially equal basis. We currently expect the venture to redeem Marriott's interest for approximately $200 million, the projected fair market value, in March 2004. We expect to loan the venture such amount in March 2004 to enable the venture to meet its obligations to Marriott. Upon redemption, we will own 100% of the venture. Under the terms of the venture agreement, we control the venture and, therefore, will

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consolidate the venture into our results of operations, financial position and cash flows beginning on March 1, 2002. The venture has no third party liabilities.

On May 22, 2002, we sold our car parking facility business, NCP, a wholly-owned subsidiary within our Vehicle Services segment, for approximately $1.2 billion in cash. We recorded an after-tax loss of $256 million in second quarter 2002 on the sale of this business principally related to foreign currency translation, as U.S. dollar strengthened significantly against the U.K. pound since Cendant's acquisition of NCP in 1998. NCP operated off-street commercial parking facilities and managed on-street parking and related operations on behalf of town and city administration in England. The account balances and activities of NCP have been segregated and reported as a discontinued operation for all periods presented.

During 2001, we acquired several businesses, which substantially contributed to our revenue growth and overall improvement in the cash flows we generate from operations. Avis Group Holdings, Inc., one of the world's leading service and information providers for comprehensive automotive transportation and vehicle management solutions, was acquired on March 1, 2001 for approximately $994 million primarily in cash and Fairfield Resorts, Inc. (formerly, Fairfield Communities, Inc.), one of the largest vacation ownership companies in the United States, was acquired on April 2, 2001 for approximately $760 million primarily in cash. In addition, on October 1, 2001 and October 5, 2001, we acquired Galileo International, Inc., a leading provider of electronic global distribution services for the travel industry, for approximately $1.9 billion (approximately $1.5 billion of which was funded through the issuance of approximately 117 million shares of CD common stock with the remainder being funded in cash) and Cheap Tickets, Inc., a leading seller of discount leisure travel products, for approximately $313 million primarily in cash, respectively. In connection with these acquisitions, we acquired net assets (assets acquired less liabilities assumed) of approximately $2.1 billion (including the assumption of approximately $11.8 billion of liabilities).

During 2001, we also completed the sale of our real estate Internet portal, move.com, along with certain ancillary businesses to Homestore.com, Inc. in exchange for approximately 21 million shares of Homestore common stock then-valued at $718 million. As of December 31, 2001, we held 18.1 million shares of Homestore, for which the carrying amounts had been written down to zero during the fourth quarter of 2001 (see discussion in "Results of Consolidated Operations 2001 vs. 2000—Net Loss on Dispositions of Businesses and Impairment of Investments"). The sale permitted us to align the company with the market leader in on-line real estate content, as well as real estate broker technology. We also outsourced our individual membership and loyalty business to Trilegiant Corporation during 2001 (see discussion in "Liquidity and Capital Resources").

The consolidated results of operations of the businesses we acquired have been included in our consolidated results of operations since their respective dates of acquisition and the consolidated results of operations of businesses we disposed of have only been included in our consolidated results of operations through their respective dates of disposition.

Critical Accounting Policies

In presenting our financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions that affect the amounts reported therein. Certain of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. We continue to evaluate these estimates and assumptions. However, events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significantly unfavorable change to current conditions, there will likely be a material adverse impact to our financial statements. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. We have reviewed the accounting policies of all our businesses to identify those policies where we are required to make particularly subjective and complex judgments that affect these estimates and assumptions.

The majority of our businesses operate in environments where we are paid a fee for a service performed, and therefore, the majority of our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex. Following is a description of those

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accounting policies which we believe require subjective and complex judgments and could potentially affect reported results.

Mortgage Servicing Rights.    A mortgage servicing right is the right to receive a portion of the interest coupon and fees collected from the mortgagor for performing specified servicing activities. The value of mortgage servicing rights is estimated based on expected future cash flows considering market prepayment estimates, historical prepayment rates, portfolio characteristics, interest rates and other economic factors. We estimate future prepayment rates based on current interest rate levels, other economic conditions and market forecasts, as well as relevant characteristics of the servicing portfolio, such as loan types, interest rate stratification and recent prepayment experience. To the extent that fair value is less than carrying value, we would consider the portfolio to have been impaired and record a related charge. During 2001, we determined that impairment had occurred due to interest rate reductions, which results in a greater level of mortgage prepayments than expected. Accordingly, we recorded net aggregate write-downs of $144 million. Approximately $50 million of this write-down was related to changes in estimates of interest rates in the ordinary course of business, which were the direct result of the continued lowering of interest rates that occurred during 2001 prior to the September 11th terrorist attacks. These rate reductions caused a decline in the value of our mortgage servicing rights portfolio, hence requiring the write-down. The remaining $94 million of aggregate write-down was directly related to interest rate reductions subsequent to the September 11th terrorist attacks, whereby the Federal Reserve reduced the Federal Funds rate by 50 basis points twice within a 14-day period following the terrorist attacks and the U.S. Treasury Department announced thereafter the discontinuance of new sales of the 30-year treasury bond. The reductions in the Federal Funds rate which occurred between September 17th and December 11th of 2001, resulted in a 50% reduction to such rate, which has never occurred over such a short period in the history of the Federal Funds rate. The series of these actions resulted in a reduction of mortgage rates to a 30-year low during fourth quarter 2001, according to the Freddie Mac Home Loan Index. Such reductions resulted in increases to our forecasted loan prepayment rates, which negatively impacted the carrying value of the mortgage servicing rights asset, hence requiring a write-down of $94 million. Further reductions in interest rates would have caused us to use different assumptions in the valuation of our mortgage servicing rights resulting in additional corresponding write-downs through a valuation allowance. We use derivatives to mitigate the prepayment risk associated with mortgage servicing rights. Such derivatives tend to increase in value as interest rates decline and conversely decline in value as interest rates increase. Additionally, as interest rates are reduced, we have historically experienced a greater level of refinancings, which partially mitigates the impact of the decline in the valuation of our mortgage servicing rights portfolio.

We continue to evaluate these estimates and assumptions and believe that these assumptions, which included estimates of future interest rate levels and prepayment rates, were appropriate. Changes in fair value of the mortgage servicing rights based upon variations in the assumptions (e.g. future interest rate levels, prepayment speeds) cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Changes in one assumption may result in changes in another, which may magnify or counteract the sensitivities. The carrying value of our Mortgage Servicing rights was approximately $2.0 billion at December 31, 2001 after recording the net aggregate write-down of $144 million.

Securitizations.    We sell a significant portion of our residential mortgage loans, relocation receivables and timeshare receivables into securitization entities as part of our financing strategy. We retain the servicing rights and, in some instances, subordinated residual interests in the mortgage loans and relocation and timeshare receivables. The investors have no recourse to our other assets for failure of debtors to pay when due. Gains or losses relating to the assets sold are allocated between such assets and the retained interests based on their relative fair values at the date of transfer. We estimate fair value of retained interests based upon the present value of expected future cash flows. The value of the retained interests is subject to the prepayment risks, expected credit losses and interest rate risks of the transferred financial assets. The effects of any adverse changes in the fair value of our retained interests are detailed in Note 24—Transfers and Servicing of Financial Assets to the Consolidated Financial Statements.

We continue to evaluate these estimates and assumptions and believe that these assumptions, which included estimates of future cash flows and expected credit losses were appropriate. Changes in fair value

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of the retained interests based upon variations in the assumptions (e.g. prepayment risks, expected credit losses and interest rate risks) cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Changes in one assumption may result in changes in another, which may magnify or counteract the sensitivities. The fair value of the retained interest was approximately $400 million at December 31, 2001. (Refer to Note 24—Transfers and Servicing of Financial Assets)

Financial Instruments.    We use derivative instruments as part of our overall strategy to manage and reduce the interest rate risk primarily related to our mortgage-related assets. Effective January 1, 2001, we account for our derivatives at fair value on the balance sheet in accordance with SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities." The application of SFAS No. 133 is complex, as evidenced by amendments and significant interpretations to the original standard, which continue to evolve. When applying SFAS No. 133, we must make an estimate of fair value for each of our derivatives and other financial instruments. Most of the derivatives and other financial instruments we use are not exchange traded. Therefore, we estimate fair values using dealer quotes, present value cash flow models, options-pricing models or other conventional valuation methods, as appropriate. These estimates involve significant judgments and estimates in the absence of quoted market prices. The amounts of such estimates are disclosed in Note 23—Financial Instruments to the Consolidated Financial Statements. The key assumptions used in these valuations are estimates of future interest rate levels based on interest rate yield curves, prepayment and volatility factors, and an estimation around the timing of future cash flows. The use of different assumptions may have a material effect on the estimated fair value amounts recorded in the financial statements. In addition, hedge accounting requires that at the beginning of each hedge period, we justify an expectation that the relationship between the changes in fair value of derivatives designated as hedges compared to changes in the fair value of the underlying hedged items be highly effective. This effectiveness assessment involves estimation of changes in fair value resulting from changes in interest rates and corresponding changes in prepayment levels, as well as the probability of the occurrence of transactions for cash flow hedges. Use of different assumptions and changing market conditions may impact the results of the effectiveness assessment and ultimately the timing of when changes in derivative fair values and the underlying hedged items are recorded in earnings.

We continue to evaluate these estimates and assumptions and believe that these assumptions, which included an estimate of fair value (including estimates of future interest rate levels, prepayment and volatility factors and an estimate around the timing of future cash flows) were appropriate. See Item 7a. "Quantitative and Qualitative Disclosures about Market Risk" for a discussion of the effect of hypothetical changes to the assumptions.

Goodwill and Other Intangible Assets.    We have reviewed the carrying value of all our goodwill and other intangible assets in connection with the implementation of SFAS No. 142, "Goodwill and Other Intangible Assets," by comparing such amounts to their fair values. We determined that the carrying amounts of all our goodwill and other intangible assets did not exceed their respective fair values. Accordingly, the initial implementation of this standard will not impact earnings during 2002. We are required to perform this comparison at least annually, or more frequently if circumstances indicate possible impairment. When determining fair value, we utilize various assumptions, including projections of future cash flows. A change in these underlying assumptions will cause a change in the results of the tests and, as such, could cause fair value to be less than the carrying amounts. In such event, we would then be required to record a corresponding charge, which would impact earnings.

We continue to evaluate these estimates and assumptions and believe that these assumptions, which included an estimate of future cash flows based upon the anticipated performance of the underlying business units, were appropriate. We provide a wide range of consumer and business services and, as a result, our goodwill and other intangible assets are reflected among many diverse reporting units. Accordingly, it is difficult to quantify the impact of an adverse change in financial results and related cash flows as such change may be isolated to a small number of our reporting units or spread across our entire organization. In either case, the magnitude of an impairment to our goodwill such other intangibles, if any, cannot be extrapolated. However, our businesses are concentrated in a few industries (e.g. Travel, Real Estate) and, as such, an adverse change to any of these industries will impact our consolidated results and

39

may result in impairment of our goodwill and other intangibles. The carrying value of our goodwill and other intangibles (including franchise agreements) was approximately $10 billion at December 31, 2001.

RESULTS OF CONSOLIDATED OPERATIONS—2001 vs. 2000

Our consolidated results from continuing operations comprised the following:

 
   2001
   2000
   Change
  
Net revenues   $ 8,613   $ 4,320   $ 4,293  
   
 
 
 
Expenses, excluding other charges and non-vehicle interest, net     7,003     3,056     3,947  
Other charges     671     111     560  
Non-vehicle interest, net     252     152     100  
   
 
 
 
Total expenses     7,926     3,319     4,607  
   
 
 
 
Gains on disposition of businesses     (443 )   (37 )   (406 )
Losses on disposition of businesses     26     45     (19 )
Impairment of investments     441     —     441  
   
 
 
 
Income before income taxes, minority interest and equity in Homestore.com     663     993     (330 )
Provision for income taxes     220     341     (121 )
Minority interest, net of tax     24     83     (59 )
Losses related to equity in Homestore.com, net of tax     77     —     77  
   
 
 
 
Income from continuing operations   $ 342   $ 569   $ (227 )
   
 
 
 

Net revenues increased primarily as a result of the impact of acquired businesses (Avis, Fairfield, Galileo and Cheap Tickets), which resulted in an additional $4.2 billion in net revenues, as well as substantial growth in mortgage refinancing activity and mortgage purchase volume, which resulted in an additional $367 million in net revenues. A detailed discussion of revenue trends is included in "Results of Reportable Segments—2001 vs. 2000." Total expenses also increased primarily as a result of the impact of acquired businesses, which resulted in an additional $4.0 billion in expenses, as well as other charges of $560 million (discussed below) and an increase in net non-vehicle interest expense of $100 million, which primarily resulted from interest expense accrued on our stockholder litigation settlement liability.

Our overall effective tax rate was 33.2% and 34.3% for 2001 and 2000, respectively. The effective rate for 2001 was lower, as the benefit from the recognition of foreign tax credits exceeded the negative impact of acquisitions. Minority interest, net of tax, decreased by $59 million due to the maturity of the Feline PRIDES in February 2001, at which time holders used the interest bearing trust preferred security to satisfy their obligation to purchase CD common stock. Additionally, we recorded after-tax charges of $77 million related to our equity ownership in Homestore, which was received in connection with the sale of move.com and certain ancillary businesses to Homestore in February 2001.

As a result of the above-mentioned items, income from continuing operations decreased $227 million, or 40%, during 2001.

Other Charges

Restructuring and Other Unusual Charges

Restructuring Costs.    During 2001 and 2000, we incurred restructuring charges of $110 million and $60 million, respectively. The 2001 charges were primarily recorded as a result of actions taken in response to the September 11th terrorist attacks, while the 2000 charges primarily related to the consolidation of business operations and rationalization of certain existing processes.

As a result of changes in business and consumer behavior following the September 11th terrorist attacks, we formally committed to various strategic initiatives during fourth quarter 2001, which were generally aimed at aligning cost structures in our underlying businesses in response to anticipated levels of volume. The major areas of cost reductions include call center operations, field locations for car rental operations and back office support functions. To achieve these reductions, we will redirect call traffic, consolidate processes, reduce staffing levels and close offices. Accordingly, we incurred restructuring charges of $110 million, of which $21 million were non-cash, ($40 million, $30 million, $22 million, $8 million, $7 million and $3 million of charges were recorded within Hospitality, Real Estate Services, Corporate and Other, Financial Services, Vehicle Services and Travel Distribution, respectively). We anticipate that these

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initiatives will be completed by the end of fourth quarter 2002. The initiatives are anticipated to increase pre-tax income by approximately $95 million to $100 million annually, commencing in first quarter 2002. The initial recognition of the charge and the corresponding utilization from inception are summarized by category as follows:

 
   2001
Restructuring
Charge
   Cash
Payments
   Other
Reductions
   Balance at
December 31,
2001
Personnel related   $ 68   $ 11   $ 5   $ 52
Asset impairments and contract terminations     17     3     10     4
Facility related     25     1     —     24
   
 
 
 
Total   $ 110   $ 15   $ 15   $ 80
   
 
 
 

Personnel related costs primarily include severance resulting from the rightsizing of certain businesses and corporate functions. As of December 31, 2001, we formally communicated the termination of employment to approximately 3,000 employees, representing a wide range of employee groups, and approximately 2,100 employees were terminated. We anticipate the majority of the personnel related costs will be paid during first quarter 2002. All other costs were incurred primarily in connection with facility closures and lease obligations resulting from the consolidation of our operations. Cash payments made during 2001 were funded from operations and we anticipate funding remaining cash requirements from operations.

During first quarter 2000, we incurred restructuring charges of $60 million in connection with various strategic initiatives (such liability was reduced by $4 million during 2001 as a result of a change in the original estimate of costs to be incurred). These initiatives were generally aimed at improving the overall level of organizational efficiency, consolidating and rationalizing existing processes, and reducing cost structures in our underlying businesses. The initiatives primarily affected our Hospitality and Financial Services segments and were completed by the end of first quarter 2001. The initial recognition of the charge and the corresponding utilization from inception are summarized by category as follows:

 
   2000
Restructuring
Charge
   Cash
Payments
   Other
Reductions
   Balance at
December 31,
2000
   Cash
Payments
   Other
Reductions
   Balance at
December 31,
2001
Personnel related   $ 25   $ 18   $ 1   $ 6   $ 4   $ 2   $ —
Asset impairments and contract terminations     26     1     25     —     —     —     —
Facility related     9     2     1     6     4     2     —
   
 
 
 
 
 
 
Total   $ 60   $ 21   $ 27   $ 12   $ 8   $ 4   $ —
   
 
 
 
 
 
 

Personnel related costs primarily included severance resulting from the consolidation of our operations and certain corporate functions. We formally communicated the termination of employment to approximately 970 employees, representing a wide range of employee groups, all of whom were terminated by March 31, 2001. Asset impairments and contract terminations were incurred in connection with the exit of our timeshare software development business. Facility related costs consisted of facility closures and lease obligations also resulting from the consolidation of our operations. All cash payments were funded from operations.

Other Unusual Charges.    During 2001 and 2000, we incurred unusual charges of $273 million and $49 million, respectively. The 2001 charges primarily consisted of (i) $95 million related to the funding of an irrevocable contribution to the Real Estate Technology Trust, an independent technology trust responsible for providing technology initiatives for the benefit of certain of our current and future real estate franchisees, (ii) $85 million related to the funding of Trip Network, Inc., formerly, Travel Portal, Inc., (see discussion in "Liquidity and Capital Resources"), (iii) $41 million related to the rationalization of the Avis fleet in response to the September 11th terrorist attacks as a result of anticipated reduction in the volume of business (including the reduction in the fleet, as well as corresponding personnel reductions), (iv) $8 million related to the abandonment of financial software projects due to our decision to forego their implementation as a result of anticipated reduction in the volume of business in our rental car, travel distribution and timeshare businesses resulting from the September 11th terrorist attacks and (v) $7 million related to a charitable contribution of $1.5 million in cash and stock in a publicly traded company valued at $5.5 million (based upon its then-current fair value), to the Cendant Charitable Foundation, which we established in September

41

2000 to serve as a vehicle for making charitable contributions to worthy charitable causes that are of particular interest to our employees, customers and franchisees. The foundation is controlled by its Board of Directors, which is currently comprised of eight persons, all of whom are either our employees or employees of our affiliates. Although we may make contributions to the foundation from time to time, we are not under any obligation or otherwise committed to do so. No contributions were made to the foundation in 2000.

The 2000 charges primarily consisted of (i) $21 million of costs to fund an irrevocable contribution to the Hospitality Technology Trust, an independent technology trust responsible for completing the transition of our lodging franchisees to a common property management system, (ii) $11 million of executive termination costs, (iii) $7 million of costs primarily related to the abandonment of certain computer system applications, (iv) $3 million of costs related to stock option contract modifications and (v) $3 million of costs related to the postponement of the initial public offering of Move.com common stock.

The Real Estate Technology Trust and Hospitality Technology Trust are governed by trustees, none of whom are employees or affiliates of Cendant. Furthermore, we have no on-going requirement to fund these independent trusts.

Acquisition and Integration Related Costs

During 2001, we incurred acquisition and integration charges totaling $112 million. Such charges primarily represented (i) $78 million in connection with the outsourcing of our data operations, including Galileo's global distribution system and desktop support and other related services to a third party provider, (ii) $23 million in connection with the integration of our existing travel agency businesses with Galileo's computerized reservations system and (iii) $4 million of severance costs in connection with the rationalization of duplicative functions.

Mortgage Servicing Rights Impairment

As previously discussed, during fourth quarter 2001, we determined that an impairment of our mortgage servicing rights portfolio had occurred due to unprecedented interest rate reductions subsequent to the September 11th terrorist attacks that we deemed not to be in the ordinary course of business as the Federal Reserve reduced the Federal Funds Rate by 50 basis points twice within a 14-day period following the terrorist attacks. Additionally, during fourth quarter 2001, the U.S. Treasury Department announced the discontinuance of new sales of the 30-year treasury bond. The reductions in the Federal Funds Rate, which occurred between September 17th and December 11th of 2001, resulted in a 50% reduction to such rate which has never occurred over such a short period in the history of the Federal Funds Rate. The series of these actions resulted in a reduction of mortgage rates to a 30-year low during fourth quarter 2001, according to the Freddie Mac Home Loan Index. Such reductions resulted in increases to our forecasted loan prepayment rates, which negatively impacted the carrying value of the mortgage servicing rights assets. Accordingly, we recorded an impairment charge of $94 million to reduce the carrying value of our mortgage servicing rights portfolio to approximately $2.0 billion as of December 31, 2001.

Litigation Settlement and Related Costs

During 2001 and 2000, we recorded $86 million and $2 million, respectively, of litigation settlement and related charges net of credits discussed below. The 2001 charges are comprised of $67 million related to the settlement of litigation (outside of the principal common stockholder litigation) resulting from previously discovered accounting irregularities in the former business units of CUC International, Inc. and $33 million related to investigations into those accounting irregularities. Such charges were partially offset by a credit of $14 million related to an adjustment to the PRIDES class action litigation settlement charge we recorded in 1998 (see Note 18—Mandatorily Redeemable Trust Preferred Securities Issued by Subsidiary Holding Solely Senior Debentures Issued by the Company for a detailed discussion regarding the PRIDES settlement). The 2000 charges are comprised of $23 million related to investigations into the previously discovered accounting irregularities in the former business units of CUC and $20 million related to the settlement of litigation resulting from those accounting irregularities (outside of the principal common stockholder litigation). Such charges were partially offset by a credit of $41 million also related to an adjustment to the PRIDES class action litigation settlement charge we recorded in 1998.

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Net Loss on Dispositions of Businesses and Impairment of Investments

During 2001, we recorded net losses on dispositions of businesses and impairment of investments of $24 million. Such amount comprises (i) losses of $19 million related to the sale of several non-strategic businesses, (ii) a gain of $436 million recorded on the sale of our real estate Internet portal and certain ancillary businesses to Homestore and (iii) impairment losses of $441 million recorded during fourth quarter 2001 as a result of an other-than-temporary decline in the value of our investment in Homestore ($407 million) and a lodging and an Internet-related investment ($34 million). At December 31, 2001, our investment in Homestore was recorded at zero and we had no future obligations relating to this investment.

During 2000, we recorded net losses on dispositions of businesses and impairment of investments of $8 million. Such amount comprises (i) losses of $43 million related to the sale of several non-strategic businesses and (ii) the recognition of $35 million of the deferred gain that resulted from the 1999 sale of our fleet management business (see Note 4—Dispositions of Businesses and Impairment of Investments).

RESULTS OF REPORTABLE SEGMENTS—2001 vs. 2000

Our discussion of each of our segment's operating results focuses on Adjusted EBITDA, which is defined as earnings before non-vehicle interest, income taxes, non-vehicle depreciation and amortization, minority interest and equity in Homestore.com, all of which are not measured in assessing segment performance or are not segment specific. In addition, Adjusted EBITDA also excludes items, which are of a non-recurring or unusual nature and are also not measured in assessing segment performance or are not segment specific. For specific details regarding the nature of excluded items, see the sections above entitled "Other Charges" and "Net Loss on Dispositions of Businesses and Impairment of Investments." Our management believes such discussions are the most informative representation of how management evaluates performance. However, our presentation of Adjusted EBITDA may not be comparable with similar measures used by other companies.

In connection with the acquisitions of Avis and Galileo and the disposition of our real estate Internet portal, we realigned the operations and management of certain of our businesses during 2001. Accordingly, our segment reporting structure now encompasses the following five reportable segments: Real Estate Services, Hospitality, Vehicle Services, Travel Distribution and Financial Services. The periods presented herein have been reclassified to reflect this change in our segment reporting structure.

 
   Revenues
   Adjusted EBITDA
  
 
   2001
   2000
   % Change
  2001(a)
   2000(b)
   % Change
  
Real Estate Services(c)   $ 1,859   $ 1,461   27 % $ 939   $ 752   25 %
Hospitality(d)     1,522     918   66     513     385   33  
Travel Distribution(f)     437     99   *     108     10   *  
Vehicle Services(e)     3,322     230   *     290     169   *  
Financial Services     1,402     1,380   2     310     373   (17 )
   
 
     
 
     
Total Reportable Segments     8,542     4,088         2,160     1,689      
Corporate and Other(g)     71     232   *     (73 )   (104 ) *  
   
 
     
 
     
Total Company   $ 8,613   $ 4,320       $ 2,087   $ 1,585      
   
 
     
 
     
*
Not meaningful.
(a)
Excludes charges of $192 million primarily in connection with restructuring and other initiatives undertaken as a result of the September 11th terrorist attacks ($31 million, $51 million, $58 million, $7 million, $10 million and $35 million of charges were recorded within Real Estate Services, Hospitality, Vehicle Services, Travel Distribution, Financial Services and Corporate and Other, respectively).
(b)
Excludes charges of $109 million in connection with restructuring and other initiatives ($2 million, $63 million, $31 million and $13 million of charges were recorded within Real Estate Services, Hospitality, Financial Services and Corporate and Other, respectively).
(c)
Adjusted EBITDA for 2001 excludes charges of $95 million related to the funding of an irrevocable contribution to an independent technology trust responsible for providing technology initiatives for the benefit of certain of our current and future franchisees and $94 million related to the impairment of our mortgage servicing rights portfolio.

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(d)
Adjusted EBITDA for 2001 excludes a charge of $11 million related to the impairment of certain of our investments in part due to the September 11th terrorist attacks. Adjusted EBITDA for 2000 excludes $12 million of losses related to the dispositions of businesses.
(e)
Adjusted EBITDA for 2001 excludes charges of $5 million related to the acquisition and integration of Avis and $2 million related to the impairment of certain of our investments due to the September 11th terrorist attacks.
(f)
Adjusted EBITDA for 2001 excludes charges of $23 million related to the acquisition and integration of Galileo and Cheap Tickets.
(g)
Represents the results of operations of our non-strategic businesses, unallocated corporate overhead and the elimination of transactions between segments. Adjusted EBITDA for 2001 excludes charges of (i) $427 million primarily related to the impairment of our investment in Homestore, (ii) $86 million for net litigation settlement and related costs, (iii) $85 million related to the funding of Trip Network., (iv) $80 million related to the outsourcing of our information technology operations to IBM in connection with the acquisition of Galileo, (v) $19 million related the dispositions of certain non-strategic businesses in 1999, (vi) $7 million related to a non-cash contribution to the Cendant Charitable Foundation and (vii) $4 million related to the acquisition and integration of Avis. Such charges were partially offset by a gain of $436 million primarily related to the sale of our real estate Internet portal, move.com. Adjusted EBITDA for 2000 excludes a gain of $35 million, which represents the recognition of a portion of our previously recorded deferred gain from the sale of our former fleet business due to the disposition of VMS Europe by Avis in August 2000. Such amounts were partially offset by $31 million of losses related to the disposition of certain non-strategic businesses and $2 million of net litigation settlement and related costs.

Real Estate Services

Revenues and Adjusted EBITDA increased $398 million (27%) and $187 million (25%), respectively. The increase in operating results was primarily driven by substantial growth in mortgage loans sold due to increased refinancing activity and purchase volume. Higher franchise fees from our Century 21, Coldwell Banker and ERA franchise brands and increases in relocation services also contributed to the favorable operating results. Offsetting the revenue increases, operating and administrative expenses within this segment increased $208 million primarily to support the higher volume of mortgage originations and related servicing activities.

Collectively, mortgage loans sold increased $14.8 billion (70%) to $35.9 billion, generating incremental revenues of $367 million, a 117% increase. Closed mortgage loans increased $22.4 billion (101%) to $44.5 billion in 2001. Such growth consisted of a $17.6 billion increase (approximately ten-fold) in refinancings and a $4.8 billion increase (24%) in purchase mortgage closings. A significant portion of mortgage loans closed in any quarter will generate revenues in future periods as those loans closed are packaged and sold and revenue is recognized upon the sale of the loan, which is typically 45 to 60 days after closing. Beginning in January 2001, Merrill Lynch outsourced its mortgage loan origination and servicing operations to us under a 10-year agreement, which accounted for $7.4 billion (17%) of our mortgage closings in 2001. Consideration paid to Merrill Lynch for this outsourcing agreement was not material. Partially offsetting record production revenues was a $26 million (24%) decline in net loan servicing revenue. The average servicing portfolio grew $28 billion (45%) resulting from the high volume of mortgage loan originations and our purchase of rights to service $11 billion of existing mortgage loans owned by Merrill Lynch; however, accelerated servicing amortization expenses during 2001, due primarily to refinancing activity, more than offset the increase in recurring servicing fees from the portfolio growth.

Franchise fees from our real estate franchise brands also contributed to revenue and Adjusted EBITDA growth. Royalties and other franchise fees increased $41 million (8%), despite only modest industry-wide growth and a year-over-year industry decline in California, principally due to a 4% increase in the average price of homes sold and a $16 million fee received from NRT in connection with the termination of a franchise agreement under which NRT operated our Century 21 real estate brand. Service-based fees from relocation activities also contributed to the increase in revenues and Adjusted EBITDA principally due to a $14 million increase in referral fees resulting from increased volume, which included the execution of new service contracts. In addition, asset-based relocation revenues decreased by $3 million, which was comprised of a $10 million revenue decline due to lower corporate and government homesale closings, partially offset by a $7 million increase in net interest income from relocation operations due to reduced debt levels in 2001.

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Hospitality

Revenues and Adjusted EBITDA increased $604 million (66%) and $128 million (33%), respectively. While our April 2001 acquisition of Fairfield produced the bulk of this growth, our pre-existing timeshare exchange operations also made contributions. Prior to the acquisition of Fairfield, the results of this segment consisted principally of royalties earned on our lodging brands and exchange fees earned from our timeshare exchange business, Resort Condominium International, LLC. Fairfield contributed revenues, expenses and Adjusted EBITDA of $568 million, $424 million and $144 million, respectively, during 2001. In addition, the first quarter 2001 acquisition of Holiday Cottages Group Limited, the leading UK brand in holiday cottage rentals, contributed incremental revenues and Adjusted EBITDA of $34 million and $13 million, respectively, in 2001. Notwithstanding the negative impact that the September 11th terrorist attacks had on the economy's travel sector, timeshare subscription and transaction fees increased $41 million supported by increases in both members and exchange transactions. A corresponding increase in timeshare-related staffing costs was incurred to support volume growth and meet anticipated service levels. Revenues and Adjusted EBITDA in this segment include a decline in preferred alliance fees of $8 million, principally due to the expiration of a vendor contract in 2000. Royalties and marketing fund revenues from our lodging franchise operations declined $13 million (6%) and $14 million (7%), respectively, due to a 7% decrease in revenue per available room. Lower marketing fund revenues received from franchisees were directly offset by lower expenses incurred on the marketing of our nine lodging brands. The September 11th terrorist attacks caused a decline in the occupancy levels and room rates of our franchised lodging properties in the fourth quarter of 2001. While we expect the events of September 11th to suppress the growth of this segment in the near term, we also expect that the percentage impact will continue to decline over time, absent any further negative events affecting the travel industry. Furthermore, since many of our timeshare operations and franchised lodging properties principally serve road travelers (rather than air travelers), we believe that the effects of September 11th on this segment's operations will be less severe than on the travel industry as a whole.

Vehicle Services

Revenues and Adjusted EBITDA increased $3.1 billion and $121 million, respectively, substantially due to the acquisition of Avis in March 2001. Prior to the acquisition of Avis, revenues and Adjusted EBITDA of this segment consisted principally of earnings from our 18% equity investment in Avis and franchise royalties received from Avis. The acquisition of Avis contributed incremental revenues, expenses and Adjusted EBITDA of $3.1 billion, $3.0 billion and $112 million, respectively, in 2001. Avis' results in 2001 were negatively impacted by reduced demand at airport locations due to a general decline in commercial travel throughout the year, which was further exacerbated by the September 11th terrorist attacks. In response to the slowdown in commercial travel and in the wake of the September 11th terrorist attacks, we believe that we have rightsized our car rental operations to meet anticipated business levels, which included reductions in workforce and fleet (fleet was downsized by approximately 10%). We expect that seasonally adjusted car rental volumes will continue to increase as air travel volumes rebound. Our fleet management and fuel card management businesses were not materially impacted by the September 11th terrorist attacks.

Travel Distribution

Prior to the acquisitions of Galileo and Cheap Tickets, revenue and Adjusted EBITDA for this segment principally comprised the operations of Cendant Travel, our travel agent subsidiary. Galileo contributed revenues, expenses and Adjusted EBITDA of $337 million, $233 million and $104 million, respectively, while Cheap Tickets contributed revenues and expenses of $8 million each and made no contribution to Adjusted EBITDA. The September 11th terrorist attacks caused a decline in demand for travel-related services and, accordingly, reduced the booking volumes for Galileo and our travel agency businesses below fourth quarter 2000 levels. Galileo worldwide booking volume for air travel declined 19% in fourth quarter 2001 compared with fourth quarter 2000 and other travel-related bookings (car, hotel, etc.) were down 23% for the comparable periods. Upon completing the acquisitions of Galileo and Cheap Tickets, in

45


response to the existing economic conditions, we not only moved aggressively to integrate these businesses and achieve expected synergies, but we also re-examined their cost structures and streamlined their operations through workforce reductions and other means to meet expected business volumes. Absent any further shock to the travel industry, we expect travel volumes to continue to improve over time.

Financial Services

Revenues increased $22 million (2%) while Adjusted EBITDA decreased $63 million (17%). While the royalties we will receive from Trilegiant will benefit segment results in future periods, the outsourcing of our individual membership business to Trilegiant caused a decrease in Adjusted EBITDA during 2001, largely due to $41 million of our transaction-related expenses and $66 million of marketing spending by Trilegiant, which we were contractually required to fund and, as such, expensed (see discussion in "Liquidity and Capital Resources—Trilegiant Corporation"). The transaction related expenses are comprised of the $20 million write-off of the entire amount of our preferred stock investment due to operating losses incurred by Trilegiant in excess of the common equity and other expenses that include employee benefits and professional fees and a portion of the marketing advance that was expensed as Trilegiant incurred qualified marketing expenses pursuant to the contractual terms of the agreement. Membership volumes and revenues declined; however, commissions increased due to higher commission rates. Conversely, the cost savings from servicing fewer members, as well as Trilegiant's absorption of its share of fixed overhead expenses subsequent to the outsourcing, more than offset the lower membership revenues and higher commissions. In addition, we acquired Netmarket, an online membership business, during fourth quarter 2000, which was immediately integrated into our existing membership business. Netmarket contributed incremental revenues of $53 million in 2001. Jackson Hewitt, our tax preparation franchise business, contributed incremental revenues of $18 million, principally comprised of higher royalties due to a 22% increase in tax return volume, with relatively no corresponding increases in expenses due to the significant operating leverage within our franchise operations. Revenues and Adjusted EBITDA in 2000 included $8 million of fees recognized from the sale of certain referral agreements.

Corporate and Other

Revenues decreased $161 million while Adjusted EBITDA increased $31 million. Our real estate Internet portal and certain ancillary businesses, which were sold to Homestore in February 2001, collectively accounted for a decline in revenues of $87 million and an improvement to Adjusted EBITDA of $82 million because we were investing in the development and marketing of the portal during 2000. Revenues and Adjusted EBITDA were negatively impacted by $36 million less income from financial investments. In addition, revenues recognized from providing electronic reservation processing services to Avis ceased coincident with our acquisition of Avis, contributing to a reduction in revenues of $43 million with no Adjusted EBITDA impact since Avis had been billed for such services at cost. In December 2001, we entered into a ten-year, information technology services relationship with IBM whereby IBM will manage all of our data center operations. Adjusted EBITDA in 2001 benefited from the absence of $13 million of costs incurred in 2000 to pursue Internet initiatives and also reflects increased unallocated corporate overhead costs principally due to infrastructure expansion to support company growth.

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RESULTS OF CONSOLIDATED OPERATIONS—2000 vs. 1999

Our consolidated results from continuing operations comprised the following:

 
   2000
   1999
   Change
  
Net revenues   $ 4,320   $ 5,755   $ (1,435 )
   
 
 
 
Expenses, excluding other charges and non-vehicle interest, net     3,056     4,299     (1,243 )
Other charges     111     3,032     (2,921 )
Non-vehicle interest, net     152     201     (49 )
   
 
 
 
Total expenses     3,319     7,532     (4,213 )
   
 
 
 
Gains on dispositions of businesses     (37 )   (1,142 )   1,105  
Losses on dispositions of businesses     45     33     12  
   
 
 
 
Income (loss) before income taxes and minority interest     993     (668 )   1,661  
Provision (benefit) for income taxes     341     (422 )   763  
Minority interest, net of tax     83     61     22  
   
 
 
 
Income (loss) from continuing operations   $ 569   $ (307 ) $ 876  
   
 
 
 

Net revenues decreased primarily as a result of the impact of businesses we disposed of during 1999 (primarily our former fleet management and entertainment publications businesses), which resulted in a $1.55 billion reduction in net revenues, despite growth in recurring business activities, including higher relocation service-based fees of $33 million, increased mortgage production and loan servicing revenues aggregating $27 million and greater royalty fees of $31 million generated from our real estate franchised brands, which resulted in an increase in net revenues of approximately $100 million. A detailed discussion of revenue trends is included in "Results of Reportable Segments—2000 vs. 1999." Total expenses decreased primarily due to other charges (discussed below), as well as the impact of businesses we disposed of during 1999, which also resulted in a $1.5 billion reduction in expenses, and a decrease in net non-vehicle interest expense primarily resulting from a decrease in our average debt balance outstanding, which was partially offset by interest expense accrued on our stockholder litigation settlement liability during 2000.

Our provision for income taxes was $341 million in 2000, or an effective tax rate of 34.3%, compared to a benefit of $422 million in 1999, or an effective tax rate of 63.2%. The effective tax rate variance represents the impact of the disposition of our fleet businesses in 1999, which was accounted for as a tax-free merger.

As a result of the above-mentioned items, income from continuing operations increased $876 million.

Other Charges

Restructuring and Other Unusual Charges

Restructuring Costs.    During 2000, we incurred restructuring charges of $60 million. A detailed discussion of such charges is included in "Results of Consolidated Operations—2001 vs. 2000."

Other Unusual Charges.    During 2000 and 1999, we incurred unusual charges of $49 million and $117 million, respectively. A detailed discussion of the 2000 unusual charges is included in "Results of Consolidated Operations—2001 vs. 2000." The 1999 charge primarily consisted of (i) $85 million incurred in connection with the creation of Netmarket Group, Inc., a then-independent company that was created to pursue the development and expansion of interactive businesses, which is contingently repayable to us only if certain financial targets related to NGI are achieved, (ii) $23 million primarily related to an irrevocable contribution to an independent technology trust responsible for completing the transition of our lodging franchisees to a common property management system and (iii) $7 million primarily related to the termination of a proposed acquisition.

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Litigation Settlement and Related Costs

During 2000 and 1999, we recorded net charges of $2 million and $2.9 billion, respectively, for litigation settlement and related costs. A detailed discussion of the 2000 charge is included in "Results of Consolidated Operations—2001 vs. 2000." The 1999 charge primarily represented the settlement of our principal common stockholder class action lawsuit, as well as $21 million of charges related to investigations into previously discovered accounting irregularities in the former business units of CUC.

Net Gain (Loss) on Dispositions of Businesses

During 2000 and 1999, we recorded a net loss of $8 million and a gain of $1.1 billion, respectively, related to the dispositions of businesses. A detailed discussion of the 2000 net loss is included in "Results of Consolidated Operations—2001 vs. 2000." The 1999 gain was recognized primarily in connection with the disposal of our fleet and entertainment publications businesses.

RESULTS OF REPORTABLE SEGMENTS—2000 vs. 1999

For specific details regarding the nature of excluded items, see the sections above entitled "Other Charges" and "Net Gain (Loss) on Dispositions of Businesses."

 
   Revenues
   Adjusted EBITDA
  
 
   2000
   1999
   % Change
   2000(a)
   1999
   % Change
  
Real Estate Services   $ 1,461   $ 1,383   6 % $ 752   $ 727   3 %
Hospitality(b)     918     920   —     385     420   (8 )
Travel Distribution     99     91   9     10     7   43  
Vehicle Services     230     1,109   *     169     246   *  
Financial Services(c)     1,380     1,518   (9 )   373     305   22  
   
 
     
 
     
Total Reportable Segments     4,088     5,021         1,689     1,705      
Corporate and Other(d)     232     734   *     (104 )   89   *  
   
 
     
 
     
Total Company   $ 4,320   $ 5,755       $ 1,585   $ 1,794      
   
 
     
 
     
(*)
Not meaningful
(a)
Excludes a charge of $109 million in connection with restructuring and other initiatives ($2 million, $63 million, $31 million and $13 million of charges were recorded within Real Estate Services, Hospitality, Financial Services and Corporate and Other, respectively).
(b)
Adjusted EBITDA for 2000 excludes $12 million of losses related to the dispositions of businesses. Adjusted EBITDA for 1999 excludes a charge of $23 million related to the funding of an irrevocable contribution to an independent technology trust responsible for providing technology initiatives for the benefit of certain of our current and future franchisees.
(c)
Adjusted EBITDA for 1999 excludes $131 million of gains related to the dispositions of businesses and a charge of $85 million associated with the creation of Netmarket.
(d)
Represents the results of operations of our non-strategic businesses, unallocated corporate overhead and the elimination of transactions between segments. Adjusted EBITDA for 2000 excludes a gain of $35 million, which represents the recognition of a portion of our previously recorded deferred gain from the sale of our former fleet business due to the disposition of VMS Europe by Avis in August 2000. Such amounts were partially offset by $31 million of losses related to the disposition of certain non-strategic businesses and $2 million of net litigation settlement and related costs. Adjusted EBITDA for 1999 excludes charges of (i) $2,915 million primarily related to the settlement of the principal common stockholder class action lawsuit and (ii) $7 million related to the termination of a proposed acquisition. Such charges were partially offset by a net gain of $978 million related to the dispositions of businesses.

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Real Estate Services

Revenues and Adjusted EBITDA increased $78 million (6%) and $25 million (3%), respectively. The increase in operating results was principally due to increased royalties from our real estate franchise brands and growth in service-based fees generated from client relocations. Royalty fees for the CENTURY 21®, Coldwell Banker®, and ERA® franchise brands collectively increased $31 million (7%) resulting from an 11% increase in the average price of homes sold (net of a 3% reduction in the volume of homes sold). Increases in royalties and franchise fees are recognized with minimal corresponding increases in expenses due to the significant operating leverage within our franchise operations. Service-based fees from relocation related operations also significantly contributed to the increase in revenues and Adjusted EBITDA. Service-based relocation fees increased $33 million and are reflective of increased penetration into both destination and departure markets and expanded services provided to our clients.

Revenues from mortgage loans closed increased $16 million as the impact of favorable production margins exceeded the effect of a reduction in mortgage loan closings. The average production fee increased 25 basis points (21%) due to a reduction in the direct costs per loan. Mortgage loan closings declined $3.4 billion (13%) to $22.1 billion, consisting of $20.2 billion in purchase mortgages and $1.9 billion in refinancing mortgages. The decline in loan closings was primarily the result of a $4.2 billion reduction in mortgage refinancings due to the continued high volume of industry-wide refinancing activity in 1999. Lower loan origination volume during the first half of 2000 contributed to a reduction in the Adjusted EBITDA margin in 2000. Purchase mortgage closings in our retail lending business (where we interact directly with the consumer) increased $1.0 billion to $16.6 billion. Retail mortgage lending has been our primary focus and accounted for more than 80% of loan volume in 2000.

Loan servicing revenues in 1999 included an $8 million gain on the sale of servicing rights. Excluding such gain, recurring loan servicing revenue increased $19 million (20%). The increase in loan servicing revenue was principally attributable to a corresponding increase in the average servicing portfolio, which grew approximately $14.3 billion (31%).

The aforementioned increases in our core business operations were partially offset by a reduction of $10 million in gains recognized from the sale of portions of our preferred stock investments in NRT Incorporated, a $7 million gain recognized in 1999 on the sale of a minority interest in an insurance subsidiary, an $8 million gain on the sale of mortgage servicing rights and a $9 million increase in corporate overhead allocations due to a refinement of allocation methods used in 2000. Excluding the aforementioned gains on asset sales and increase in corporate overhead allocations, revenues and Adjusted EBITDA increased $103 million (8%) and $59 million (8%), respectively, and the Adjusted EBITDA margin (Adjusted EBITDA as a percentage of revenue) remained constant at 52%.

Hospitality

Revenues remained relatively constant while Adjusted EBITDA decreased $35 million, or 8%. However, the primary drivers impacting our franchise and timeshare operations reflected growth. Royalties from our lodging business increased $8 million (4%) principally due to a 3% increase in available rooms. Timeshare exchange revenues grew $12 million (6%) primarily due to a 6% growth in memberships and a 6% increase in the average exchange fee. Timeshare subscription revenues remained constant, despite the membership growth, due to the impact of the January 1, 2000 implementation of Staff Accounting Bulletin No. 101, which modified and extended the timing of revenue recognition for subscriptions and certain other fees. Accounting under SAB No. 101 resulted in non-cash reductions in timeshare subscription revenues and preferred alliance revenues of $11 million and $6 million, respectively. Also during 2000, Adjusted EBITDA declined in part due to $24 million of incremental overhead allocations due to a refinement of allocation methods used in 2000. During 1999, revenues and Adjusted EBITDA benefited by $11 million from the execution of a bulk timeshare exchange transaction and also by $6 million from the generation of a master license agreement and joint venture.

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Vehicle Services

Prior to the acquisition of Avis on March 1, 2001, revenues and Adjusted EBITDA of this segment consisted principally of earnings from our equity investment in Avis and royalties received from Avis. Revenues and Adjusted EBITDA decreased $879 million and $77 million, respectively. Such decreases are significantly due to the disposition of our fleet businesses in June 1999 which contributed revenues, expenses and Adjusted EBITDA of $881 million, $800 million and $81 million, respectively, to our 1999 operating results, prior to its disposition. Excluding the impact of fleet operations in 1999, revenues and Adjusted EBITDA increased $2 million (1%) and $4 million (2%), respectively. Franchise royalties increased $4 million (3%) primarily due to a 4% increase in the volume of car rental transactions at Avis. Additionally, an increase in revenues and Adjusted EBITDA of $10 million, due to incremental dividend income recognized on our preferred stock investment in Avis, was offset by $11 million of gains recognized in 1999 on the sale of a portion of our common equity interest in Avis.

Travel Distribution

Revenues and Adjusted EBITDA increased $8 million (9%) and $3 million (43%), respectively. Prior to the acquisitions of Galileo and Cheap Tickets in October 2001, revenues and Adjusted EBITDA of this segment consisted of our travel services business.

Financial Services

Revenues decreased $138 million (9%), while Adjusted EBITDA increased $68 million (22%). During 1999, we disposed of four individual membership businesses, which had contributed revenues, expenses and Adjusted EBITDA losses of $174 million, $190 million and $16 million, respectively, in 1999 prior to their disposals. Excluding the operating results of these businesses, revenues and Adjusted EBITDA increased $36 million (3%) and $52 million (16%), respectively. During 2000, our membership solicitation strategy was to focus on profitability by targeting our marketing efforts and reducing expenses incurred to reach potential new members. Accordingly, a favorable mix of products and programs with marketing partners in 2000 positively impacted revenues and Adjusted EBITDA. Additionally, we acquired and integrated Netmarket Group, an online membership business, in the fourth quarter of 2000, which contributed $12 million to revenues but also decreased Adjusted EBITDA by $7 million. Such increases were partially offset by a decrease in membership expirations during 2000 (revenue is generally recognized upon expiration of the membership), which was partially mitigated by a reduction in operating and marketing expenses, including commissions, which directly related to servicing fewer members.

Jackson Hewitt, our tax preparation franchise business, contributed incremental revenues of $16 million, which were recognized with minimal corresponding increases in expenses due to our significant operating leverage within our franchise operations. Jackson Hewitt experienced a 33% increase in tax return volume and a 10% increase in the average price of a return. Additionally, we incurred costs of approximately $9 million during 2000 to consolidate our domestic insurance wholesale business operations in Tennessee. The majority of such costs were offset by economies and related cost savings realized from such consolidation.

Corporate and Other

Revenues and Adjusted EBITDA decreased $502 million and $193 million, respectively. Revenues decreased primarily as a result of the 1999 dispositions of several businesses, the operating results of which were included through their respective disposition dates in 1999. The absence of such divested businesses from 2000 operations resulted in a reduction in revenues, expenses and Adjusted EBITDA of $502 million, $424 million and $78 million, respectively. Excluding the impact of divested businesses on 1999 operating results, revenues remained constant while Adjusted EBITDA decreased $115 million in 2000. Our real estate Internet portal, move.com, which was sold during first quarter 2001, contributed incremental revenues of $41 million, with a reduction in Adjusted EBITDA of $72 million. The increase in revenues principally reflects an increase in sponsorship revenues resulting from the launch of the move.comSM

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portal. The decline in Adjusted EBITDA primarily reflects our increased investment in marketing and development of the move.com network. Additionally, revenues and Adjusted EBITDA in 2000 were negatively impacted by $30 million less income recognized from financial investments and $19 million of costs incurred to pursue Internet initiatives.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Within our car rental, vehicle management, relocation, mortgage services and timeshare development businesses, we purchase assets or finance the purchase of assets on behalf of our clients. Assets generated in this process are classified as assets under management and mortgage programs. We seek to offset the interest rate exposures inherent in these assets by matching them with financial liabilities that have similar term and interest rate characteristics. As a result, we minimize the interest rate risk associated with managing these assets and create greater certainty around the financial income that they produce. Fees generated from our clients are used, in part, to repay the interest and principal associated with the financial liabilities. Funding for our assets under management and mortgage programs is also provided by both unsecured borrowings and secured financing arrangements, which are classified as liabilities under management and mortgage programs, as well as securitization facilities with special purpose entities. Cash inflows and outflows relating to the generation or acquisition of assets and the principal debt repayment or financing of such assets are classified as activities of our management and mortgage programs.

Financial Condition

 
   2001
   2000
   Change
  
Total assets exclusive of assets under management and mortgage programs   $ 21,676   $ 12,292   $ 9,384  
Assets under management and mortgage programs     11,868     2,861     9,007  
Total liabilities exclusive of liabilities under management and mortgage programs     15,207     7,805     7,402  
Liabilities under management and mortgage programs     10,894     2,516     8,378  
Mandatorily redeemable preferred securities     375     2,058     (1,683 )
Stockholders' equity     7,068     2,774     4,294  

Total assets exclusive of assets under management and mortgage programs increased primarily due to an increase in goodwill resulting from the acquisitions of Avis and Galileo, various other increases in assets also due to the impact of acquired businesses and cash proceeds received from debt and equity issuances during 2001 (including the Upper DECS). Assets under management and mortgage programs increased primarily due to vehicles acquired in the acquisition of Avis, as well as vehicles acquired during 2001 for use in our car rental and fleet management operations.

Total liabilities exclusive of liabilities under management and mortgage programs increased primarily due to $4.8 billion of debt issued during 2001 (including the Upper DECS), approximately $600 million of debt assumed in the acquisition of Avis and various other increases in liabilities due to the impact of acquired businesses. Liabilities under management and mortgage programs increased primarily due to $5.1 billion of debt assumed in the acquisition of Avis and $2.2 billion of debt issued during 2001, as well as $750 million of borrowings in 2001 under a revolving credit facility.

Mandatorily redeemable securities decreased due to the settlement of the purchase contracts underlying the FELINE PRIDES during 2001, whereby we issued 61 million shares of CD common stock in satisfaction of our obligation under the forward purchase contracts and received, in exchange, the trust preferred securities forming a part of the PRIDES.

Stockholders' equity increased primarily due to the issuance of approximately 117 million shares of CD common stock valued at $12.72 per share to fund a portion of the purchase price of Galileo, the above-mentioned issuance of approximately 61 million shares of CD common stock, the issuance during first quarter 2001 of 46 million shares of CD common stock at $13.20 per share for aggregate proceeds of approximately $607 million and net income of $385 million generated during 2001.

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Liquidity and Capital Resources

Our principal sources of liquidity are cash on hand, our ability to generate cash through operations and financing activities, as well as available credit and securitization facilities.

Cash Flows

At December 31, 2001, we had approximately $1.9 billion of cash on hand, an increase of approximately $1.1 billion from $856 million at December 31, 2000. The following table summarizes such increase:

 
   2001
   2000
   Change
  
Net cash provided by (used in):                    
  Operating activities   $ 2,737   $ 1,336   $ 1,401  
  Investing activities     (6,407 )   (1,142 )   (5,265 )
  Financing activities     4,643     (483 )   5,126  
Effects of exchange rate changes on cash and cash equivalents     (8 )   (6 )   (2 )
Cash provided by discontinued operations     121     89     32  
   
 
 
 
Net change in cash and cash equivalents   $ 1,086   $ (206 ) $ 1,292  
   
 
 
 

Net cash provided by operating activities increased primarily due to cash generated by acquired operations, as well as growth in our mortgage business. We used more cash in 2001 for investing activities primarily to fund the acquisitions of Avis, Fairfield, Galileo and Cheap Tickets and a portion of our stockholder litigation settlement liability. Additionally, we used $1.6 billion of cash during 2001 to acquire vehicles used in our car rental and fleet management programs. We also generated cash from financing activities during 2001 as compared to using cash in financing activities during 2000 primarily due to proceeds received from debt and equity issuances, the issuance of the Upper DECS and borrowings under our revolving credit facilities. Capital expenditures during 2001 amounted to $329 million and were utilized to support operational growth, enhance marketing opportunities and develop operating efficiencies through technological improvements. We anticipate capital expenditure investments during 2002 of approximately $375 million. Such amount represents an increase from 2001 primarily due to capital expenditures related to businesses we acquired during 2001. During February 2002, we used $390 million of available cash to redeem all our outstanding 3% convertible notes. During first quarter 2002, we used $36 million of available cash to repurchase approximately 2.0 million shares of our CD common stock. We anticipate using cash on hand and operating cash flow generated in 2002 to continue repurchasing our CD common stock in order to offset the impact of employee stock option exercises. We currently have approximately $226 million of remaining availability under our board-authorized CD common stock repurchase program. We also anticipate using cash on hand, operating cash flow generated in 2002 and, if necessary, revolving credit facility borrowings to fund the remainder of our stockholder litigation settlement liability during 2002. Our net funding obligation for the stockholder litigation settlement liability was $1.44 billion at December 31, 2001. We intend to make quarterly payments of $250 million to this trust until mid-July 2002, at which time we will fund the remaining obligation.

Available Credit Facilities

At December 31, 2001, we had $2.8 billion of available credit facilities (including availability of $1.7 billion at the corporate level and $1.1 billion at our PHH subsidiary). The credit facilities at the corporate level comprise a $1.75 billion revolving credit facility maturing in August 2003 and a $1.15 billion revolving credit facility maturing in February 2004. Borrowings under the $1.75 billion facility bear interest at LIBOR plus a margin of 60 basis points. In addition, we are required to pay a per annum facility fee of 15 basis points under this facility and a per annum utilization fee of 12.5 basis points if usage under the facility exceeds 33% of aggregate commitments. In the event that the credit ratings assigned to us by nationally recognized debt rating agencies are downgraded to a level below our ratings as of December 31, 2001 but still above investment grade, the interest rate and facility fees on our $1.75 billion facility are subject to incremental upward adjustments of 10 and 2.5 basis points, respectively. In the event that such credit ratings are downgraded below investment grade, the interest rate and facility fees are subject to further

52


upward adjustments of 47.5 and 15 basis points, respectively. This facility also contains the committed capacity to issue up to $1.75 billion in letters of credit. As of December 31, 2001, there were no borrowings outstanding under this facility; however, letters of credit of $1.1 billion were outstanding under this facility, of which $865 million were used as collateral for our stockholder litigation settlement liability. Under the terms of this facility, in August 2002, the revolving line will be reduced by $500 million to $1.25 billion. The $1.15 billion facility contains the committed capacity to issue up to $300 million in letters of credit, of which $82 million were outstanding as of December 31, 2001. Borrowings under this facility bear interest at LIBOR plus a margin of 82.5 basis points. In addition, we are required to pay a per annum facility fee of 17.5 basis points under this facility and a per annum utilization fee of 25 basis points if usage under the facility exceeds 33% of aggregate commitments. In the event that the credit ratings assigned to us by nationally recognized debt rating agencies are downgraded below investment grade, the interest rate and facility fees on our $1.15 billion facility are subject to upward adjustments of 35 and 15 basis points, respectively.

The credit facilities at our PHH subsidiary are comprised of two $750 million revolving credit facilities maturing in February 2004 and February 2005, a $100 million revolving credit facility maturing in December 2002 and $275 million of other revolving credit facilities maturing in November 2002. Borrowings under these facilities currently bear interest at LIBOR plus a margin of approximately 62.5 basis points. In addition, we are currently required to pay a per annum facility fee of approximately 12.5 basis points under these facilities and a per annum utilization fee of approximately 25 basis points if usage under the facilities exceeds 25% of aggregate commitments. In the event that the credit ratings assigned to PHH by nationally recognized debt rating agencies are downgraded to a level below PHH's ratings as of December 31, 2001, the interest rate and facility fees on these facilities are subject to incremental upward adjustments of approximately 12.5 basis points. In the event that the credit ratings are downgraded below investment grade, the interest rate and facility fees are subject to further upward adjustments of approximately 62.5 basis points. At December 31, 2001, we had outstanding borrowings of $750 million under our facility maturing in February 2005. There were no borrowings outstanding under any of these other facilities at December 31, 2001.

We also currently have $3.0 billion of availability for public debt or equity issuances under a shelf registration statement at the corporate level and $2.4 billion of availability for public debt issuances under shelf registration statements at the PHH level.

Outstanding Corporate Debt

At December 31, 2001, we had approximately $17.2 billion of indebtedness (including corporate indebtedness of $7.0 billion, debt related to our management and mortgage programs of $9.8 billion and our mandatorily redeemable interest of $375 million). Our net debt (excluding the Upper DECS and net of cash and cash equivalents) to total capital (including debt and the Upper DECS) ratio was 36% and the ratio of Adjusted EBITDA to net non-vehicle interest expense was 9 to 1 for 2001.

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The following table summarizes the components of our corporate indebtedness:

 
   Earliest
Redemption
Date
   Final
Maturity
Date
   2001
   2000
   Change
  
3% convertible subordinated notes(a)   February 2002   February 2002   $ 390   $ 548   $ (158 )
73/4% notes   December 2003   December 2003     1,150     1,149     1  
6.875% notes   August 2006   August 2006     850     —     850  
11% senior subordinated notes   May 2009   May 2009     584     —     584  
37/8% convertible senior debentures   November 2004   November 2011     1,200     —     1,200  
Zero coupon senior convertible contingent notes   February 2004   February 2021     920     —     920  
Zero coupon convertible debentures   May 2002   May 2021     1,000     —     1,000  
Term loan facility             —     250     (250 )
Other             38     1     37  
           
 
 
 
Total long-term debt, excluding Upper DECS             6,132     1,948     4,184  
Upper DECS   May 2004   August 2006     863     —     863  
           
 
 
 
            $ 6,995   $ 1,948   $ 5,047  
           
 
 
 
(a)
On February 15, 2002, we redeemed the entire outstanding balance of 3% convertible subordinated notes.

During 2001, we generated cash of $4.8 billion from the issuance of contingently convertible debt securities, the 6.875% notes and the Upper DECS. The proceeds from these issuances were used, in part, to prepay a portion of our stockholder litigation settlement liability, reduce or extinguish certain borrowings, fund a portion of the purchase price of certain acquisitions and for general corporate purposes. During 2001, we used $160 million of cash to redeem a portion of our 3% convertible subordinated notes. We redeemed the remaining balance at maturity on February 15, 2002. Our 73/4% notes are due in December 2003 and may be redeemed by us, in whole or in part, at any time at our option. Our 6.875% notes, which were issued during 2001 for net proceeds of $843 million, are due in August 2006. Our 73/4% and 6.875% notes are senior unsecured obligations and rank equally in right of payment with all our existing and future unsecured senior indebtedness. The interest rates on these notes are subject to upward adjustments of 150 basis points in the event that the credit ratings assigned to us by nationally recognized debt rating agencies are downgraded below investment grade. Our 11% senior subordinated notes are due in May 2009 and may be redeemed by us in part prior to May 2002 upon the occurrence of specific events, or at any time, in whole or in part, after May 2004. These notes are subordinated in the right of payment to all our existing and future senior indebtedness of Avis and are unconditionally guaranteed on a senior subordinated basis by certain of our car rental subsidiaries.

Contingently Convertible Debt Securities

Our contingently convertible debt securities, which were all issued during 2001, comprised the following:

 
   Earliest
Redemption
Date
   Principal
Amount
   Gross
Proceeds
Received
   Conversion
Rate
   Shares
Potentially
Issuable
37/8% convertible senior debentures   November 2004   $ 1.2 billion   $ 1.2 billion   41.58   49.9 million
Zero coupon senior convertible contingent notes   February 2004   $ 1.5 billion   $ 0.9 billion   33.40   49.4 million
Zero coupon convertible debentures   May 2002   $ 1.0 billion   $ 1.0 billion   39.08   39.1 million

As described in detail below, our contingently convertible debt securities include provisions that permit investors to require us to redeem the securities at their accreted value at specified times. Holders of our 37/8% convertible senior debentures may first require us to redeem them in November 2004; holders of our zero coupon senior convertible contingent notes, in February 2004; and holders of our zero coupon convertible debentures, in May 2003. If our stock price fails to adequately appreciate from the date of issuance of the contingently convertible debt securities until their redemption date, we believe it is likely that investors would exercise their option to require us to redeem the securities absent any modification to the terms of the securities. A redemption could cause us to utilize a material amount of cash to redeem such securities at their accreted value; however, we would not expect it to have a material adverse effect on

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our results of operations. The cost of redeeming and/or refinancing such securities would depend on market conditions at the time and the type of securities, if any, issued for refinancing purposes. As a result, our management considers the use of redemption of our contingently convertible securities in establishing and utilizing our credit facilities, in targeting our cash position, and in evaluating additional issuances of securities. We consider our access to capital adequate to meet our prospective obligations under the terms of our contingently convertible debt securities. If holders were to require us to redeem these securities, we would fund such redemptions with available cash, borrowings under available credit facilities and/or the issuance of debt or equity securities; we may also consider amending the terms of the securities to induce holders to retain, rather than redeem, these securities.

As also described in detail below, our contingently convertible debt securities include provisions that could require us to pay a higher interest rate on the securities if they remain outstanding after the date at which we begin to have the right to redeem them. Because we have the right to redeem the securities at their accreted value before any such provisions become effective; we do not believe these provisions would have an adverse impact on our results of operations compared to our results of operations using other financing sources available at that time.

37/8% Convertible Senior Debentures.    We may be required to pay additional interest on these notes commencing in November 2004 if the average of the sales prices of our CD common stock is less than or equal to 45% of the accreted conversion price of the debentures for any 20 of the 30 trading days during the applicable measurement period. Thereafter, the interest rate will be adjusted upward for the subsequent six-month period to the rate at which a hypothetical issue of our senior, non-convertible, fixed-rate, callable debt securities would trade, at that time, at par, provided that the reset rate shall not exceed 10% per year. The accreted conversion price of the debentures would increase (ratably with the accreted value of debentures) if an upward interest adjustment occurs. The applicable measurement period for determining whether an upward interest adjustment will occur ends five business days prior to each May 30 and November 30 after November 27, 2004. In the event of an upward interest adjustment, no more than 0.25% per year, incrementally, will be paid in cash; the remaining additional interest will accrue and be paid at maturity. Through December 31, 2001, there was no upward interest adjustment to the notes.

These notes may be converted prior to maturity (i) during each three-month period following issuance of the notes if the closing sale price of our CD common stock exceeds 120%, declining ratably to 110% in November 2011, of the accreted conversion price per share for at least 20 trading days in the period of 30 trading days ending on the first day of such three-month period; (ii) if the notes have been called for redemption; or (iii) in the event of certain material distributions to holders of CD common stock, excluding payments of dividends in the normal course. We expect that, if these debentures are indeed convertible immediately prior to maturity due to the price of our CD common stock exceeding the contingent-conversion threshold, holders of such debentures will elect to convert them into shares of our CD common stock. The conversion threshold at maturity is 110% of the accreted conversion price per share. The accreted conversion price is subject to change as a result of any upward interest adjustment as it is calculated as 100% of the principal amount of the notes, plus accrued and unpaid cash interest (which will only result from an upward adjustment to the interest) divided by the number of shares of CD common stock issued for each note, or 41.58. At December 31, 2001, the accreted conversion price was $24.05.

The notes are not redeemable by us prior to November 27, 2004, but will be redeemable thereafter. In addition, holders of the notes may require us to repurchase the notes on November 27, 2004 and 2008. In such circumstance, we have the option of paying the repurchase price in cash, shares of our CD common stock, or any combination thereof. These debentures are senior unsecured obligations and rank equally in right of payment with all our existing and future senior unsecured indebtedness.

Zero Coupon Senior Convertible Contingent Notes.    These notes were issued at a discount representing a yield-to-maturity of 2.5%. We will not make periodic payments of interest on the notes, but may be required to make nominal interest payments commencing in February 2004 if the average market price of the zero coupon senior convertible contingent notes equals 120% or more of the sum of the issue price and accrued original issue discount for the notes during the applicable measurement period, then we will make contingent interest payments on the notes. The contingent interest payments for any six-month period will

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equal (a) the lesser of (i) 2% of our estimated borrowing rate, at that time, for our senior, non-convertible, fixed-rate indebtedness with a maturity date comparable to these notes and (ii) 0.25% times (b) the sum of the issue price of $608.41 and accrued original issuance discount for the notes as of the day immediately preceding the relevant six-month period. The applicable measurement period for determining whether contingent interest payments will be made is the five trading days ending on the second trading day preceding each February 13 and August 13, commencing February 13, 2004.

These notes may be converted prior to maturity (i) during each three-month period following issuance of the notes if the closing sale price of our CD common stock exceeds 110% of the accreted conversion price per share for at least 20 trading days in the period of 30 trading days ending on the first day of such three-month period; (ii) if the notes have been called for redemption; (iii) if Moody's Investors Service and Standard & Poor's Corporation no longer have investment-grade ratings assigned to the notes; or (iv) in the event of certain material distributions to holders of CD common stock, excluding payments of dividends in the normal course. We expect that, if these notes are indeed convertible immediately prior to maturity due to the price of our CD common stock exceeding the contingent-conversion threshold, holders of such notes will elect to convert them into shares of our CD common stock. The conversion threshold at maturity is 110% of the accreted conversion price per share. The accreted conversion price is calculated as the issue price of $608.41 and accrued original discount divided by the number of shares of CD common stock issued for each note, or 33.4. At December 31, 2001, the accreted conversion price was $18.62.

The notes are not redeemable by us prior to February 13, 2004, but will be redeemable thereafter at the issue price of $608.41 per note plus accrued original discount through the redemption date. In addition, holders of the notes may require us to repurchase the notes on February 13, 2004 for $655.49 per note, February 13, 2009 for $742.20 per note or February 13, 2014 for $840.37 per note. In such circumstance, we have the option of paying the repurchase price in cash, shares of our CD common stock, or any combination thereof. These notes are senior unsecured obligations and rank equally in right of payment with all our existing and future senior unsecured and unsubordinated indebtedness.

Zero Coupon Convertible Debentures.    We will make cash interest payments of 3% per annum beginning May 5, 2002 and continuing through May 4, 2003 to the holders of these debentures on a semi-annual basis. We amended the terms of the debentures to include these interest payments in order to maintain a lower cost of capital rather than issuing additional equity to cover the potential puts, which were exercisable at May 4, 2002. We may be required to pay additional interest on these notes commencing in May 2004 if the average of the sales prices of our CD common stock is less than or equal to 60% of the accreted conversion price of the debentures for any 20 of the 30 trading days during the applicable measurement period, then the interest rate will be adjusted to 7% per year. The applicable measurement period for determining whether contingent interest payments will be made ends five business days prior to each May 4 and November 4, commencing May 4, 2004. In the event of an upward interest adjustment, 0.25% per year will be paid in cash; the remaining additional interest will accrue and be paid at maturity. Through December 31, 2001, there was no upward interest adjustment to the notes. These notes may be converted prior to maturity (i) during each three-month period following issuance of the notes if the closing sale price our CD common stock exceeds 110% of the accreted conversion price per share for at least 20 trading days in the period of 30 trading days ending on the first day of such three-month period; (ii) if the notes trade at less than 95% of the value of the shares into which the notes are convertible; (iii) if the notes have been called for redemption; (iv) if Moody's Investors Service and Standard & Poor's Corporation no longer have investment-grade ratings assigned to the notes; or (v) in the event of certain material distributions to holders of CD commons stock, excluding payments of dividends in the normal course. We believe that, if these debentures are indeed convertible immediately prior to maturity due to the price of our CD common stock exceeding the contingent-conversion threshold, holders of such notes and debentures will elect to convert them into shares of our CD common stock. The conversion threshold at maturity is 110% of the accreted conversion price per share. The accreted conversion price is subject to change as a result of any upward interest adjustment as it is calculated as 100% of the principal amount of the notes, plus accrued and unpaid cash interest (which will only result from an upward adjustment to the interest) divided by the number of shares of CD common stock issued for each note, or 39.08. At

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December 31, 2001, the accreted conversion price was $25.59. The conversion threshold at maturity is 110% of the accreted conversion price per share, or approximately $28.15.

The notes will not be redeemable by us prior to May 4, 2004, but will be redeemable thereafter. In addition, holders of the notes may require us to repurchase the notes on May 4, 2003, 2004, 2006, 2008, 2011 and 2016. In such circumstance, we have the option of paying the repurchase price in cash, shares of our CD common stock, or any combination thereof. These debentures are senior unsecured obligations and rank equally in right of payment with all our existing and future senior unsecured indebtedness.

Upper DECS

The Upper DECS each consist of both a senior note and a forward purchase contract. The senior notes initially bear interest at an annual rate of 6.75%, which will be reset based upon a remarketing in either May or August 2004. The senior notes have a term of five years and represent senior unsecured debt, which ranks equally in right of payment with all our existing and future unsecured and unsubordinated debt and ranks senior to any future subordinated indebtedness.

In August 2004, the forward purchase contract component of each Upper DECS security requires the holder to purchase $50 of CD common stock. The price at which Upper DECS holders will be required to purchase CD common stock will be the average closing price of our CD common stock during the twenty consecutive trading days ending on the third trading day immediately preceding August 17, 2004, but no less than $21.53 and no more than $28.42. The minimum and maximum number of shares to be issued under the forward purchase contracts are 30.3 million and 40.1 million, respectively. The forward purchase contracts also require quarterly cash distributions to each holder at an annual rate of 1.00% through August 2004 (the date the forward purchase contracts are required to be settled).

Upon settlement of the forward purchase contracts in August 2004, we expect to receive gross proceeds in cash of approximately $863 million. Upon maturity in August 2006, of the senior notes that are currently a component of the Upper DECS, we would be required to repay $863 million.

Because the Upper DECS obligate holders to purchase CD common stock at a price determined by the average closing price of CD common stock during a 20-trading-day period ending in August 2004, the Upper DECS are functionally equivalent to issuing shares of CD common stock subject to an issue-price collar, with a delay in issuance until 2004. At the time of issuance of the Upper DECS, we believed that the economic impact of issuing the Upper DECS would be favorable compared to an equivalent immediate issuance of common stock. The proceeds from the offering were to be used for general corporate purposes, including acquisitions.

Outstanding Debt Related to Management and Mortgage Programs

The following table summarizes the components of our debt related to management and mortgage programs:

 
   December 31,
 
   2001
   2000
Secured Borrowings:            
Term notes   $ 6,237   $ —
Short-term borrowings     582     292
Commercial paper     120     —
Other     295     —

Unsecured Borrowings:
 
 
 
 
 
 
Medium-term notes     679     117
Short-term borrowings     983     —
Commercial paper     917     1,556
Other     31     75
   
 
    $ 9,844   $ 2,040
   
 

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Debt related to our management and mortgage programs increased $7.8 billion during 2001 primarily resulting from the assumption of Avis debt aggregating $5.1 billion (principally comprising $4.7 billion of secured term notes and $415 million of secured commercial paper and other borrowings), debt issuances during 2001 aggregating approximately $2.2 billion and unsecured borrowings under our revolving credit facility during 2001 aggregating $750 million. The proceeds from these issuances were used to fund the purchase of assets under management and mortgage programs and retire maturing debt under management and mortgage programs.

Secured Borrowings

Secured borrowings primarily represent asset-backed funding arrangements whereby we or our wholly-owned and consolidated special purpose entities issue debt or enter into loans supported by the cash flows derived from specific pools of assets classified as assets under management and mortgage programs. These borrowings are primarily issued under our AESOP Funding or Greyhound Funding programs. AESOP Funding is a domestic financing program that provides for the issuance of up to $4.45 billion of variable rate notes to support our car rental operations. Greyhound Funding is also a domestic financing program that provides for the issuance of up to $3.19 billion of variable rate notes, preferred membership interests and term notes to support our fleet leasing operations. Under both programs, the debt issued is collateralized by vehicles owned by either our car rental subsidiary or our fleet leasing subsidiary. In the AESOP Funding program, the vehicles financed are generally covered by agreements where manufacturers guarantee a specified repurchase price for the vehicles. However, the program will allow funding for 25% of vehicles not covered by such agreements. The titles to all the vehicles supporting these facilities is held in bankruptcy remote trusts and we act as a servicer of all the vehicles. For the Greyhound Funding facility, the bankruptcy remote trust also acts as lessor under both operating and financing lease agreements. At December 31, 2001, we had $3.5 billion of term notes outstanding under the AESOP Funding program. At December 31, 2001, we had $2.9 billion of outstanding debt under the Greyhound Funding program, of which $2.6 billion and $295 million were included as components of secured term notes and other secured borrowings, respectively, in the above table. All debt issued under these programs is classified as liabilities under management and mortgage programs on our Consolidated Balance Sheet. Also included in secured term notes are $450 million of variable- rate notes maturing in 2011 and $285 million of variable-rate notes maturing in 2006. These notes are collaterized by vehicles owned by our fleet leasing subsidiary.

Secured short-term borrowings primarily consist of financing arrangements to sell mortgage loans under a repurchase agreement, which is renewable on an annual basis at the discretion of the lender. Such loans are collateralized by underlying mortgage loans held in safekeeping by the custodian to the agreement. The total commitment under this agreement is $500 million. Secured commercial paper matures within 270 days and is supported by rental vehicles owned by our car rental subsidiary.

Unsecured Borrowings

Unsecured medium-term notes primarily bear interest at a rate of 81/8% per annum. Such interest rate is generally subject to incremental upward adjustments of 50 basis points in the event that the credit ratings assigned to PHH by nationally recognized credit rating agencies are downgraded to a level below PHH's ratings as of December 31, 2001. In the event that the credit ratings are downgraded below investment grade, the interest rate is subject to an upward adjustment not to exceed 300 basis points. Unsecured short-term borrowings primarily represent borrowings under revolving credit facilities. Unsecured commercial paper matures within 270 days and is fully supported by the committed revolving credit agreements described above.

Mandatorily Redeemable Interest

Also included in out total indebtedness in addition to corporate indebtedness and debt related to our management and mortgage program, is a $375 million mandatorily redeemable senior preferred interest, which is mandatorily redeemable by the holder in 2015 and may not be redeemed by us prior to March 2005, except upon the occurrence of specified circumstances. We are required to pay distributions

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on the senior preferred interest based on three-month LIBOR plus a margin of 1.77%. In the event of default, or other specified events, including a downgrade in our credit ratings below investment grade, holders of the senior preferred interest have certain remedies and liquidation preferences, including the right to demand payment by us.

Off-Balance Sheet Financing Arrangements

In addition to our on-balance sheet borrowings and available credit facilities, we enter into transactions where special purpose entities are used as a means of securitizing financial assets generated or acquired in the normal course of business under our management and mortgage programs. We utilize these special purpose entities because they are highly efficient for the sale of financial assets and represent conventional practice in the securitization industry. In accordance with generally accepted accounting principles, the assets sold to the special purpose entities and the related liabilities are not reflected on our balance sheet as such assets are legally isolated from creditor claims and removed from our control.

At the corporate level, we sell timeshare receivables in securitizations to bankruptcy remote qualifying special purpose entities under revolving sales agreements in exchange for cash. Our maximum funding capacity under these securitization facilities is $500 million. These facilities are non-recourse to us. However, we retain a subordinated residual interest and the related servicing rights and obligations in the transferred timeshare receivables. We receive monthly servicing fees of approximately 100 basis points of the outstanding balance of the transferred timeshare receivables. At December 31, 2001, we were servicing approximately $492 million of timeshare receivables transferred under these agreements.

Additionally, our PHH subsidiary customarily sells all mortgage loans we originate into the secondary market, primarily to government-sponsored entities, in exchange for cash. These mortgage loans are placed into the secondary market either by PHH or through an unaffiliated bankruptcy remote special purpose entity, Bishop's Gate Residential Mortgage Trust, the equity (currently in excess of 4%) of which is held by independent third parties who bear the credit risk of the assets. Our maximum funding capacity through the special purpose entity is $3.2 billion. The loans sold to the secondary market are generally non-recourse to us and to PHH. However, we generally retain the servicing rights on the mortgage loans sold and receive an annual servicing fee of approximately 47 basis points on such loans. At December 31, 2001, we were servicing $96.3 billion of mortgage loans sold to the secondary market and $2.5 billion sold to the special purpose entity.

Bishop's Gate has entered into a swap with several banks, the net effect of which is that the banks have agreed to bear certain interest rate risks, non-credit related market risks and prepayment risks related to the mortgage loans held by Bishop's Gate. Additionally, PHH has entered into a separate corresponding swap with the banks, the net effect of which is that PHH has agreed to bear the interest rate risks, non-credit related market risks and prepayment risks related to the mortgage loans held by Bishop's Gate assumed by the banks under their swap with Bishop's Gate. We in turn offset the interest rate risks associated with the swap by entering into forward delivery contracts for mortgage backed securities. Both the swap and the forward delivery commitments are derivatives under SFAS No. 133 and are marked-to-market through earnings in the current period. The fair value and changes in fair value of the swap and forward delivery committments have substantially offsetting effects.

Our PHH subsidiary also sells relocation receivables in securitizations to a bankruptcy remote qualifying special purpose entity in exchange for cash. Our maximum funding capacity under this securitization facility is $650 million. This facility is non-recourse to us and to PHH. However, we retain a subordinated residual interest and the related servicing rights and obligations in the relocation receivables and receive an annual servicing fee of approximately 75 basis points on the outstanding balance of relocation receivables transferred. At December 31, 2001, we were servicing $620 million of relocation receivables transferred under this agreement.

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None of our affiliates, officers, directors or employees hold any equity interest in any of the above special purpose entities, nor do we or our affiliates provide any financial support or financial guarantee arrangements to the above special purpose entities. None of our affiliates, officers, directors or employees receive any remuneration from any of the above special purpose entities.

PHH also sells interests in operating leases and the underlying vehicles to two independent Canadian third parties. PHH repurchases the leased vehicles and leases such vehicles under direct financing leases to the Canadian third parties. The Canadian third parties retain the lease rights and prepay all the lease payments except for an agreed upon residual amount, which is typically 0% to 8% of the total lease payments. The residual amounts represent our only exposure in connection with these transactions. At December 31, 2001, the balance of outstanding lease receivables which were sold to the Canadian third parties was $341 million. The total outstanding prepaid rent and our subordinated residual interest under these leasing arrangements were $320 million and $21 million, respectively, as of December 31, 2001. We recognized $108 million of revenues related to these leases during 2001.

Additionally, PHH leases certain office buildings on an annual basis from an unaffiliated finance company which holds the title to the property. PHH has the option to renew this lease each year through 2004. At the end of each annual renewal period, we have the option to either purchase the property under a fixed price purchase option of approximately $80 million or sell the office buildings, on behalf of the lessor, to an unrelated third party. If the office buildings are sold and the proceeds from the sale are less than the amount of the fixed price purchase option, we are required to make a payment to the lessor for any deficiency, up to a maximum payment of approximately $68 million.

Liquidity Risk

Our liquidity position may be negatively affected by unfavorable conditions in any one of the industries in which we operate as we may not have the ability to generate sufficient cash flows from operating activities due to those unfavorable conditions. Additionally, our liquidity as it relates to both management and mortgage programs could be adversly affected by a deteroriation in the performance of the underlying assets of such programs. Access to the principal financing program for our car rental subsidiary may also be impaired should General Motors Corporation not be able to honor its obligations to repurchase a substantial number of our vehicles. Our liquidity as it relates to mortgage programs is highly dependent on the secondary markets for mortgage loans. Access to certain of our securitization facilities and our ability to act as servicer thereto also may be limited in the event that our or PHH's credit ratings are downgraded below investment grade and, in certain circumstances, where we or PHH fail to meet certain financial ratios. However, we do not believe that our or PHH's credit ratings are likely to fall below such thresholds. Additionally, we monitor the maintenance of these financial ratios and as of December 31, 2001, we were in compliance with all covenants under these facilities. When securitizing assets under management and mortgage programs, we make representations and warranties customary to the securitization markets, including eligibility characteristics of the assets transferred and servicing responsibilties.

Currently our credit ratings are as follows:

 
   Moody's
Investors
Service
   Standard &
Poor's
   Fitch
Cendant            
Senior unsecured debt   Baa1   BBB    BBB+
Subordinated debt   Baa2   BBB-   BBB  

PHH
 
 
 
 
 
 
Senior debt   Baa1   A-   BBB+
Short-term debt   P-2   A-2   F-2

In February 2002, the credit ratings assigned to us and to PHH by Moody's Investors Service and Standard & Poor's were affirmed. A security rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal at any time.

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Affiliated Entities

We also maintain certain relationships with affiliated entities principally to support our business model of growing earnings and cash flow with minimal asset risk. We do not have the ability to control the operating and financial policies of these entities and, accordingly, do not consolidate these entities in our results of operations, financial position or cash flows. Certain of our officers serve on the Board of Directors of these entities, but in no instances do they constitute a majority of the Board, nor do they receive any economic benefits.

NRT Incorporated

NRT Incorporated is a joint venture between us and Apollo Management, L.P. NRT acquires independent real estate brokerages, converts them to one of our real estate brands and operates the brand under a 50-year franchise agreement with us. The original business purpose of this relationship was to permit us to maintain and expand our original business purpose as a franchisor in the lodging and residential real estate brokerage industries without directly competing with our existing franchisees. This structure permitted us to receive a royalty stream on NRT's revenues consistent with other franchisees and to receive a market rate return on the preferred investment. Upon NRT's formation, we committed to participate in acquisitions made by NRT by acquiring intangible assets and, in some cases, mortgage operations of the real estate brokerage firms acquired by NRT, which result in us recording franchise agreements or other intangible assets on our Consolidated Balance Sheets. As of December 31, 2001, we had committed to participate in additional NRT acquisitions for which we would fund up to $592 million ($500 million of which will not be funded prior to February 2004).

Franchise agreements of $854 million and other intangible assets of $29 million, which resulted from the acquisition of mortgage operations through NRT, are recorded on our Consoldiated Balance Sheet as of December 31, 2001. Except for the term and the lack of a royalty rebate provision, these franchise agreements are similar to those of our other real estate franchisees. NRT pays us royalty and advertising fees in connection with these franchise agreements based on the real estate commissions earned by NRT, which approximated $220 million, $198 million and $172 million during 2001, 2000 and 1999, respectively. Additionally, during 2001, we received $16 million of other fees from NRT, which included a fee paid in connection with the termination of a franchise agreement under which NRT operated our Century 21 real estate brand. The mortgage operations we acquired through NRT were immediately integrated into our existing mortgage operations. We also receive real estate referral fees from NRT in connection with clients referred to NRT by our relocation business. These fees are based on a standard real estate brokerage agreement, in which the franchisor receives approximately 40% of the commission. During 2001, 2000 and 1999, such fees were approximately $37 million, $25 million and $15 million, respectively. These fees are also paid to us by all other real estate brokerages (both affiliates and non-affiliates) who receive referrals from our relocation business. In February 1999, we advanced $35 million to NRT for services to be provided related to the identification of potential acquisition candidates, the negotiation of agreements and other services in connection with future brokerage acquisitions by NRT. As NRT makes acquisitions, we capitalize a proportionate share of this advance, which is then amortized over the term of the franchise agreement. As of December 31, 2001, the remaining balance of this advance was $12 million. Such amount is refundable in the event that services are not provided and therefore is accounted for as a prepaid asset until services are rendered by NRT.

Apollo's original investment in NRT consisted of a $20 million investment in NRT's common stock and a $54 million investment in NRT's preferred stock, which was subsequently redeemed in 1999. As of December 31, 2001, we owned all of NRT's preferred stock, which approximated $384 million as of December 31, 2001. This ownership entitles us to preferred dividends at 5% to 9% of our investment, which we negotiated with NRT and Apollo. We have the option, upon the occurrence of certain events, to convert a portion of our preferred stock investment into no more than 50% of NRT's common stock. As of December 31, 2001, none of the events that would have caused the preferred stock to be currently convertible had occurred and there was no common management between us, Apollo and NRT. We also have the option to purchase all of NRT's common stock from Apollo for $20 million. This option is not

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exercisable until August 11, 2002 and is conditional upon NRT's payment of $166 million to Apollo. We may exercise the option prior to August 11, 2002 if we satisfy NRT's obligation. If NRT is unable to make the $166 million payment to Apollo, we would be required to make the payment on behalf of NRT and would receive additional NRT preferred stock in exchange. As of December 31, 2001, NRT had $291 million in debt, which is non-recourse to us. NRT has ten seats on its board of directors, four of which were under our control as of December 31, 2001. In addition, without the consent of both Cendant and Apollo, NRT cannot make capital expenditures over $500,000; approve its business plan; engage in any affiliate transactions; acquire a brokerage for more than $2 million; appoint or terminate an officer; amend the by-laws, charter or material agreements; incur debt over $500,000; issue or redeem equity, sell assets or combine with any business; file a registration statement; settle any litigation or pay a dividend.

Trip Network, Inc.

During March 2001, we funded the creation of Trip Network with a contribution of assets valued at approximately $20 million in exchange for all of the common and preferred stock of Trip Network. We transferred all the common shares of Trip Network to the Hospitality Technology Trust, an independent technology trust that is controlled by three independent trustees who are not officers, directors or employees of Cendant or relatives of officers, directors or employees of Cendant. The trust was established in 1997 for purposes of enhancing and promoting the use of advanced technology for our lodging brands, its beneficiaries, including providing financial and technology support services and investing in Internet related activities for the benefit of its beneficiaries. The hotel franchise chains have agreed to link their brand and property Web sites to Trip.com, for among other reasons because of their beneficial interest in the trust. Management believes that the enhanced functionality for the brand and property Web pages to be provided by Trip.com links will help build customer loyalty and avoid the problem of viewers leaving the brand and property web sites for the sites of competitors. Additionally, management believes that the aggregate links of all franchisee properties creates critical mass and web-traffic for Trip Network further enhancing its ablility to be successful. If Trip Network is successful, then management believes the common shares will likely appreciate in value. The liquidation of shares (representing the trust's equity stake, which approximates 20% of Trip Network's common stock on a fully diluted basis) will provide the trust with further resources to pursue its stated objectives. Further, as Trip Network provides travel services to both our franchisees as well as non-franchisees, our contribution of the Trip Network common stock to the Hospitality Technology Trust supported our lodging franchise business model whereby we do not compete directly with our franchisees for the sale of transient hotel rooms.

The preferred stock investment, which is convertible into approximately 80% of Trip Network's common stock on a fully diluted basis, is not convertible prior to March 31, 2003, except upon a change of control of Trip Network. Subsequently, we contributed $85 million, including $45 million in cash and 1.5 million shares of Homestore common stock, then-valued at $34 million, to Trip Network to pursue the development of an online travel business for the benefit of certain of our current and future franchisees. Such amount was expensed during 2001. We also received warrants to purchase up to 28,250 shares of Trip Network's common stock, which are exercisable, at our option, upon the achievement of certain valuations beginning on March 31, 2003 or upon a change of control at Trip Network at an exercise price of $0.01 per share. This arrangement is consistent with our strategy of creating a single platform to research and develop Internet related products within an integrated business plan. Since we do not have the in-house expertise to develop new technology for Internet Web sites, we outsourced the development of certain Internet assets and Web-site features to Trip Network.

During October 2001, we entered into two separate lease and licensing agreements with Trip Network, whereby, Trip Network was granted a license to operate the online businesses of Trip.com, Inc. and Cheap Tickets (both wholly-owned subsidiaries of Cendant) and a lease or sublease, as applicable, to all the assets of these companies necessary to operate such businesses. The Trip.com license agreement has a one-year term and is renewable at Trip Network's option for 40 additional one-year periods. The Cheaptickets.com license agreement has a 40-year term. Under these agreements, we receive a license fee of 3% of revenues generated by Trip.com and Cheaptickets.com during the term of the agreements. We also received warrants to purchase up to 46,000 shares of Trip Network common stock, which are exercisable upon

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achievement of certain financial results beginning in October 2003 or upon a change of control of Trip Network. The royalty rate and warrants were negotiated with and approved by Trip Network's board of directors. We proposed our royalty rate based upon market rate analysis of similar licensing type agreements. Also during October 2001, we entered into a travel services agreement with Trip Network, whereby we provide Trip Network with call center services. In addition, we process and support Trip Network's booking and fulfillment of travel transactions and provide travel-related products and services to maintain and develop relationships, discounts and favorable commissions with travel vendors. For these services, we receive a fee of cost plus an applicable mark-up, which was determined based upon our understanding of profit margins in the travel agency industry. During 2001, the revenue we received in connection with these agreements was not material. Additionally, during October 2001, we entered into a 40-year global distribution services subscriber agreement with Trip Network, whereby we provide all global distribution services for Trip Network. We are not obligated or contingently liable for any debt incurred by Trip Network. We recorded a prepaid asset of approximately $40 million in connection with this agreement, which is being amortized over 40 years. The $40 million was computed as the present value of the expected benefit we would realize in lieu of paying financial assistance at market rates for expected volumes at an appropriate discount rate. Amortization of the asset is calculated in direct proportion to the expected cash flow benefits.

FFD Development Company, LLC

Prior to our acquisition of Fairfield in April 2001, Fairfield contributed approximately $60 million of timeshare inventory and $4 million of cash to FFD Development Company LLC, a company created by Fairfield to acquire real estate for construction of vacation ownership units, which are sold to Fairfield upon completion. Fairfield previously operated its own property acquisition, planning, design and construction function. This function was transferred to FFD immediately prior to our acquisition of Fairfield. Former Fairfield employees who were responsible for the timeshare property development became employed by FFD as part of the spin-off. Given the extensive knowledge of Fairfield's standards and specifications as it related to the procurement of property and the planning and construction of the timeshares, we continue to rely on the relationship between Fairfield and FFD.

In exchange for the contribution of timeshare inventory and cash, Fairfield received all of the common and preferred equity interests of FFD. Fairfield then contributed all the common equity interest to an independent trust and retained a convertible preferred equity interest, which is convertible at any time, and a warrant to purchase FFD's common equity. The warrant is not exercisable until April 2004, except upon the occurrence of specified events, including our conversion of more than half of our preferred equity interest into common equity interests. In connection with our acquisition of Fairfield in April 2001, we, through our Fairfield subsidiary, now own the preferred equity interest, which approximated $59 million as of December 31, 2001, and the warrant to purchase a common equity interest in FFD. The warrant is exercisable in whole or in increments of 25% upon payment in cash or in kind of an amount per percentage of common interest exercised, which is equal to the lower of 80% of the book value per common interest as of April 2, 2001 and 90% of the book value per common interest as of the warrant exercise date. During 2001, we recognized dividend income on our preferred interest of $6 million, which was paid-in-kind on a quarterly basis based on an 18% annual return on our preferred equity interest in FFD. The dividend rate was agreed upon in FFD's amended operating agreement among Fairfield, FFD and the independent trust. Upon the conversion of such preferred equity interests and the exercise of such warrant, we would own approximately 75% of FFD's common equity interests on a fully diluted basis. Additionally, we are now obligated to fulfill Fairfield's purchase commitments with FFD. However, under the development contracts with FFD, we are not obligated to purchase a resort property until construction is completed to the contractual specifications, a certificate of occupancy is delivered and clear title is obtained. Fairfield also leases office space to FFD and provides various services to FFD in exchange for a fee, including general management services, information and technology support and human resources administration. During 2001, we purchased $40 million of timeshare interval inventory and land from FFD and as of December 31, 2001 are obligated to purchase an additional $98 million. FFD is obligated to finance, plan, design and construct vacation ownership units according to Fairfield's specifications and deliver those units according

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to an agreed schedule and at agreed purchase prices. The schedule and prices allow for FFD to charge cost plus an applicable mark-up, which was 17.4% in 2001. Such fee arrangement is provided by in the operating agreement between Fairfield and FFD. The purchase price, which includes FFD's fee, is agreed upon by Fairfield and FFD based upon the cost of construction. The delivery date is agreed upon by Fairfield and FFD based upon the time necessary to complete construction and when Fairfield requires the completed inventory for sale and deeding to its customers. Subsequent to December 31, 2001, as is customary in "build to suit" agreements, when we contract with FFD for the development of a property, we will issue a letter of credit for up to 20% of our purchase price for such property. Drawing under all such letters of credit will only be permitted if we fail to meet our obligation under any purchase commitment. While we intend to issue such letters of credit in 2002, no such letters of credit were outstanding at December 31, 2001. We are not obligated or contingently liable for any obligations incurred by FFD.

Trilegiant Corporation.    On July 2, 2001, we entered into an agreement with Trilegiant Corporation, a newly-formed company owned by the former management of our Cendant Membership Services and Cendant Incentives subsidiaries, whereby we outsourced our individual membership and loyalty business to Trilegiant. Trilegiant operates membership-based clubs and programs and other incentive-based programs. As part of this agreement, Trilegiant provides fulfillment services (including collecting cash, paying commissions, processing refunds, providing membership services and benefits and maintaining specified service level standards) to members of our individual membership business that existed as of the transaction date in exchange for a servicing fee pursuant to the Third Party Administrator agreement, which is cost plus 10%. During 2001, we paid Trilegiant $106 million in connection with services provided under the Third Party Administrator agreement and Trilegiant collected $212 million of cash on our behalf in connection with membership renewals. Additionally, as of December 31, 2001, Trilegiant owed us $7 million in connection with services provided under the Third Party Administrator agreement.

Additionally, Trilegiant is licensing and/or leasing from us the assets of our individual membership business in order to service these members and also to obtain new members. The assets licensed to Trilegiant include various tradenames, trademarks, logos, service marks and other intellectual property relating to its membership business. Upon expiration of the licensing term (40 years), Trilegiant will have the option to purchase any or all of the intellectual property licenses at their then-fair market values. Real property owned by us was leased to Trilegiant on a monthly basis at rates that approximated our depreciation expense. In connection with the licensing and leasing arrangements, Trilegiant paid us $7 million in 2001 and owed us an additional $2 million as of December 31, 2001.

We continue to collect membership fees from, and are obligated to provide membership benefits to, existing members as of July 2, 2001, including their renewals. Trilegiant collects the membership fees from, and is obligated to provide membership benefits to, those new members who join the membership based clubs and programs and all other incentive programs subsequent to July 2, 2001 and will recognize the related revenue and expenses. Beginning in third quarter 2002 and throughout the remainder of the 40-year term of the licensing agreement, we will recognize as revenue the related royalty income received from Trilegiant for membership fees generated by the new members (initially 5%, increasing to approximately 16% over 10 years). We also licensed various tradenames, trademarks, logos, service marks, and other intellectual property relating to our membership business to Trilegiant for 40 years. Upon expiration of the 40-year term, Trilegiant will have the option to purchase any or all of the intellectual property licenses at their then-fair market values.

In connection with the foregoing arrangements, we advanced approximately $100 million in cash and $33 million of prepaid assets to Trilegiant to support their marketing activities and also made a $20 million convertible preferred stock investment in Trilegiant, which is convertible, at our option, into approximately 20% of Trilegiant's common stock on a fully diluted basis. We accounted for the entire advance to Trilegiant as a prepaid expense at the date of advance. The purpose of the advance was to help Trilegiant fund qualified marketing costs associated with obtaining new members whose revenue would become subject to royalties paid to us. We expense such advance as Trilegiant incurs qualified marketing expenses

64


pursuant to the terms of the advance. During 2001, we expensed $66 million of the advance. As of December 31, 2001, the remaining balance of this prepaid expense approximated $67 million.

The preferred stock investment is mandatorily redeemable and, therefore, accounted for as an available-for-sale debt security at fair value, convertible at any time at our option and we are entitled to receive a 12% cumulative non-cash dividend annually through July 2006. During third quarter 2001, we wrote-off the entire amount of our preferred stock investment due to operating losses incurred by Trilegiant and the fact that this entity had relatively thin common equity capitalization since inception.

We also provide Trilegiant with a $35 million revolving line of credit under which advances are at our sole and unilateral discretion. As of December 31, 2001, Trilegiant had not drawn on this line. During August 2001, Trilegiant entered into marketing agreements with a third party, whereby Trilegiant will provide certain marketing services to the third party in exchange for a commission. As part of our royalty arrangement with Trilegiant, we will receive 13% of the commissions paid by the third party to Trilegiant. In connection with these marketing agreements, we provided Trilegiant with a $75 million loan facility bearing interest at a rate of 9% under which we will advance funds to Trilegiant for marketing performed by Trilegiant on behalf of the third party. As of December 31, 2001, the outstanding loan balance under this facility was $24 million. Such amount is accounted for as a note receivable. We evaluate the collectibility of the note at the end of each reporting period. We will collect the receivable as commissions are received by Trilegiant from the third party.

Additionally, we maintain warrants to purchase up to 2.1 million shares of Trilegiant's common stock, which are exercisable, at our option, at an exercise price of $0.01 per share, upon the achievement of certain business valuations ranging from $200 million to $750 million, into a majority ownership interest in Trilegiant. We are not obligated or contingently liable for any debt incurred by Trilegiant.

Trilegiant's Board of Directors is comprised of three directors elected by the Trilegiant management (as the common shareholder) and three directors elected by us (as the sole preferred shareholder).

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Goodwill and Other Intangible Assets.    On January 1, 2002, we adopted SFAS No. 142, "Goodwill and Other Intangible Assets" in its entirety. SFAS No. 142 addresses the financial accounting and reporting standards for the acquisition of intangible assets outside of a business combination and for goodwill and other intangible assets subsequent to their acquisition. This standard eliminates the amortization of goodwill and indefinite lived intangible assets. Intangible assets with finite lives will continue to be amortized over their estimated useful lives. We will be required to assess goodwill and indefinite lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. We have reassessed the useful lives assigned to our intangible assets acquired in transactions consummated prior to July 1, 2001 and the related amortization methodology. Accordingly, we identified those intangible assets that have indefinite lives, adjusted the future amortization periods of certain intangible assets appropriately and changed our amortization methodology where appropriate.

In accordance with SFAS No. 142, we did not amortize goodwill and indefinite lived intangible assets acquired after June 30, 2001. As of January 1, 2002, we discontinued the amortization of all goodwill and indefinite lived intangible assets. Based upon a preliminary assessment, we expect that the increase in net income from the application of the non-amortization provisions of SFAS No. 142 would have approximated $154 million, $76 million and $83 million for 2001, 2000 and 1999, respectively.

As previously described, the initial implementation of this standard will not impact our results of operations during 2002.

Impairment or Disposal of Long-Lived Assets.    During October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and replaces the accounting and reporting provisions of APB Opinion No. 30, "Reporting Results of Operations—Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual

65


and Infrequently Occurring Events and Transactions," as it relates to the disposal of a segment of a business. SFAS No. 144 requires the use of a single accounting model for long-lived assets to be disposed of by sale, including discontinued operations, by requiring those long-lived assets to be measured at the lower of carrying amount or fair value less cost to sell. The impairment recognition and measurement provisions of SFAS No. 121 were retained for all long-lived assets to be held and used with the exception of goodwill. We adopted this standard on January 1, 2002.

FORWARD-LOOKING STATEMENTS

Forward-looking statements in our public filings or other public statements are subject to known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements include the information concerning our future financial performance, business strategy, projected plans and objectives.

Statements preceded by, followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "project", "estimates", "plans", "may increase", "may fluctuate" and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. You should understand that the following important factors and assumptions could affect our future results and could cause actual results to differ materially from those expressed in such forward-looking statements:

66

Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements, and the failure of such other assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond our control.

You should consider the areas of risk described above in connection with any forward-looking statements that may be made by us and our businesses generally. Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless required by law. For any forward-looking statements contained in any document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We use various financial instruments, particularly swap contracts, forward delivery commitments and futures and options contracts to manage and reduce the interest rate risk related specifically to our committed mortgage pipeline, mortgage loan inventory, mortgage servicing rights, mortgage-backed securities, debt and certain other interest bearing liabilities. Foreign currency forwards are also used to manage and reduce the foreign currency exchange rate risk associated with our foreign currency denominated receivables and forecasted royalties, forecasted earnings of foreign subsidiaries and forecasted foreign currency denominated acquisitions.

We are exclusively an end user of these instruments, which are commonly referred to as derivatives. We do not engage in trading, market-making, or other speculative activities in the derivatives markets. More detailed information about these financial instruments is provided in Note 23—Financial Instruments to our Consolidated Financial Statements.

Our principal market exposures are interest and foreign currency rate risks.

We assess our market risk based on changes in interest and foreign currency exchange rates utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in earnings, fair values and cash flows based on a hypothetical 10% change (increase and decrease) in interest and currency rates.

67


We use a discounted cash flow model in determining the fair values of relocation receivables, timeshare receivables, equity advances on homes, mortgage loans, commitments to fund mortgages, mortgage servicing rights, mortgage-backed securities and our retained interests in securitized assets. The primary assumptions used in these models are prepayment speeds, estimated loss rates, and discount rates. In determining the fair value of mortgage servicing rights and mortgage-backed securities, the models also utilize credit losses and mortgage servicing revenues and expenses as primary assumptions. In addition, for commitments to fund mortgages, the borrower's propensity to close their mortgage loan under the commitment is used as a primary assumption. For mortgage loans, commitments to fund mortgages, forward delivery contracts and options, we rely on prices sourced from Bloomberg in determining the impact of interest rate shifts. We also utilize an option-adjusted spread ("OAS") model to determine the impact of interest rate shifts on mortgage servicing rights and mortgage-backed securities. The primary assumption in an OAS model is the implied market volatility of interest rates and prepayment speeds and the same primary assumptions used in determining fair value.

We use a duration-based model in determining the impact of interest rate shifts on our debt portfolio, certain other interest bearing liabilities and interest rate derivatives portfolios. The primary assumption used in these models is that a 10% increase or decrease in the benchmark interest rate produces a parallel shift in the yield curve across all maturities.

We use a current market pricing model to assess the changes in the value of the U.S. dollar on foreign currency denominated monetary assets and liabilities and derivatives. The primary assumption used in these models is a hypothetical 10% weakening or strengthening of the U.S. dollar against all our currency exposures at December 31, 2001, 2000 and 1999.

Our total market risk is influenced by a wide variety of factors including the volatility present within the markets and the liquidity of the markets. There are certain limitations inherent in the sensitivity analyses presented. While probably the most meaningful analysis permitted, these "shock tests" are constrained by several factors, including the necessity to conduct the analysis based on a single point in time and the inability to include the complex market reactions that normally would arise from the market shifts modeled.

We used December 31, 2001, 2000 and 1999 market rates on our instruments to perform the sensitivity analyses separately for each of our market risk exposures—interest and currency rate instruments. The estimates are based on the market risk sensitive portfolios described in the preceding paragraphs and assume instantaneous, parallel shifts in interest rate yield curves and exchange rates.

We have determined that the impact of a 10% change in interest and foreign currency exchange rates and prices on our earnings, fair values and cash flows would not be material.

While these results may be used as benchmarks, they should not be viewed as forecasts.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Financial Statements and Financial Statement Index commencing on Page F-1 hereof.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information contained in the Company's Annual Proxy Statement under the sections titled "Executive Officers", "Election of Directors", "Executive Officers" and "Compliance with Section 16(a) of the Exchange Act" are incorporated herein by reference in response to this item.

68


ITEM 11. EXECUTIVE COMPENSATION

The information contained in the Company's Annual Proxy Statement under the section titled "Executive Compensation and Other Information" is incorporated herein by reference in response to this item.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information contained in the Company's Annual Proxy Statement under the section titled "Security Ownership of Certain Beneficial Owners and Management" is incorporated herein by reference in response to this item.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information contained in the Company's Annual Proxy Statement under the section titled "Certain Relationships and Related Transactions" is incorporated herein by reference in response to this item.

ITEM 14. CONTROLS AND PROCEDURES.

        (a)    Evaluation of Disclosure Controls and Procedures.    Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to our company (including our consolidated subsidiaries) required to be included in our reports filed or submitted under the Exchange Act.

        (b)    Changes in Internal Controls.    Since the Evaluation Date, there have not been any significant changes in our internal controls or in other factors that could significantly affect such controls.


PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

ITEM 15(A)(1) FINANCIAL STATEMENTS

See Financial Statements and Financial Statements Index commencing on page F-1 hereof.

ITEM 15(A)(3) EXHIBITS

See Exhibit Index commencing on page G-1 hereof.

ITEM 15(B) REPORTS ON FORM 8-K

On October 2, 2001, we filed a current report on Form 8-K to report under Item 5 the issuance of a press release updating our operations, estimating the impact of the September 11, 2001 terrorist attacks on our financial results and to provide an update on our planned acquisitions of Galileo International, Inc. and Cheap Tickets, Inc.

On October 15, 2001, we filed a current report on Form 8-K to report under Item 5 the acquisition of Galileo International, Inc.

On October 18, 2001, we filed a current report on Form 8-K to report under Item 5 third quarter 2001 results.

On October 23, 2001, we filed a current report on Form 8-K to report under Item 5 consolidated free cash flows for the nine months and twelve months ended September 30, 2001 and 2000, respectively.

On December 6, 2001, we filed a current report on Form 8-K to report under Item 5 the sale of $1 billion aggregate principal amount of 37/8% convertible senior debentures due 2011.

69


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

    CENDANT CORPORATION

 
 
By:
 
/s/  JAMES E. BUCKMAN      
       
James E. Buckman
 Vice Chairman and General Counsel
Date: November 4, 2002

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature
   Title
   Date

 
 
 
 
 
/s/  HENRY R. SILVERMAN      
(Henry R. Silverman)		   Chairman of the Board, President, Chief Executive Officer and Director   November 4, 2002

/s/  JAMES E. BUCKMAN      
(James E. Buckman)
 
Vice Chairman, General Counsel and Director
 
November 4, 2002

/s/  STEPHEN P. HOLMES      
(Stephen P. Holmes)
 
Vice Chairman and Director
 
November 4, 2002

/s/  KEVIN M. SHEEHAN      
(Kevin M. Sheehan)
 
Senior Executive Vice President and Chief Financial Officer
 
November 4, 2002

/s/  TOBIA IPPOLITO      
(Tobia Ippolito)
 
Executive Vice President and Chief Accounting Officer
 
November 4, 2002

/s/  MYRA J. BIBLOWIT      
(Myra J. Biblowit)
 
Director
 
November 4, 2002

(The Honorable William S. Cohen)
 
Director
 
November 4, 2002

/s/  LEONARD S. COLEMAN      
(Leonard S. Coleman)
 
Director
 
November 4, 2002

/s/  MARTIN L. EDELMAN      
(Martin L. Edelman)
 
Director
 
November 4, 2002

/s/  DR. JOHN C. MALONE      
(Dr. John C. Malone)
 
Director
 
November 4, 2002

/s/  CHERYL D. MILLS      
(Cheryl D. Mills)
 
Director
 
November 4, 2002

 
 
 
 
 

70


/s/  BRIAN MULRONEY      
(The Rt. Hon. Brian Mulroney, P.C., L.L.D.)
 
Director
 
November 4, 2002

/s/  ROBERT E. NEDERLANDER      
(Robert E. Nederlander)
 
Director
 
November 4, 2002

(Robert W. Pittman)
 
Director
 
November 4, 2002

(Sheli Z. Rosenberg)
 
Director
 
November 4, 2002

(Robert F. Smith)
 
Director
 
November 4, 2002

71


CERTIFICATIONS

I, Henry R. Silverman, certify that:

        1.    I have reviewed this annual report on Form 10-K/A of Cendant Corporation;

        2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

        3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

        4.    The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

        5.    The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

        6.    The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 4, 2002

/s/ HENRY R. SILVERMAN


Chief Executive Officer

72

I, Kevin M. Sheehan, certify that:

        1.    I have reviewed this annual report on Form 10-K/A of Cendant Corporation;

        2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

        3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

        4.    The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

        5.    The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

        6.    The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 4, 2002

/s/ KEVIN M. SHEEHAN


Chief Financial Officer

73


INDEX TO RESTATED FINANCIAL STATEMENTS

 
   Page
Independent Auditors' Report   F-2

Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999
 
F-3

Consolidated Balance Sheets as of December 31, 2001 and 2000
 
F-4

Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999
 
F-5

Consolidated Statements of Stockholders' Equity for the years ended December 31, 2001, 2000 and 1999
 
F-7

Notes to Consolidated Financial Statements
 
F-9

F-1


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of Cendant Corporation

We have audited the accompanying consolidated balance sheets of Cendant Corporation and subsidiaries (the "Company") as of December 31, 2001 and 2000, and the related consolidated statements of operations, cash flows and stockholders' equity for each of the three years in the period ended December 31, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, in 2001, the Company modified the accounting treatment relating to securitization transactions and the accounting for derivative instruments and hedging activities. Also, as discussed in Note 1, in 2000, the Company revised certain revenue recognition policies.

As discussed in Notes 1 and 5 to the consolidated financial statements, in connection with the disposition of the Company's National Car Parks subsidiary ("NCP") in May 2002, the account balances and activities of NCP have been segregated and reported as a discontinued operation for all periods presented.

/s/ Deloitte & Touche
New York, New York
February 7, 2002
(April 1, 2002 as to the subsequent events described in Note 28)
(August 12, 2002 as to the effects of the discontinued
        operation described in Notes 1 and 5 and as to the
        pro forma effect of the non-amortization of goodwill described in Note 1)

F-2


Cendant Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)

 
   Year Ended December 31,
  
 
   2001
   2000
   1999
  
Revenues                    
  Service fees and membership-related, net   $ 5,434   $ 4,191   $ 4,831  
  Vehicle-related     3,134     11     758  
  Other     45     118     166  
   
 
 
 
Net revenues     8,613     4,320     5,755  
   
 
 
 
Expenses                    
  Operating     2,658     1,176     1,572  
  Vehicle depreciation, lease charges and interest, net     1,789     —     674  
  Marketing and reservation     1,114     896     1,009  
  General and administrative     965     663     706  
  Non-vehicle depreciation and amortization     477     321     338  
  Other charges:                    
    Restructuring and other unusual charges     379     109     117  
    Acquisition and integration related costs     112     —     —  
    Mortgage servicing rights impairment     94     —     —  
    Litigation settlement and related costs, net     86     2     2,915  
  Non-vehicle interest (net of interest income of $91, $73 and $38)     252     152     201  
   
 
 
 
Total expenses     7,926     3,319     7,532  
   
 
 
 
Gains on dispositions of businesses     443     37     1,142  
   
 
 
 
Losses on dispositions of businesses     (26 )   (45 )   (33 )
   
 
 
 
Impairment of investments     (441 )   —     —  
   
 
 
 
Income (loss) before income taxes, minority interest and equity in Homestore.com     663     993     (668 )
Provision (benefit) for income taxes     220     341     (422 )
Minority interest, net of tax     24     83     61  
Losses related to equity in Homestore.com, net of tax     77     —     —  
   
 
 
 
Income (loss) from continuing operations     342     569     (307 )
Income from discontinued operations, net of tax     81     91     78  
Gain on disposal of discontinued operations, net of tax     —     —     174  
   
 
 
 
Income (loss) before extraordinary loss and cumulative effect of accounting changes     423     660     (55 )
Extraordinary loss, net of tax     —     (2 )   —  
   
 
 
 
Income (loss) before cumulative effect of accounting changes     423     658     (55 )
Cumulative effect of accounting changes, net of tax     (38 )   (56 )   —  
   
 
 
 
Net income (loss)   $ 385   $ 602   $ (55 )
   
 
 
 
CD common stock income (loss) per share                    
  Basic                    
    Income (loss) from continuing operations   $ 0.37   $ 0.79   $ (0.41 )
    Net income (loss)     0.42     0.84     (0.07 )
  Diluted                    
    Income (loss) from continuing operations   $ 0.36   $ 0.77   $ (0.41 )
    Net income (loss)     0.41     0.81     (0.07 )

See Notes to Consolidated Financial Statements.

F-3


Cendant Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)

 
   December 31,
  
 
   2001
   2000
  
ASSETS              
Current assets:              
  Cash and cash equivalents   $ 1,942   $ 856  
  Receivables (net of allowance for doubtful accounts of $104 and $74)     1,313     746  
  Stockholder litigation settlement trust     1,410     —  
  Deferred income taxes     697     174  
  Assets of discontinued operations     1,310     1,401  
  Other current assets     1,045     756  
   
 
 
Total current assets     7,717     3,933  
Property and equipment, net     1,394     735  
Stockholder litigation settlement trust     —     350  
Deferred income taxes     771     1,191  
Franchise agreements (net of accumulated amortization of $322 and $264)     1,656     1,462  
Goodwill (net of accumulated amortization of $483 and $341)     7,360     2,524  
Other intangibles, net     1,210     647  
Other noncurrent assets     1,568     1,450  
   
 
 
Total assets exclusive of assets under programs     21,676     12,292  
   
 
 
Assets under management and mortgage programs:              
  Mortgage loans held for sale     1,244     879  
  Relocation receivables     292     329  
  Vehicle-related, net     8,073     —  
  Timeshare receivables     222     —  
  Mortgage servicing rights, net     2,037     1,653  
   
 
 
      11,868     2,861  
   
 
 
Total assets   $ 33,544   $ 15,153  
   
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY              
Current liabilities:              
  Accounts payable and other current liabilities   $ 3,468   $ 1,350  
  Current portion of long-term debt     401     —  
  Stockholder litigation settlement     2,850     —  
  Liabilities of discontinued operations     172     176  
  Deferred income     900     1,007  
   
 
 
Total current liabilities     7,791     2,533  
Long-term debt, excluding Upper DECS     5,731     1,948  
Upper DECS     863     —  
Stockholder litigation settlement     —     2,850  
Deferred income     297     411  
Other noncurrent liabilities     525     63  
   
 
 
Total liabilities exclusive of liabilities under programs     15,207     7,805  
   
 
 
Liabilities under management and mortgage programs:              
  Debt     9,844     2,040  
  Deferred income taxes     1,050     476  
   
 
 
      10,894     2,516  
   
 
 
Mandatorily redeemable preferred interest in a subsidiary     375     375  
   
 
 
Mandatorily redeemable preferred securities issued by subsidiary holding solely senior debentures issued by the Company     —     1,683  
   
 
 
Commitments and contingencies (Note 19)              
Stockholders' equity:              
  Preferred stock, $.01 par value—authorized 10 million shares; none issued and outstanding     —     —  
  CD common stock, $.01 par value—authorized 2 billion shares; issued 1,166,492,626 and 914,655,918 shares     11     9  
  Move.com common stock, $.01 par value—authorized 500 million shares; issued and outstanding none and 2,181,586 shares; notional issued shares with respect to Cendant Group's retained interest 22,500,000     —     —  
  Additional paid-in capital     8,676     4,540  
  Retained earnings     2,412     2,027  
  Accumulated other comprehensive loss     (264 )   (234 )
  CD treasury stock, at cost—188,784,284 and 178,949,432 shares     (3,767 )   (3,568 )
   
 
 
Total stockholders' equity     7,068     2,774  
   
 
 
Total liabilities and stockholders' equity   $ 33,544   $ 15,153  
   
 
 

See Notes to Consolidated Financial Statements.

F-4


Cendant Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

 
   Year Ended December 31,
  
 
   2001
   2000
   1999
  
Operating Activities                    
Net income (loss)   $ 385   $ 602   $ (55 )
Adjustments to arrive at income (loss) from continuing operations     (43 )   (33 )   (252 )
   
 
 
 
Income (loss) from continuing operations     342     569     (307 )

Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities:
 
 
 
 
 
 
 
 
 
 
  Non-vehicle depreciation and amortization     477     321     338  
  Non-cash portion of other charges     298     24     2,869  
  Gain on dispositions of business     (443 )   (37 )   (1,142 )
  Losses on dispositions of business     26     45     33  
  Impairment of investments     441     —     —  
  Proceeds from sales of trading securities     110     —     180  
  Purchases of trading securities     —     —     (147 )
  Deferred income taxes     394     25     260  
  Net change in operating assets and liabilities, excluding the impact of acquisitions and dispositions:                    
    Receivables     10     198     (214 )
    Income taxes     (177 )   319     (702 )
    Accounts payable and other current liabilities     232     (213 )   38  
    Deferred income     (162 )   (79 )   (83 )
    Other, net     (150 )   (221 )   (181 )
   
 
 
 
Net cash provided by operating activities exclusive of management and mortgage programs     1,398     951     942  
   
 
 
 
Management and mortgage programs:                    
  Depreciation and amortization     1,659     153     698  
  Origination of mortgage loans     (40,963 )   (24,196 )   (25,025 )
  Proceeds on sale of and payments from mortgage loans held for sale     40,643     24,428     26,328  
   
 
 
 
      1,339     385     2,001  
   
 
 
 
Net cash provided by operating activities     2,737     1,336     2,943  
   
 
 
 

Investing Activities
 
 
 
 
 
 
 
 
 
 
Property and equipment additions     (329 )   (192 )   (239 )
Funding of stockholder litigation settlement trust     (1,060 )   (350 )   —  
Proceeds from sales of available-for-sale securities     36     379     741  
Purchases of available-for-sale securities     (35 )   (441 )   (672 )
Purchases of non-marketable securities     (101 )   (90 )   (18 )
Net assets acquired (net of cash acquired of $308 in 2001) and acquisition-related payments     (2,757 )   (106 )   (205 )
Net proceeds from dispositions of businesses     109     4     3,509  
Other, net     (69 )   (24 )   8  
   
 
 
 
Net cash provided by (used in) investing activities exclusive of management and mortgage programs     (4,206 )   (820 )   3,124  
   
 
 
 

F-5

Management and mortgage programs:                    
  Investment in vehicles     (14,906 )   —     (2,378 )
  Payments received on investment in vehicles     13,324     —     1,604  
  Origination of timeshare receivables     (497 )   —     —  
  Principal collection of timeshare receivables     538     —     —  
  Equity advances on homes under management     (6,306 )   (7,637 )   (7,608 )
  Repayment on advances on homes under management     6,340     8,009     7,688  
  Net additions to mortgage servicing rights and related hedges     (752 )   (778 )   (727 )
  Proceeds from sales of mortgage servicing rights     58     84     156  
   
 
 
 
      (2,201 )   (322 )   (1,265 )
   
 
 
 
Net cash provided by (used in) investing activities     (6,407 )   (1,142 )   1,859  
   
 
 
 

Financing Activities
 
 
 
 
 
 
 
 
 
 
Proceeds from borrowings     5,608     —     1,719  
Principal payments on borrowings     (2,213 )   (897 )   (2,213 )
Issuances of common stock     877     603     127  
Repurchases of common stock     (254 )   (381 )   (2,863 )
Proceeds from mandatorily redeemable preferred interest in a subsidiary     —     375     —  
Proceeds from mandatorily redeemable preferred securities issued by subsidiary holding solely senior debentures issued by the Company     —     91     —  
Other, net     (153 )   —     —  
   
 
 
 
Net cash provided by (used in) financing activities exclusive of management and mortgage programs     3,865     (209 )   (3,230 )
   
 
 
 
Management and mortgage programs:                    
  Proceeds from borrowings     9,460     4,133     5,263  
  Principal payments on borrowings     (8,798 )   (5,320 )   (7,838 )
  Net change in short-term borrowings     116     913     (2,000 )
  Proceeds received for debt repayment in connection with disposal of fleet businesses     —     —     3,017  
   
 
 
 
      778     (274 )   (1,558 )
   
 
 
 
Net cash provided by (used in) financing activities     4,643     (483 )   (4,788 )
   
 
 
 
Effect of changes in exchange rates on cash and cash equivalents     (8 )   (6 )   36  
Cash provided by discontinued operations     121     89     79  
   
 
 
 
Net increase (decrease) in cash and cash equivalents     1,086     (206 )   129  
Cash and cash equivalents, beginning of period     856     1,062     933  
   
 
 
 
Cash and cash equivalents, end of period   $ 1,942   $ 856   $ 1,062  
   
 
 
 
Supplemental Disclosure of Cash Flow Information                    
Interest payments   $ 609   $ 263   $ 450  
Income tax payments (refunds), net   $ 40   $ (73 ) $ (46 )

See Notes to Consolidated Financial Statements.

F-6


Cendant Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In millions)

 
   Common Stock
    
    
   Accumulated
Other
Comprehensive
Income (Loss)
   Treasury Stock
    
  
 
   Additional
Paid-in
Capital
   Retained
Earnings
   Total
Stockholders'
Equity
  
 
   Shares
   Amount
   Shares
   Amount
  
Balance at January 1, 1999   861   $ 9   $ 3,863   $ 1,480   $ (49 ) (27 ) $ (467 ) $ 4,836  
Comprehensive loss:                                              
Net loss   —     —     —     (55 )   —   —     —        
Currency translation adjustment   —     —     —     —     (69 ) —     —        
Unrealized gain on available-for-sale securities, net of tax of $22   —     —     —     —     37   —     —        
Reclassification adjustments, net of tax of $13   —     —     —     —     39   —     —        
Total comprehensive loss                                           (48 )
Exercise of stock options   9     —     81     —     —   4     42     123  
Tax benefit from exercise of stock options   —     —     52     —     —   —     —     52  
Repurchases of CD common stock   —     —     —     —     —   (141 )   (2,863 )   (2,863 )
Modifications of stock option plans due to dispositions of businesses   —     —     83     —     —   —     —     83  
Rights issuable   —     —     22     —     —   —     —     22  
Other   —     —     1     —     —   —     —     1  
   
 
 
 
 
 
 
 
 
Balance at December 31, 1999   870     9     4,102     1,425     (42 ) (164 )   (3,288 )   2,206  
Comprehensive income:                                              
Net income   —     —     —     602     —   —     —        
Currency translation adjustment   —     —     —     —     (107 ) —     —        
Unrealized loss on available-for-sale securities, net of tax of ($40)   —     —     —     —     (65 ) —     —        
Reclassification adjustments, net of tax of ($12)   —     —     —     —     (20 ) —     —        
Total comprehensive income                                           410  
Issuances of CD common stock   28     —     476     —     —   —     —     476  
Issuances of Move.com common stock   4     —     93     —     —   —     —     93  
Exercise of stock options   17     —     56     —     —   2     26     82  
Tax benefit from exercise of stock options   —     —     66     —     —   —     —     66  
Repurchases of CD common stock   —     —     —     —     —   (17 )   (306 )   (306 )
Repurchases of Move.com common stock   (2 )   —     (100 )   —     —   —     —     (100 )
Mandatorily redeemable preferred securities issue by subsidiary holding solely senior debentures issued by the Company   —     —     (108 )   —     —   —     —     (108 )
Rights issuable   —     —     (41 )   —     —   —     —     (41 )
Other   —     —     (4 )   —     —   —     —     (4 )
   
 
 
 
 
 
 
 
 
Balance at December 31, 2000   917   $ 9   $ 4,540   $ 2,027   $ (234 ) (179 ) $ (3,568 ) $ 2,774  
   
 
 
 
 
 
 
 
 

F-7

 
   Common Stock
    
    
   Accumulated
Other
Comprehensive
Loss
   Treasury Stock
    
  
 
   Additional
Paid-in
Capital
   Retained
Earnings
   Total
Stockholders'
Equity
  
 
   Shares
   Amount
   Shares
   Amount
  

Balance at January 1, 2001
 
917
 
$
9
 
$
4,540
 
$
2,027
 
$
(234
)
(179
)
$
(3,568
)
$
2,774
 
Comprehensive income:                                              
Net income   —     —     —     385     —   —     —        
Currency translation adjustment   —     —     —     —     (65 ) —     —        
Unrealized losses on cash flow hedges, net of tax of $22   —     —     —     —     (33 ) —     —        
Minimum pension liability adjustment   —     —     —     —     (21 ) —     —        
Unrealized gain on available-for-sale securities, net of tax of $21   —     —     —     —     33   —     —        
Reclassification adjustments,net of tax of $29   —     —     —     —     56   —     —        
Total comprehensive income                                           355  
Issuances of CD common stock   108     1     2,342     —     —   —     —     2,343  
Exercise of stock options   26     —     237     —     —   2     27     264  
Tax benefit from exercise of stock options   —     —     59     —     —   —     —     59  
Repurchases of CD common stock   —     —     —     —     —   (12 )   (226 )   (226 )
Repurchases of Move.com common stock   (2 )   —     (75 )   —     —   —     —     (75 )
Present value of forward purchase contract distributions and related costs   —     —     (48 )   —     —   —     —     (48 )
Modifications to stock options   —     —     25     —     —   —     —     25  
Issuance of CD common stock and conversion of stock options for acquisitions   117     1     1,604     —     —   —     —     1,605  
Other   —     —     (8 )   —     —   —     —     (8 )
   
 
 
 
 
 
 
 
 
Balance at December 31, 2001   1,166   $ 11   $ 8,676   $ 2,412   $ (264 ) (189 ) $ (3,767 ) $ 7,068  
   
 
 
 
 
 
 
 
 

See Notes to Consolidated Financial Statements.

F-8


Cendant Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise noted, all amounts are in millions, except per share amounts)

1.    Summary of Significant Accounting Policies

F-9

F-10

F-11

F-12

F-13

 
   2001
   1999
Depreciation expense   $ 1,406   $ 580
Losses on sales of vehicles, net     27     4
Interest expense, net(a)     329     90
Lease charges     27     —
   
 
    $ 1,789   $ 674
   
 

F-14

F-15

 
   Year Ended December 31,
  
 
   2001
   2000
   1999
  
Reported net income   $ 385   $ 602   $ (55 )
Add back: Goodwill amortization, net of tax     145     67     74  
Add back: Trademark amortization, net of tax     9     9     9  
   
 
 
 
Pro forma net income   $ 539   $ 678   $ 28  
   
 
 
 
Net income per share:                    
Basic                    
  Reported net income   $ 0.42   $ 0.84   $ (0.07 )
  Add back: Goodwill amortization, net of tax     0.17     0.09     0.10  
  Add back: Trademark amortization, net of tax     0.01     0.01     0.01  
   
 
 
 
  Pro forma net income   $ 0.60   $ 0.94   $ 0.04  
   
 
 
 
Diluted                    
  Reported net income   $ 0.41   $ 0.81   $ (0.07 )
  Add back: Goodwill amortization, net of tax     0.16     0.09     0.10  
  Add back: Trademark amortization, net of tax     0.01     0.01     0.01  
   
 
 
 
Pro forma net income   $ 0.58   $ 0.91   $ 0.04  
   
 
 
 

F-16

2.    Earnings Per Share

 
   Year Ended December 31,
  
 
   2001
   2000
   1999
  
CD Common Stock                    
Income (loss) from continuing operations:                    
Cendant Group   $ 87   $ 631   $ (293 )
Cendant Group's retained interest in Move.com Group     238     (56 )   (14 )
   
 
 
 
Income (loss) from continuing operations for basic EPS     325     575     (307 )
Convertible debt interest, net of tax     11     11     —  
Adjustment to Cendant Group's retained interest in Move.com Group(a)     (3 )   —     —  
   
 
 
 
Income (loss) from continuing operations for diluted EPS   $ 333   $ 586   $ (307 )
   
 
 
 
Weighted average shares outstanding:                    
Basic     869     724     751  
  Stock options, warrants and non-vested shares     30     20     —  
  Convertible debt     18     18     —  
   
 
 
 
Diluted     917     762     751  
   
 
 
 
Income (loss) per share:                    
Basic                    
  Income (loss) from continuing operations   $ 0.37   $ 0.79   $ (0.41 )
  Income from discontinued operations     0.10     0.13     0.11  
  Gain on disposal of discontinued operations     —     —     0.23  
  Cumulative effect of accounting changes     (0.05 )   (0.08 )   —  
   
 
 
 
  Net income (loss)   $ 0.42   $ 0.84   $ (0.07 )
   
 
 
 
Diluted                    
  Income (loss) from continuing operations   $ 0.36   $ 0.77   $ (0.41 )
  Income from discontinued operations     0.09     0.12     0.11  
  Gain on disposal of discontinued operations     —     —     0.23  
  Cumulative effect of accounting changes     (0.04 )   (0.08 )   —  
   
 
 
 
  Net income (loss)   $ 0.41   $ 0.81   $ (0.07 )
   
 
 
 
(a)
Represents the change in Cendant Group's retained interest in Move.com Group due to the dilutive impact of Move.com common stock options.

F-17

 
   Year Ended December 31,
  
 
   2001
   2000
  
Move.com Common Stock              
Income (loss) from continuing operations:              
Move.com Group   $ 255   $ (62 )
Less: Cendant Group's retained interest in Move.com Group     238     (56 )
   
 
 
Income (loss) from continuing operations for basic EPS     17     (6 )

Adjustment to Cendant Group's retained interest in Move.com Group(a)
 
 
3
 
 
—
 
   
 
 
Income (loss) from continuing operations for diluted EPS   $ 20   $ (6 )
   
 
 
Weighted average shares outstanding:              
  Basic and Diluted     2     3  
   
 
 
Income (loss) per share:              
  Basic              
    Income (loss) from continuing operations   $ 9.94   $ (1.76 )
    Cumulative effect of accounting changes     (0.07 )   —  
   
 
 
    Net income (loss)   $ 9.87   $ (1.76 )
   
 
 
  Diluted              
    Income (loss) from continuing operations   $ 9.81   $ (1.76 )
    Cumulative effect of accounting changes     (0.07 )   —  
   
 
 
    Net income (loss)   $ 9.74   $ (1.76 )
   
 
 
(a)
Represents the change in Cendant Group's retained interest in Move.com Group due to the dilutive impact of Move.com common stock options.

 
   December 31,
 
   2001
   2000
   1999
CD Common Stock            
  Options(a)   98   110   183
  Warrants(b)   2   2   2
  Convertible debt   —   —   18
  FELINE PRIDES   —   63   41
  Upper DECS(c)   40   —   —

Move.com Common Stock
 
 
 
 
 
 
  Options(d)   —   6   —
(a)
The weighted average exercise prices for antidilutive options at December 31, 2001, 2000 and 1999 were $22.59, $22.27 and $15.24, respectively.
(b)
The weighted average exercise prices for antidilutive warrants at December 31, 2001, 2000 and 1999 were $21.31, $21.31 and $16.77, respectively.
(c)
The appreciation price for antidilutive Upper DECS at December 31, 2001 was $28.42.
(d)
The weighted average exercise price for antidilutive options at December 31, 2000 was $18.60.

F-18

3.    Acquisitions

 
   Amount
  
Cash consideration   $ 937  
Fair value of converted options     17  
Transaction costs and expenses     40  
   
 
Total purchase price     994  
Book value of Cendant's existing net investment in Avis     409  
   
 
Cendant's basis in Avis     1,403  
Less: Historical value of liabilities assumed in excess of assets acquired     (207 )
Less: Fair value adjustments*     (258 )
   
 
Excess purchase price over fair value of assets acquired and liabilities assumed   $ 1,868  
   
 
(*)
Primarily represents (i) the establishment of $125 million of liabilities associated with pre-acquisition contingencies, (ii) $130 million of fair value adjustments to long-term liabilities, (iii) $65 million of costs associated with exiting activities, (iv) $105 million of fair value adjustments to assets acquired primarily related to the vehicle fleet and investments and (v) $28 million of fair value adjustments to liabilities assumed primarily associated with contractual obligations; offset, in part, by (i) $110 million of deferred tax liabilities for book-tax basis differences and (ii) $85 million related to the allocation of the purchase price to identifiable intangible assets.

 
   Costs
   Cash
Payments
   Other
Reductions
   Balance at
December 31,
2001
Personnel related   $ 39   $ (22)   $ —   $ 17
Asset fair value adjustments     19     —     (19 )   —
Facility related     7     —     —     7
   
 
 
 
Total   $ 65   $ (22)   $ (19 ) $ 24
   
 
 
 

F-19

 
   Amount
  
Cash consideration   $ 358  
Issuance of CD common stock     1,482  
Fair value of converted options     32  
Transaction costs and expenses     36  
   
 
Total purchase price     1,908  
Less: Historical value of assets acquired in excess of liabilities assumed     253  
Less: Fair value adjustments(*)     (471 )
   
 
Excess purchase price over fair value of assets acquired and liabilities assumed   $ 2,126  
   
 
(*)
Primarily represents (i) $179 million of deferred tax liabilities for book-tax basis differences and pre-acquisition tax contingencies, (ii) $153 million of costs associated with exiting activities, (iii) $79 million of fair value adjustments to liabilities assumed primarily related to pensions and unfavorable contracts, (iv) $41 million related to the establishment of liabilities associated with pre-acquisition contingencies, (v) $17 million related to the allocation of the purchase price to identifiable intangible assets and (vi) $2 million of fair value adjustments to assets acquired.

 
   Costs
   Cash
Payments
   Other
Reductions
   Balance at
December 31,
2001
Personnel related   $ 44   $ (26)   $ —   $ 18
Asset fair value adjustments and contract terminations     93     (10)     (46 )   37
Facility related     16     —     —     16
   
 
 
 
Total   $ 153   $ (36)   $ (46 ) $ 71
   
 
 
 

F-20

Total current assets   $ 293
Property and equipment, net     330
Intangible assets     444
Goodwill     2,126
Other noncurrent assets     175
   
Total assets acquired     3,368
   
Total current liabilities     741
Long-term debt     453
Other noncurrent liabilities     266
   
Total liabilities assumed     1,460
   
Net assets acquired   $ 1,908
   

F-21

 
   Year Ended December 31,
 
   2001
   2000
Net revenues   $ 10,520   $ 9,828
Income from continuing operations     560     1,001
Net income     596     1,034

CD common stock income per share:
 
 
 
 
 
 
  Basic            
    Income from continuing operations   $ 0.55   $ 1.20
    Net income     0.59     1.24
  Diluted            
    Income from continuing operations   $ 0.53   $ 1.16
    Net income     0.57     1.20

4.    Dispositions of Businesses and Impairment of Investments

 
   2001
   2000
   1999
  
Gains on non-strategic businesses                    
  Move.com and ancillary businesses   $ 436   $ —   $ —  
  Former Fleet segment     —     35     724  
  Entertainment Publications, Inc.     —     —     156  
  North American Outdoor Group     —     —     114  
  Other     7     2     148  
   
 
 
 
    $ 443   $ 37   $ 1,142  
   
 
 
 
Losses on non-strategic businesses   $ (26 ) $ (45 ) $ (33 )
   
 
 
 

Impairment of Investments
 
 
 
 
 
 
 
 
 
 
  Investment in Homestore.com, Inc.   $ (407 ) $ —   $ —  
  Other     (34 )   —     —  
   
 
 
 
    $ (441 ) $ —   $ —  
   
 
 
 

F-22

F-23

5.    Discontinued Operations

 
   NCP
   CSC
 
   2001
   2000
   1999
   1999
                         
Net revenues   $ 337   $ 339   $ 321   $ —
   
 
 
 
Income from discontinued operations:                        
Income before income taxes and minority interest   $ 96   $ 113   $ 94   $ —
Provision for income taxes     15     21     16     —
Minority interest     —     1     —     —
   
 
 
 
Income from discontinued operations, net of tax   $ 81   $ 91   $ 78   $ —
   
 
 
 

F-24

Gain on disposal of discontinued operations:                        
Gain on disposal of discontinued operations   $ —   $ —   $ —   $ 299
Provision for income taxes     —     —     —     125
   
 
 
 
Gain on disposal of discontinued operations, net of tax   $ —   $ —   $ —   $ 174
   
 
 
 
 
   NCP
 
   2001
   2000
             
Assets of discontinued operations:            
Current assets   $ 85   $ 139
Property and equipment     599     610
Goodwill     618     652
Other assets     8     —
   
 
Total assets of discontinued operations   $ 1,310   $ 1,401
   
 
Liabilities of discontinued operations:            
Current liabilities   $ 69   $ 79
Other liabilities     103     97
   
 
Total liabilities of discontinued operations   $ 172   $ 176
   
 

6.    Franchising and Marketing/Reservation Activities

 
   2001
   2000
   1999
Lodging properties   6,624   6,456   6,315
Car rental locations   1,714   1,745   1,642
Tax preparation offices   4,013   3,365   2,845
Real estate brokerage offices   12,361   12,169   11,917

F-25

7.    Other Charges

 
   2001
Restructuring
Charge
   Cash
Payments
   Other
Reductions
   Balance at
December 31,
2001
Personnel related   $ 68   $ 11   $ 5   $ 52
Asset impairments and contract terminations     17     3     10     4
Facility related     25     1     —     24
   
 
 
 
Total   $ 110   $ 15   $ 15   $ 80
   
 
 
 

F-26

 
   2000
Restructuring
Charge
   Cash
Payments
   Other
Reductions
   Balance at
December 31,
2000
   Cash
Payments
   Other
Reductions
   Balance at
December 31,
2001
Personnel related   $ 25   $ 18   $ 1   $ 6   $ 4   $ 2   $ —
Asset impairments and contract terminations     26     1     25     —     —     —     —
Facility related     9     2     1     6     4     2     —
   
 
 
 
 
 
 
Total   $ 60   $ 21   $ 27   $ 12   $ 8   $ 4   $ —
   
 
 
 
 
 
 

F-27

F-28

8.    Income Taxes

 
   Year Ended
December 31,
  
 
   2001
   2000
   1999
  
Current                    
Federal   $ 48   $ 81   $ 306  
State     21     19     9  
Foreign     43     30     35  
   
 
 
 
      112     130     350  
   
 
 
 
Deferred                    
Federal     113     220     (748 )
State     (5 )   (9 )   (24 )
Foreign     —     —     —  
   
 
 
 
      108     211     (772 )
   
 
 
 
Provision (benefit) for income taxes   $ 220   $ 341   $ (422 )
   
 
 
 
 
   Year Ended
December 31,
  
 
   2001
   2000
   1999
  
Domestic   $ 529   $ 896   $ (793 )
Foreign     134     97     125  
   
 
 
 
Pre-tax income (loss)   $ 663   $ 993   $ (668 )
   
 
 
 
 
   December 31,
 
   2001
   2000
Current deferred income tax assets            
Stockholder litigation settlement   $ 536   $ —
Unrealized loss on marketable securities     47     46
Accrued liabilities and deferred income     215     200
Provision for doubtful accounts     47     25
Acquisition and integration related liabilities     22     21
   
 
Current deferred income tax assets     867     292
   
 
Current deferred income tax liabilities            
Insurance retention refund     20     20
Franchise acquisition costs     17     12
Prepaid expense     106     83
Other     27     3
   
 
Current deferred income tax liabilities     170     118
   
 
Current net deferred income tax asset   $ 697   $ 174
   
 

F-29

 
   December 31,
  
 
   2001
   2000
  
Noncurrent deferred income tax assets              
Stockholder litigation settlement   $ —   $ 922  
Net operating loss carryforwards     873     616  
State net operating loss carryforwards     349     193  
Capital loss carryforward     112     —  
Acquisition and integration related liabilities     141     19  
Accrued liabilities and deferred income     132     48  
Other     52     23  
Valuation allowance(a)     (378 )   (161 )
   
 
 
Noncurrent deferred income tax assets     1,281     1,660  
   
 
 
Noncurrent deferred income tax liabilities              
Depreciation and amortization     510     450  
Other     —     19  
   
 
 
Noncurrent deferred income tax liabilities     510     469  
   
 
 
Noncurrent net deferred income tax asset   $ 771   $ 1,191  
   
 
 
(a)
The valuation allowance of $378 million at December 31, 2001 relates to deferred tax assets for state net operating loss carryforwards and capital loss carryforwards of $273 million and $105 million, respectively. The valuation allowance will be reduced when and if the Company determines that the deferred income tax assets are likely to be realized.

 
   December 31,
 
   2001
   2000
Management and mortgage program deferred income tax assets            
Depreciation   $ —   $ 13
Other     —     4
   
 
Management and mortgage program deferred income tax assets     —     17
   
 
Management and mortgage program deferred income tax liabilities            
Unamortized mortgage servicing rights     472     473
Depreciation and amortization     529     —
Accrued liabilities     49     20
   
 
Management and mortgage program deferred income tax liabilities     1,050     493
   
 
Net deferred income tax liability under management and mortgage programs   $ 1,050   $ 476
   
 

F-30

 
   Year Ended December 31,
  
 
   2001
   2000
   1999
  
Federal statutory rate   35.0 % 35.0 % (35.0 )%
State and local income taxes, net of federal tax benefits   1.4   0.7   (1.5 )
Amortization of non-deductible goodwill   4.4   1.7   2.4  
Taxes on foreign operations at rates different than U.S. federal statutory rates   (0.4 ) 0.4   (2.1 )
Taxes on repatriated and accumulated foreign income, net of tax credits   (3.2 ) —   —  
Changes in valuation reserve   (2.3 ) —   —  
Nontaxable gain on disposal   —   (1.5 ) (26.6 )
Other   (1.7 ) (2.0 ) (0.4 )
   
 
 
 
    33.2 % 34.3 % (63.2 )%
   
 
 
 

9.    Property and Equipment, net

 
   December 31,
  
 
   2001
   2000
  
Land   $ 54   $ 24  
Building and leasehold improvements     391     224  
Furniture, fixtures and equipment     1,663     994  
   
 
 
      2,108     1,242  
Less: accumulated depreciation and amortization     (714 )   (507 )
   
 
 
    $ 1,394   $ 735  
   
 
 

10.  Other intangible Assets

 
   December 31, 2001
  
 
   2001
   2000
  
Trademarks   $ 773   $ 564  
Customer lists     552     173  
Other     103     61  
   
 
 
      1,428     798  
Less: accumulated amortization     (218 )   (151 )
   
 
 
    $ 1,210   $ 647  
   
 
 

F-31

11.  Mortgage Loans Held for Sale and Mortgage Servicing Rights

 
   2001
   2000
   1999
  
Balance, January 1   $ 1,653   $ 1,084   $ 636  
Additions to MSRs, net     860     767     698  
Amortization     (237 )   (153 )   (118 )
Net hedge activity     (57 )   12     29  
Sales     (38 )   (57 )   (161 )
   
 
 
 
Balance, December 31     2,181     1,653     1,084  
   
 
 
 
Valuation Allowance                    
Balance, January 1     —     —     —  
Additions     (144 )   (2 )   (5 )
Reductions     —     2     5  
   
 
 
 
Balance, December 31     (144 )   —     —  
   
 
 
 
Mortgage Servicing Rights, net   $ 2,037   $ 1,653   $ 1,084  
   
 
 
 

12.  Vehicle-related

 
   Car
Rental
   Fleet
Leasing
  
Rental vehicles   $ 3,733   $ —  
Vehicles under open-end operating leases     —     4,121  
Vehicles under closed-end operating leases     —     106  
   
 
 
Vehicles held for rental/leasing     3,733     4,227  
Other     63     43  
   
 
 
      3,796     4,270  
Less: accumulated depreciation     (367 )   (879 )
   
 
 
    $ 3,429   $ 3,391  
   
 
 

F-32

Year
   Amount
2002   $ 1,132
2003     950
2004     672
2005     352
2006     133
Thereafter     152
   
    $ 3,391
   

13.  Accounts Payable and Other Current Liabilities

 
   December 31,
 
   2001
   2000
Accounts payable   $ 984   $ 222
Acquisition and integration related     448     114
Restructuring and other unusual     115     14
Accrued payroll and related     418     248
Income taxes payable     261     158
Other     1,242     594
   
 
    $ 3,468   $ 1,350
   
 

14.  Stockholder Litigation Settlement

F-33

15.  Long-term Debt and Borrowing Arrangements

 
   December 31,
 
   2001
   2000
3% convertible subordinated notes   $ 390   $ 548
73/4% notes     1,150     1,149
6.875% notes     850     —
11% senior subordinated notes     584     —
37/8% convertible senior debentures     1,200     —
Zero coupon senior convertible contingent notes     920     —
Zero coupon convertible debentures     1,000     —
Term loan facility     —     250
Other     38     1
   
 
      6,132     1,948
Less: current portion     401     —
   
 
Long-term debt, excluding Upper DECS     5,731     1,948
Upper DECS     863     —
   
 
    $ 6,594   $ 1,948
   
 

F-34

F-35

F-36

F-37

Year
   Amount
2002   $ 401
2003     1,150
2004(a)     863
2005     —
2006     850
Thereafter     3,731
   
    $ 6,995
   
(a)
Represents Upper DECS, which will be settled in shares of CD common stock.

F-38

16.  Liabilities Under Management and Mortgage Programs and Borrowing Arrangements

 
   December 31,
 
   2001
   2000
Secured Borrowings:            
Term notes   $ 6,237   $ —
Short-term borrowings     582     292
Commercial paper     120     —
Other     295     —

Unsecured Borrowings:
 
 
 
 
 
 
Medium-term notes     679     117
Short-term borrowings     983     —
Commercial paper     917     1,556
Other     31     75
   
 
    $ 9,844   $ 2,040
   
 

F-39

F-40

Year
   Amount
2002   $ 3,462
2003     1,140
2004     840
2005     1,123
2006     710
Thereafter     2,569
   
    $ 9,844
   

17.  Mandatorily Redeemable Preferred Interest in a Subsidiary

F-41

18.  Mandatorily Redeemable Trust Preferred Securities Issued by Subsidiary Holding Solely Senior Debentures Issued by the Company

19.  Commitments and Contingencies

Year
   Amount
2002   $ 275
2003     219
2004     167
2005     122
2006     94
Thereafter     436
   
    $ 1,313
   

F-42

20.  Stockholders' Equity

 
   Currency Translation Adjustments
   Unrealized Losses on Cash Flow Hedges
   Minimum Pension Liability Adjustment
   Unrealized
Gains (Losses) on
Available-for-sale
Securities
   Accumulated Other Comprehensive Loss
  
Balance, January 1, 1999   $ (49 ) $ —   $ —   $ —   $ (49 )
Current period change     (9 )               16     7  
   
 
 
 
 
 
Balance, December 31, 1999     (58 )   —     —     16     (42 )
Current period change     (107 )               (85 )   (192 )
   
 
 
 
 
 
Balance, December 31, 2000     (165 )   —     —     (69 )   (234 )
Current period change     (65 )   (33 )   (21 )   89     (30 )
   
 
 
 
 
 
Balance, December 31, 2001   $ (230 ) $ (33 ) $ (21 ) $ 20   $ (264 )
   
 
 
 
 
 

F-43

21.  Stock Plans

 
   CD common stock
 
   2001
   2000
   1999
 
   Options
   Weighted Average Exercise Price
   Options
   Weighted Average Exercise Price
   Options
   Weighted Average Exercise Price
Balance at beginning of year   187   $ 16.90   183   $ 15.24   178   $ 14.64
  Granted                              
    Equal to fair market value   75     11.33   37     19.33   30     18.09
    Greater than fair market value   —     —   —     —   1     16.04
  Exercised   (28 )   9.19   (19 )   4.26   (13 )   9.30
  Canceled   (16 )   18.46   (14 )   18.93   (13 )   19.91
   
       
       
     
Balance at end of year   218   $ 15.82   187   $ 16.90   183   $ 15.24
   
       
       
     

F-44

 
   Move.com common stock
 
   2001
   2000
   1999
 
   Options
   Weighted Average Exercise Price
   Options
   Weighted Average Exercise Price
   Options
   Weighted Average Exercise Price
Balance at beginning of year   6   $ 18.59   2   $ 11.59   —   $ —
  Granted                              
    Less than fair market value   —     —   1     15.40   1     10.00
    Equal to fair market value   —     —   3     24.21   1     13.16
  Canceled   (6 )   18.59   —     —   —     —
   
       
       
     
Balance at end of year   —   $ —   6   $ 18.59   2   $ 11.59
   
       
       
     
 
   Outstanding Options
    
    
 
   Exercisable Options
 
    
   Weighted
Average
Remaining
Contractual
Life
    
Range of
Exercise Prices
   Number
of
Options
   Weighted
Average
Exercise
Price
   Number
of
Options
   Weighted
Average
Exercise
Price
$0.01 to $10.00   82   6.2   $ 8.91   44   $ 8.44
$10.01 to $20.00   78   6.6     15.89   43     16.53
$20.01 to $30.00   40   5.8     22.51   29     22.75
$30.01 to $40.00   18   5.6     31.95   17     31.92
   
           
     
    218   6.2   $ 15.82   133   $ 17.14
   
           
     
 
   2001
   2000
   1999
  
 
   As
Reported
   Pro
Forma
   As
Reported
   Pro
Forma
   As
Reported
   Pro
Forma
  
Net income (loss)   $ 385   $ 167   $ 602   $ 502   $ (55 ) $ (213 )
Basic net income (loss) per share     0.42     0.17     0.84     0.70     (0.07 )   (0.28 )
Diluted net income (loss) per share     0.41     0.16     0.81     0.68     (0.07 )   (0.28 )
 
   CD common stock
   Move.com
common stock
  
 
   2001
   2000
   1999
   2000
   1999
  
Dividend yield   —   —   —   —   —  
Expected volatility   50.0 % 55.0 % 60.0 % —   —  
Risk-free interest rate   4.4 % 5.0 % 6.4 % 5.2 % 6.4 %
Expected holding period (years)   4.5   4.7   6.2   8.5   6.2  

22.  Employee Benefit Plans

F-45

23.  Financial Instruments

F-46

F-47

 
   2001
   2000
  
 
   Carrying
Amount
   Estimated
Fair
Value
   Carrying
Amount
   Estimated
Fair
Value
  
Assets                          
  Cash and cash equivalents   $ 1,942   $ 1,942   $ 856   $ 856  
  Restricted cash     212     212     89     89  
  Available-for-sale debt securities     515     515     787     787  
  Preferred stock investments     92     92     55     55  
Debt                          
  Current portion of long-term debt     401     401     —     —  
  Long-term debt, excluding Upper DECS     5,731     5,929     1,948     1,883  
  Upper DECS     863     836     —     —  
Mandatorily redeemable preferred interest in a subsidiary     375     375     375     375  
Mandatorily redeemable preferred securities issued by subsidiary holding solely senior debentures issued by the Company     —     —     1,683     623  
Derivatives                          
  Foreign exchange forwards     1     1     1     1  
  Interest rate swaps     (64 )   (64 )   —     —  
Assets under management and mortgage programs                          
  Mortgage loans held for sale     1,244     1,244     879     909  
  Timeshare contract receivables     150     150     —     —  
  Mortgage servicing rights     2,037     2,174     1,653     1,724  
  Available-for-sale debt securities     136     136     131     131  
  Trading securities     105     105     —     —  
  Restricted cash     861     861     —     —  
  Derivatives(a)                          
    Commitments to fund mortgages     7     7     —     24  
    Forward delivery commitments     22     22     (6 )   (29 )
    Commitments to complete securitizations     —     —     (2 )   17  
    Option contracts     78     78     73     127  
    Constant maturity treasury floors     26     26     18     177  
    Swap contracts     —     —     —     15  
Liabilities under management and mortgage programs                          
  Debt     9,844     9,790     2,040     2,040  
  Derivatives                          
    Interest rate swaps     (69 )   (69 )   —     —  
    Foreign exchange forwards     (2 )   (2 )   (1 )   (1 )
(a)
Carrying amounts and gains (losses) on mortgage-related positions are already included in the determination of respective carrying amounts and fair values of mortgage loans held for sale and mortgage servicing rights, respectively. Forward delivery commitments are used to manage price risk on sale of all mortgage loans to end investors, including commitments to complete securitizations on loans held by an unaffiliated buyer.

24.  Transfers and Servicing of Financial Assets

F-48

 
   Mortgage Loans
    
    
  
 
   Mortgage-
Backed
Securities
   MSR
   Relocation
Receivables
   Timeshare
Receivables
  
Prepayment speed   7–43 % 9–42 % — % 13–21 %
Weighted average life (in years)   2.9–7.2   2.5–9.1   0.1–0.2   7.1–7.4  
Discount rate   5–26 % 6–16 % 3.37 % 12–17 %
Anticipated credit losses   —   —   —   8–12 %
 
   Mortgage Loans
    
    
  
 
   Mortgage
Backed
Securities
   MSR(a)
   Relocation
Receivables
   Timeshare
Receivables
  
Fair value of retained interests   $ 131   $ 2,074   $ 136   $ 105  
Weighted average life (in years)     3.9     7.6     0.1–0.2     7.1–7.4  
Prepayment speed (annual rate)     8–80 %   8–40 %   — %   13–21 %
Impact of 10% adverse change   $ (4 ) $ (86 ) $ —   $ (2 )
Impact of 20% adverse change     (7 )   (166 )   —     (3 )
Discount rate (annual rate)     2–26 %   9.80 %   3.37 %   12–17 %
Impact of 10% adverse change   $ (5 ) $ (71 ) $ —   $ (3 )
Impact of 20% adverse change     (8 )   (138 )   —     (5 )
Weighted average yield to maturity     — %   — %   5.48 %   3.06–6.75 %
Impact of 10% adverse change   $ —   $ —   $ (1 ) $ (1 )
Impact of 20% adverse change     —     —     (1 )   (2 )
Anticipated credit losses (annual rate)     — %   — %   — %   8–12 %
Impact of 10% adverse change   $ —   $ —   $ —   $ (3 )
Impact of 20% adverse change     —     —     —     (6 )
(a)
Excludes fair value of MSR hedge position of $100 million.

F-49

 
   Mortgage
Loans
   Relocation
Receivables
   Timeshare
Receivables
  
Proceeds from new securitizations   $ 35,776   $ 1,964   $ 259  
Proceeds from collections reinvested in securitizations     —     1,984     —  
Servicing fees received     352     5     4  
Other cash flows received (paid) on retained interests(a)     31     (6 )   16  
Purchases of delinquent or foreclosed loans     (228 )   —     (16 )
Servicing advances     (498 )   —     —  
Repayment of servicing advances     495     —     —  
Cash received upon release of reserve account     —     3     2  
Purchases of defective contracts     —     —     (23 )
(a)
Represents cash flows received on retained interests other than servicing fees.

 
   Total
Principal
Amount
   Principal
Amount
60 Days or More
Past Due(a)
   Net
Credit
Losses
   Average
Principal
Balance
Residential mortgage loans(b)   $ 266   $ 25   $ —   $ 251
Relocation receivables     873     34     2     868
Timeshare receivables     667     5     22     646
   
 
 
 
Total securitized and other managed assets   $ 1,806   $ 64   $ 24   $ 1,765
   
 
 
 
Comprised of:                        
Assets securitized(c)   $ 1,378   $ 35   $ 1   $ 1,280
Assets held for sale or securitization     175     4     22     213
Assets held in portfolio     253     25     1     272
   
 
 
 
    $ 1,806   $ 64   $ 24   $ 1,765
   
 
 
 
(a)
Amounts are based on total securitized and other managed assets at December 31, 2001.
(b)
Excludes securitized mortgage loans that the Company continues to service but as to which it has no other continuing involvement.
(c)
Represents the principal amounts of the assets. All retained interests in securitized assets have been excluded from the table.

25.  Related Party Transactions

F-50

F-51

F-52

F-53

F-54

F-55

F-56

 
   Year Ended December 31,
 
   2001
   2000
   1999
Revenues   $ 368   $ 511   $ 458
Expenses                  
  Operating     221     —     —
  Marketing and reservation     3     1     —
  Non-program related depreciation and amortization     18     14     11
  Restructuring and other unusual charges     85     —     —
 
   December 31,
    
 
   2001
   2000
    
Receivables, net   $ 50   $ 66    
Other current assets     100     17    
Franchise agreements, net     802     576    
Other intangibles, net     29     25    
Other non-current assets*     486     298    

Deferred income—long-term
 
$
2
 
$
—
 
 
*
Represents preferred stock investments.
 
   Year Ended December 31,
  
 
   2001
   2000
   1999
  
Purchases of non-marketable securities   $ (98 ) $ (73 ) $ (5 )
Net assets acquired     (1,020 )   (76 )   (93 )

26.  Segment Information

F-57

F-58

 
   Real Estate
Services
   Hospitality(a)
   Travel
Distribution
   Vehicle
Services
Net revenues(b)   $ 1,859   $ 1,522   $ 437   $ 3,322
Adjusted EBITDA     939     513     108     290
Non-vehicle depreciation and amortization     116     119     26     102
Segment assets exclusive of assets under programs(c)     3,826     2,957     3,854     4,260
Assets under management and mortgage programs     3,573     222     —     8,073
Capital expenditures     41     70     22     74
 
    
   Financial
Services
   Corporate
and Other(d)
   Total
Net revenues(b)       $ 1,402   $ 71   $ 8,613
Adjusted EBITDA         310     (73 )   2,087
Non-vehicle depreciation and amortization         73     41     477
Segment assets exclusive of assets under programs(c)         1,611     3,858     20,366
Assets under management and mortgage programs         —     —     11,868
Capital expenditures         64     58     329

F-59

 
   Real Estate
Services
   Hospitality(a)
   Travel
Distribution
   Vehicle
Services
Net revenues(b)   $ 1,461   $ 918   $ 99   $ 230
Adjusted EBITDA     752     385     10     169
Non-vehicle depreciation and amortization     103     80     2     21
Segment assets exclusive of assets under programs(c)     3,262     1,906     22     1,292
Assets under management and mortgage programs     2,861     —     —     —
Capital expenditures     39     38     1     1
 
    
   Financial
Services
   Corporate
and Other(d)
   Total
Net revenues(b)       $ 1,380   $ 232   $ 4,320
Adjusted EBITDA         373     (104 )   1,585
Non-vehicle depreciation and amortization         59     56     321
Segment assets exclusive of assets under programs(c)         1,525     2,884     10,891
Assets under management and mortgage programs         —     —     2,861
Capital expenditures         74     39     192
 
   Real Estate
Services
   Hospitality(a)
   Travel
Distribution
   Vehicle
Services
Net revenues(b)   $ 1,383   $ 920   $ 91   $ 1,109
Adjusted EBITDA     727     420     7     246
Non-vehicle depreciation and amortization     95     76     2     36
Segment assets exclusive of assets under programs(c)     3,225     1,908     21     1,305
Assets under management and mortgage programs     2,726     —     —     —
Capital expenditures     69     51     1     24
 
    
   Financial
Services
   Corporate
and Other
   Total
Net revenues(b)       $ 1,518   $ 734   $ 5,755
Adjusted EBITDA         305     89     1,794
Non-vehicle depreciation and amortization         58     71     338
Segment assets exclusive of assets under programs(c)         1,415     3,344     11,218
Assets under management and mortgage programs         —     —     2,726
Capital expenditures         47     47     239
(a)
Net revenues and Adjusted EBITDA include the equity in earnings from the Company's investment in Avis of $5 million, $17 million and $18 million in 2001, 2000 and 1999, respectively. Net revenues and Adjusted EBITDA for 1999 include a pre-tax gain of $11 million and $18 million, respectively, as a result of the sale of a portion of the Company's equity interest. Segment assets include such equity method investment in the amount of $132 million and $118 million at December 31, 2000 and 1999, respectively.
(b)
Inter-segment net revenues were not significant to the net revenues of any one segment.
(c)
Excludes assets of discontinued operations.
(d)
Includes the Company's equity investment of $2 million and $1 million in Entertainment Publication, Inc. at December 31, 2001 and 2000, respectively.

F-60

 
   Year Ended December 31,
  
 
   2001
   2000
   1999
  
Adjusted EBITDA   $ 2,087   $ 1,585   $ 1,794  
Non-vehicle depreciation and amortization     (477 )   (321 )   (338 )
Other charges:                    
  Restructuring and other unusual charges     (379 )   (109 )   (117 )
  Acquisition and integration related costs     (112 )   —     —  
  Mortgage servicing rights impairment     (94 )   —     —  
  Litigation settlement and related costs     (86 )   (2 )   (2,915 )
Non-vehicle interest, net     (252 )   (152 )   (201 )
Gains on dispositions of businesses     443     37     1,142  
Losses on dispositions of businesses     (26 )   (45 )   (33 )
Impairment of investments     (441 )   (— )   —  
   
 
 
 
Income (loss) before income taxes, minority interest and equity in Homestore.com   $ 663   $ 993   $ (668 )
   
 
 
 
 
   United
States
   United
Kingdom
   All Other
Countries
   Total
2001                        
Net revenues   $ 7,842   $ 240   $ 531   $ 8,613
Total assets(a)     28,386     831     3,017     32,234
Net property and equipment     1,269     38     87     1,394

2000
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues   $ 3,955   $ 161   $ 204   $ 4,320
Total assets(a)     13,026     604     122     13,752
Net property and equipment     672     27     36     735

1999
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues   $ 4,916   $ 548   $ 291   $ 5,755
Total assets(a)     11,722     2,010     212     13,944
Net property and equipment     590     98     34     722
(a)
Excludes assets of discontinued operations.

F-61

27.  Selected Quarterly Financial Data—(unaudited)

 
   2001
  
 
   First(a)
   Second(b)
   Third(c)
   Fourth(d)
  
Net revenues   $ 1,411   $ 2,319   $ 2,389   $ 2,494  
   
 
 
 
 
Adjusted EBITDA   $ 418   $ 556   $ 570   $ 543  
   
 
 
 
 

Income (loss) from continuing operations
 
$
261
 
$
220
 
$
186
 
$
(326
)
Income from discontinued operations, net of tax     16     22     24     19  
Cumulative effect of accounting changes, net of tax     (38 )   —     —     —  
   
 
 
 
 
Net income (loss)   $ 239   $ 242   $ 210   $ (307 )
   
 
 
 
 
CD common stock per share information:                          
  Basic                          
    Income (loss) from continuing operations   $ 0.30   $ 0.26   $ 0.22   $ (0.33 )
    Net income (loss)   $ 0.28   $ 0.29   $ 0.25   $ (0.31 )
    Weighted average shares     790     851     857     978  
  Diluted                          
    Income (loss) from continuing operations   $ 0.28   $ 0.25   $ 0.21   $ (0.33 )
    Net income (loss)   $ 0.26   $ 0.27   $ 0.23   $ (0.31 )
    Weighted average shares     830     905     912     978  
CD common stock market prices:                          
  High   $ 14.76   $ 20.37   $ 21.53   $ 19.81  
  Low   $ 9.625   $ 13.89   $ 11.03   $ 12.04  
 
   2001
  
 
   First(a)
   Second(b)
   Third(c)
   Fourth(d)
  
Move.com common stock per share information:                      
  Basic                      
    Income (loss) from continuing operations   $ 10.41   $ (0.63 )        
    Net income (loss)   $ 10.34   $ (0.63 )        
    Weighted average shares     2     1          
  Diluted                      
    Income (loss) from continuing operations   $ 10.13   $ (0.63 )        
    Net income (loss)   $ 10.07   $ (0.63 )        
    Weighted average shares     3     1          
(a)
Includes a net gain of $435 million ($261 million, after tax or $0.28 per diluted share) related to the dispositions of businesses and a non-cash credit of $14 million ($9 million, after tax or $0.01 per diluted share) in connection with an adjustment to the PRIDES settlement. Such amounts were partially offset by charges of (i) $95 million ($62 million, after tax or $0.07 per diluted share) to fund an irrevocable contribution to an independent technology trust, (ii) $85 million ($56 million, after tax or $0.07 per diluted share) incurred in connection with the creation of Travel Portal, Inc., (iii) $25 million ($15 million, after tax or $0.02 per diluted share) for litigation settlement and related costs, (iv) $7 million ($5 million, after tax or $0.01 per diluted share) related to a non-cash contribution to the Cendant Charitable Foundation and (v) $8 million ($5 million, after tax or $0.01 per diluted share) related to the acquisition and integration of Avis Group.
(b)
Includes $9 million ($5 million, after tax or $0.01 per diluted share) of litigation settlement and related costs.
(c)
Includes charges of $77 million ($50 million, after tax or $0.05 per diluted share) related to the September 11th terrorist attacks and $9 million ($6 million, after tax or $0.01 per diluted share) of litigation settlement and related costs.
(d)
Includes charges of (i) $116 million ($73 million, after tax or $0.07 per diluted share) in connection with restructuring and other initiatives undertaken as a result of the September 11th terrorist attacks, (ii) $104 million ($65 million, after tax or $0.07 per diluted share) related to the acquisition and integration of Galileo International, Inc. and Cheap Tickets, Inc., (iii) $94 million ($55 million, after tax or $0.06 per diluted share) related to the impairment of the Company's mortgage servicing rights portfolio, (iv) $58 million ($37 million, after tax or $0.04 per diluted share) for litigation settlement and related costs, (v) $441 million ($265 million, after tax or $0.27 per diluted share) related to impairment of certain of the Company's investments and (vi) losses of $18 million ($20 million, after tax or $0.02 per diluted share) related to the dispositions of non-strategic businesses.

F-62

 
   2000
  
 
   First(a)
   Second(b)
   Third(c)
   Fourth(d)
  
Net revenues   $ 1,041   $ 1,063   $ 1,145   $ 1,071  
   
 
 
 
 
Adjusted EBITDA     375     380     457     373  
   
 
 
 
 
Income from continuing operations     102     162     193     113  
Income from discontinued operations, net of tax     25     13     21     32  
Extraordinary loss, net of tax     (2 )   —     —     —  
Cumulative effect of accounting changes, net of tax     (56 )   —     —     —  
   
 
 
 
 
Net income   $ 69   $ 175   $ 214   $ 145  
   
 
 
 
 
CD common stock per share information:                          
  Basic                          
    Income from continuing operations   $ 0.14   $ 0.23   $ 0.27   $ 0.16  
    Net income   $ 0.10   $ 0.25   $ 0.30   $ 0.20  
    Weighted average shares     717     722     725     731  
  Diluted                          
    Income from continuing operations   $ 0.14   $ 0.22   $ 0.26   $ 0.15  
    Net income   $ 0.09   $ 0.24   $ 0.29   $ 0.20  
    Weighted average shares     769     762     759     757  
CD common stock market prices:                          
  High   $ 245/16   $ 183/4   $ 147/8   $ 129/16  
  Low   $ 163/16   $ 125/32   $ 105/8   $ 81/2  
Move.com common stock per share information:                          
  Basic and Diluted                          
    Loss from continuing operations         $ (0.67 ) $ (0.55 ) $ (0.54 )
    Net loss         $ (0.67 ) $ (0.55 ) $ (0.54 )
    Weighted average shares           4     4     3  
(a)
Includes (i) restructuring and other unusual charges of $106 million ($70 million, after tax or $0.09 per diluted share) in connection with various strategic initiatives, (ii) losses of $13 million ($9 million, after tax or $0.01 per diluted share) related to the disposition of businesses and (iii) $3 million ($2 million, after tax) of litigation settlement and related costs. Such amounts were partially offset by a non-cash credit of $41 million ($26 million, after tax or $0.03 per diluted share) in connection with an adjustment to the PRIDES settlement.
(b)
Includes $5 million ($3 million, after tax) of litigation settlement and related costs, which was partially offset by $4 million ($2 million, after tax) of gains related to the dispositions of businesses.
(c)
Includes (i) losses of $32 million ($20 million, after tax or $0.03 per diluted share) related to the dispositions of businesses, (ii) $27 million ($16 million, after tax or $0.02 per diluted share) of litigation settlement and related costs and (iii) charges of $3 million ($2 million, after tax) related to the postponement of the initial public offering of Move.com common stock. Such amounts were partially offset by a gain of $35 million ($35 million, after tax or $0.05 per diluted share) resulting from the recognition of a portion of the Company's previously recorded deferred gain from the sale of its fleet businesses.
(d)
Includes $8 million ($5 million, after tax or $0.01 per diluted share) of litigation settlement and related costs.

28.  Subsequent Events

F-63

* * * *

29.  Subsequent Events (unaudited)

F-64

F-65

F-66


EXHIBIT INDEX

Exhibit No.
   Description
3.1   Amended and Restated Certificate of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q/A for the quarterly period ended March 31, 2000 dated July 28, 2000).
3.2   Amended and Restated By-Laws of the Company (Incorporated by reference to Exhibit 3.2 to the Company's Form 10-Q/A for the quarterly period ended March 31, 2000 dated July 28, 2000).
4.1   Form of Stock Certificate (Incorporated by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, dated March 29, 2001).
4.2   Indenture between the Company and The Bank of Nova Scotia Trust Company of New York, as Trustee dated February 24, 1998.*
4.3   Form of 73/4% Global Note (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated December 4, 1998).
4.4   Form of 6.875% Note due 2006 (Incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-4 filed on November 2, 2001).
4.5   Indenture dated November 6, 2000 between PHH Corporation and Bank One Trust Company, N.A., as Trustee (Incorporated by reference to Exhibit 4.0 to PHH Corporation's Current Report on Form 8-K dated December 12, 2000).
4.6   Supplemental Indenture No. 1 dated November 6, 2000 to the Indenture dated November 6, 2000 between PHH Corporation and Bank One Trust Company, N.A., as Trustee (Incorporated by reference to Exhibit 4.1 to PHH Corporation's Current Report on Form 8-K dated December 12, 2000).
4.7(a)   Supplemental Indenture No. 2 dated January 30, 2001 to the Indenture dated November 6, 2000 between PHH Corporation and Bank One Trust Company, N.A., as Trustee (pursuant to which the 81/8% Notes were issued) (Incorporated by reference to Exhibit 4.1 to PHH Corporation's Current Report on Form 8-K dated February 8, 2001).
4.7(b)   Supplemental Indenture No. 3 dated as of May 30, 2002 to the Senior Debt Securities Indenture dated November 6, 2000 between PHH Corporation and Bank One Trust Company, as Trustee (Incorporated by reference to Exhibit 4.1 to PHH Corporation's Current Report Form 8-K dated June 4, 2002).
4.7(c)   Form of the 81/8% Notes due 2003 of PHH Corporation (Incorporated by reference to Exhibit 4.4 to PHH Corporation's Annual Report on Form 10-K for the year ended December 31, 2001).
4.8   Indenture dated February 13, 2001 between the Company and The Bank of New York, as Trustee (pursuant to which Zero Coupon Senior Convertible Contingent Debt Securities (the "CODES") due 2021 were issued) (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated February 20, 2001).
4.9   Supplemental Indenture No. 1 dated June 13, 2001 to the Indenture dated February 13, 2001 between Cendant Corporation and The Bank of New York, as Trustee (pursuant to which the CODES due 2021 were issued) (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated June 13, 2001).
4.10   Form of Zero Coupon Senior Convertible Contingent Debt Securities due 2021 (included in Exhibit 4.8).
4.11   Resale Registration Rights Agreement between Cendant Corporation and Goldman, Sachs & Co. dated as of May 4, 2001 (Incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-3 filed on July 20, 2001).

G-1

4.12   Purchase Agreement (including as Exhibit A the form of the Warrant for the Purchase of Shares of Common Stock), dated December 15, 1999, between Cendant Corporation and Liberty Media Corporation (Incorporated by reference to Exhibit 4.11 to the Company's Annual Report on Form 10-K/A for the year ended December 31, 1998 filed on February 4, 2000).
4.13   Resale Registration Rights Agreement dated as of February 13, 2001 between the Company and Lehman Brothers Inc. (Incorporated by reference to Exhibit 4.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, dated March 29, 2001).
4.14(a)   Indenture dated May 4, 2001 between the Company and The Bank of New York, as Trustee (pursuant to which the Zero Coupon Convertible Debentures due 2021 were issued) (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated May 10, 2001).
4.14(b)   First Supplemental Indenture, dated as of May 1, 2002, to the Indenture dated as of May 4, 2001 between Cendant Corporation and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to the Company's Form 8-K dated May 1, 2002).
4.15   Form of 11% Senior Subordinated Notes due 2009 of Avis Group Holdings. (Included in Exhibit 4.20(a)).
4.16   Fourth Supplemental Indenture, dated as of July 27, 2001, to the Indenture dated February 24, 1998, between Cendant Corporation and The Bank of Nova Scotia Trust Company of New York, as trustee (pursuant to which the Senior Notes (making up a portion of the Upper Decs) were issued) (Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on August 1, 2001).
4.17   Indenture dated as of November 27, 2001 between Cendant Corporation and the Bank of Nova Scotia Trust Company of New York, as trustee (pursuant to which the 37/8% Convertible Senior Debentures Due 2011 were issued) (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K, filed December 6, 2001).
4.18   Form of 37/8% Convertible Senior Debenture due 2011 (included in Exhibit 4.17).
4.19   Registration Rights Agreement dated as of November 27, 2001 between Cendant Corporation and J. P. Morgan Securities (relating to the 37/8% Convertible Senior Debentures Due 2011) (Incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-3 filed on February 25, 2002).
4.20(a)   Indenture, dated as of June 30, 1999, among Avis Group Holdings, Inc., the Subsidiary Guarantors and the Bank of New York (Incorporated by reference to Avis Group Holdings, Inc.'s Registration Statement on Form S-4 filed August 31, 1999).
4.20(b)   Supplemental Indenture dated as of April 2, 2001 to the Indenture dated June 30, 1999, among Avis Group Holdings, Inc., the Subsidiary Guarantors and The Bank of New York, as trustee (pursuant to which the 11% Senior Subordinated Notes due 2009 were issued) (Incorporated by reference to Avis Group Holdings, Inc.'s current report on form 8-K filed on April 13, 2001).
4.21   Forward Purchase Contract Agreement, dated as of July 27, 2001, between Cendant Corporation and Bank One Trust Company, National Association, as Forward Purchase Contract Agent (relating to the Upper Decs) (Incorporated in reference to Exhibit 4.4 to the Company's Current Report on Form 8-K filed on August 1, 2001).
4.22   Form of Upper Decs Certificate (included in Exhibit 4.21).
4.23   Form of Stripped Upper Decs Certificate (included in Exhibit 4.21).
4.24   Form of Senior Notes (included in Exhibit 4.16).

G-2

4.25   Pledge Agreement, dated as of July 27, 2001, among Cendant Corporation, The Chase Manhattan Bank, as Collateral Agent, and Bank One Trust Company, National Association, as Forward Purchase Contract Agent (relating to the Upper Decs) (Incorporated by reference to Exhibit 4.7 to the Company's Current Report on Form 8-K filed on August 1, 2001).
4.26   Exchange and Registration Rights Agreement, dated August 13, 2001, between Cendant Corporation and J.P. Morgan Securities Inc., Banc of America Securities LLC, Barclays Capital Inc., Credit Lyonnais Securities (USA) Inc., The Royal Bank of Scotland Plc, Scotia Capital (USA) Inc., The Williams Capital Group, L.P. and Tokyo-Mitsubishi International Plc (relating to the 6.875% Notes Due 2006) (Incorporated by reference to Exhibit 4.3 the Company's Registration Statement on Form S-4 filed on November 2, 2001).
4.27   PHH Corporation $443 million Note Purchase Agreement dated as of May 3, 2002 (incorporated by reference to Exhibit 4.1 of PHH Corporation's Form 10-Q dated August 14, 2002).
10.1(a)   Agreement with Henry R. Silverman, dated June 30, 1996 and as amended through December 17, 1997 (Incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form S-4, Registration No. 333-34517 dated August 28, 1997).
10.1(b)   Amendment to Agreement with Henry R. Silverman, dated December 31, 1998 (Incorporated by reference to Exhibit 10.1(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1998).
10.1(c)   Amendment to Agreement with Henry R. Silverman, dated August 2, 1999 (Incorporated by reference to Exhibit 10.1(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1999).
10.1(d)   Amendment to Agreement with Henry R. Silverman, dated May 15, 2000 (Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2000).
10.2(a)   Agreement with Stephen P. Holmes, dated September 12, 1997 (Incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on Form S-4, Registration No. 333-34517 dated August 28, 1997).
10.2(b)   Amendment to Agreement with Stephen P. Holmes, dated January 11, 1999 (Incorporated by reference to Exhibit 10.2(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1998).
10.2(c)   Amendment to Agreement with Stephen P. Holmes dated January 3, 2001.*
10.3(a)   Agreement with James E. Buckman, dated September 12, 1997 (Incorporated by reference to Exhibit 10.9 to the Company's Registration Statement on Form S-4, Registration No. 333-34517 dated August 28, 1997).
10.3(b)   Amendment to Agreement with James E. Buckman, dated January 11, 1999 (Incorporated by reference to Exhibit 10.4(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1998).
10.3(c)   Amendment to Agreement with James E. Buckman, dated January 3, 2001.*
10.4   Employment Agreement with Richard A. Smith, dated June 2, 2001.*
10.5   Second Amended and Restated Employment Agreement with John W. Chidsey, dated January 2, 2002.*
10.6   Agreement with Samuel L. Katz, amended and restated June 5, 2000 (Incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, dated March 29, 2001).
10.6(a)   Consulting Agreement with Martin L. Edelman, dated March 21, 2001 (Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2001, dated May 11, 2001).

G-3

10.6(b)   Employment Agreement with Kevin M. Sheehan, dated March 1, 2001 (Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on From 10-Q for the period ended March 31, 2001, dated May 11, 2001.)
10.7(a)   1987 Stock Option Plan, as amended (Incorporated by reference to Exhibit 10.16 to the Company's Form 10-Q for the period ended October 31, 1996).
10.7(b)   Amendment to 1987 Stock Option Plan dated January 3, 2001 (Incorporated by reference to Exhibit 10.7(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, dated March 29, 2001).
10.8   1990 Directors Stock Option Plan, as amended (Incorporated by reference to Exhibit 10.17 to the Company's Quarterly Report on Form 10-Q for the period ended October 31, 1996).
10.9   1992 Directors Stock Option Plan, as amended (Incorporated by reference to Exhibit 10.18 to the Company's Quarterly Report on Form 10-Q for the period ended October 31, 1996).
10.10   1994 Directors Stock Option Plan, as amended (Incorporated by reference to Exhibit 10.19 to the Company's Quarterly Report on Form 10-Q for the period ended October 31, 1996).
10.11(a)   1997 Stock Option Plan (Incorporated by reference to Exhibit 10.23 to the Company's Quarterly Report on Form 10-Q for the period ended April 30, 1997).
10.11(b)   Amendment to 1997 Stock Option Plan dated January 3, 2001 (Incorporated by reference to Exhibit 10.11(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, dated March 29, 2001).
10.12(a)   1997 Stock Incentive Plan (Incorporated by reference to Appendix E to the Joint Proxy Statement/ Prospectus included as part of the Company's Registration Statement on Form S-4, Registration No. 333-34517 dated August 28, 1997).
10.12(b)   Amendment to 1997 Stock Incentive Plan dated March 27, 2000 (Incorporated by reference to Exhibit 10.12(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, dated March 29, 2001).
10.12(c)   Amendment to 1997 Stock Incentive Plan dated March 28, 2000 (Incorporated by reference to Exhibit 10.12(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, dated March 29, 2001).
10.12(d)   Amendment to 1997 Stock Incentive Plan dated January 3, 2001 (Incorporated by reference to Exhibit 10.12(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, dated March 29, 2001).
10.13(a)   HFS Incorporated's Amended and Restated 1993 Stock Option Plan (Incorporated by reference to Exhibit 4.1 to HFS Incorporated's Registration Statement on Form S-8, Registration No. 33-83956).
10.13(b)   First Amendment to the Amended and Restated 1993 Stock Option Plan dated May 5, 1995 (Incorporated by reference to Exhibit 4.1 to HFS Incorporated's Registration Statement on Form S-8, Registration No. 33-094756).
10.13(c)   Second Amendment to the Amended and Restated 1993 Stock Option Plan dated January 22, 1996 (Incorporated by reference to Exhibit 10.21(b) to HFS Incorporated's Annual Report on Form 10-K for the year ended December 31, 1995).
10.13(d)   Third Amendment to the Amended and Restated 1993 Stock Option Plan dated January 22, 1996 (Incorporated by reference to Exhibit 10.21(c) to HFS Incorporated's Annual Report on Form 10-K for the year ended December 31, 1995).
10.13(e)   Fourth Amendment to the Amended and Restated 1993 Stock Option Plan dated May 20, 1996 (Incorporated by reference to Exhibit 4.5 to HFS Incorporated's Registration Statement on Form S-8, Registration No. 333-06733).
10.13(f)   Fifth Amendment to the Amended and Restated 1993 Stock Option Plan dated July 24, 1996 (Incorporated by reference to Exhibit 10.21(e) to HFS Incorporated's Annual Report on Form 10-K for the year ended December 31, 1995).

G-4

10.13(g)   Sixth Amendment to the Amended and Restated 1993 Stock Option Plan dated September 24, 1996 (Incorporated by reference to Exhibit 10.21(e) to HFS Incorporated's Annual Report on Form 10-K for the year ended December 31, 1995).
10.13(h)   Seventh Amendment to the Amended and Restated 1993 Stock Option Plan dated as of April 30, 1997 (Incorporated by reference to Exhibit 10.17(g) to the Company's Annual Report on Form 10-K for the year ended December 31, 1999).
10.13(i)   Eighth Amendment to the Amended and Restated 1993 Stock Option Plan dated as of May 27, 1997 (Incorporated by reference to Exhibit 10.17(h) to the Company's Annual Report on Form 10-K for the year ended December 31, 1997).
10.14   HFS Incorporated's 1992 Incentive Stock Option Plan and Form of Stock Option Agreement (Incorporated by reference to Exhibit 10.6 to HFS Incorporated's Registration Statement on Form S-1, Registration No. 33-51422).
10.15   1992 Employee Stock Plan (Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8, Registration No. 333-45183, dated January 29, 1998).
10.16   Deferred Compensation Plan (Incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998).
10.17   Cendant Corporation Move.com Group 1999 Stock Option Plan (Incorporated by reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, dated March 29, 2001).
10.18   $1,150,000,000 Amended and Restated Credit Agreement dated as of October 5, 2001 among Cendant Corporation, the lenders referred to therein and The Chase Manhattan Bank, as Administrative Agent (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on October 15, 2001).
10.19(a)   $1,750,000,000 Three Year Competitive Advance and Revolving Credit Agreement dated as of August 29, 2000 among the Company, the lenders parties thereto, and The Chase Manhattan Bank, as Administrative Agent (Incorporated by reference to Exhibit 10.23(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, dated March 29, 2001).
10.19(b)   Amendment to the Three Year Competitive Advance and Revolving Credit Agreement, dated as of February 22, 2001, among the Company, the lenders parties thereto and The Chase Manhattan Bank, as Administrative Agent (Incorporated by reference to Exhibit 10.23(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, dated March 29, 2001).
10.19(c)   Second Amendment dated October 5, 2001 to the Three Year Competitive Advance and Revolving Credit Agreement, dated as of August 29, 2000, among the Company, the lenders parties thereto and The Chase Manhattan Bank, as Administrative Agent.*
10.20   Two-Year Competitive Advance and Revolving Credit Agreement dated March 4, 1997, as amended and restated through February 21, 2002, among PHH Corporation, the lenders parties thereto, and The Chase Manhattan Bank, as Administrative Agent. (Incorporated by reference to PHH Corporation's Current Report on Form 8-K filed on February 21, 2002).
10.21(a)   Five-year Competitive Advance and Revolving Credit Agreement dated March 4, 1997 as amended and restated through February 28, 2000, among PHH Corporation, the Lenders and The Chase Manhattan Bank, as Administrative Agent (Incorporated by reference to Exhibit 10.24(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1999).
10.21(b)   Amendment to the Five Year Competitive Advance and Revolving Credit Agreement, dated as of February 22, 2001, among PHH Corporation, the financial institutions parties thereto and The Chase Manhattan Bank, as Administrative Agent (Incorporated by reference to Exhibit 10.25(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, dated March 29, 2001).

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10.21(c)   Amendment to the Five Year Competitive Advance and Revolving Credit Agreement, dated as of February 21, 2002, among PHH Corporation, the financial institutions parties thereto and The Chase Manhattan Bank, as Administrative Agent (Incorporated by reference to PHH Corporation's Annual Report on Form 10-K for the year ended December 31, 2001).
10.22   Agreement and Plan of Merger by and among Cendant Corporation, PHH Corporation, Avis Acquisition Corp. and Avis Group Holdings, Inc., dated as of November 11, 2000 (Incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2000 filed on November 14, 2000).
10.23   The Company's 1999 Non-Employee Directors Deferred Compensation Plan (Incorporated by reference to Exhibit 10.44 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999).
10.24   Agreement and Plan of Merger, dated as of June 15, 2001 among the Company, Galaxy Acquisition Corp. and Galileo International, Inc. (Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated June 15, 2001).
10.25   Remarketing Agreement, dated as of July 27, 2001, among Cendant Corporation, Bank One Trust Company, National Association as Forward Purchase Contract Agent, and Salomon Smith Barney Inc., as Remarketing Agent (relating to the Upper Decs) (Incorporated by reference to Exhibit 4.8 to the Company's Current Report on Form 8-K filed on August 1, 2001).
10.26   Agreement and Plan of Merger by and among Cendant Corporation, Diamondhead Corporation and CheapTickets, Inc. dated August 13, 2001 (Incorporated by reference to Exhibit 99(D)(6) of the Company's Schedule TO filed on August 24, 2001).
10.27   Agreement and Plan of Merger by and among Cendant Corporation, Grand Slam Acquisition Corp. and Fairfield Communities, Inc. dated as of November 1, 2000 (Incorporated by Reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2000 filed November 14, 2000).
10.28   Outsourcing Agreement by and among Cendant Corporation, Cendant Membership Services Holdings Subsidiary, Inc., Cendant Membership Services, Inc. and Trilegiant Corporation dated as of July 2, 2001 (Incorporated by reference to the Company's Current Report on Form 8-K filed on July 10, 2001).
10.29   Series 1997-2 Supplement, dated as of July 30, 1997, between AESOP Funding II L.L.C. and The Bank of New York, as Trustee, to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP Funding II and the Bank of New York. (Incorporated by reference to Avis Group Holdings Inc.'s Registration Statement on Form S-1/A filed on August 11, 1997).
10.30   Amendment No.1, dated as of November 19, 1999, to the Series 1997-2 Supplement, between AESOP Funding II L.L.C. and The Bank of New York, as Trustee, to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP Funding II and the Bank of New York. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001).
10.31   Amendment No.2, dated as of June 21, 2001, to the Series 1997-2 Supplement, between AESOP Funding II L.L.C. and The Bank of New York, as Trustee, to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP Funding II and the Bank of New York. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001).
10.32   Loan Agreement, dated as of July 30, 1997, between AESOP Leasing Corp. II, as borrower, AESOP Leasing Corp., as permitted nominee of the borrower, and AESOP Funding II L.L.C., as lender. (Incorporated by reference to Avis Group Holdings Inc.'s Registration Statement on Form S-1/A filed on August 11, 1997).

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10.33   Master Motor Vehicle Finance Lease Agreement, dated as of July 30, 1997, by and among AESOP Leasing L.P., as lessor, Avis Rent A Car System, Inc., as lessee, individually and as the administrator, and Avis Rent A Car, Inc., as guarantor. (Incorporated by reference to Avis Group Holdings Inc.'s Registration Statement on Form S-1/A filed on August 11, 1997).
10.34   Master Motor Vehicle Operating Lease Agreement, dated as of July 30, 1997, by and among AESOP Leasing Corp. II, as lessor, Avis Rent A Car System, Inc., individually and as the administrator, certain Eligible Rental Car Companies, as lessees, and the Avis Rent A Car, Inc., as guarantor. (Incorporated by reference to Avis Group Holdings Inc.'s Registration Statement on Form S-1/A filed on August 11, 1997).
10.35   Supplemental Indenture No. 1, dated as of July 31, 1998, to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP Funding II L.L.C., as issuer, and the Bank of New York. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998 dated March 29, 1999).
10.36   Amendment No. 1, dated as of July 31, 1998, to Loan Agreement, dated as of July 30, 1997 between AESOP Leasing L.P., as borrower, and AESOP Funding II L.L.C., as lender. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998 dated March 29, 1999).
10.37   Amended and Restated Loan Agreement, dated as of September 15, 1998, among AESOP Leasing L.P., as borrower, PV Holding Corp., as a permitted nominee of the borrower, Quartz Fleet Management, Inc., as a permitted nominee of the borrower, and AESOP Funding II L.L.C., as lender. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998 dated March 29, 1999).
10.38   Amended and Restated Master Motor Vehicle Operating Lease Agreement, dated as of September 15, 1998, among AESOP Leasing L.P., as lessor, Avis Rent A Car System, Inc., individually and as Administrator, certain Eligible Rental Car Companies, as lessees, and Avis Rent A Car, Inc., as guarantor. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998 dated March 29, 1999).
10.39   Supplemental Indenture No. 2, dated as of September 15, 1998, to Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP Funding II L.L.C., as issuer, and the Bank of New York. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998 dated March 29, 1999).
10.40   Amended and Restated Administration Agreement, dated as of September 15, 1998, AESOP Funding II L.L.C., AESOP Leasing L.P., AESOP Leasing Corp. II, Avis Rent A Car System, Inc., as Administrator and The Bank of New York, as Trustee. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001).
10.41   The Amended and Restated Series 1997-1 Supplement, dated as of June 29, 2001, between AESOP Funding II L.L.C. and The Bank of New York, as trustee, to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP Funding II and The Bank of New York. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001).
10.42   The Amended and Restated Series 1998-1 Supplement, dated as of June, 2001, between AESOP Funding II L.L.C., as issuer, and The Bank of New York, as trustee and Series 1998-1 agent, to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP Funding II L.L.C., as issuer, and The Bank of New York. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001).

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10.43   The Amended and Restated Series 1999-1 Supplement, dated as of June, 2001, between AESOP Funding II L.L.C., as issuer, and The Bank of New York, as trustee and Series 1999-1 agent, to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP Funding II L.L.C., as issuer, and The Bank of New York. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001).
10.44   The Amended and Restated Series 2000-1 Supplement, dated as of June, 2001, between AESOP Funding II L.L.C., as issuer, and The Bank of New York, as trustee and Series 2000-1 agent, to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP Funding II L.L.C., as issuer, and The Bank of New York. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001).
10.45   The Amended and Restated Series 2000-2 Supplement, dated as of June, 2001, between AESOP Funding II L.L.C., as issuer, and The Bank of New York, as trustee and Series 2000-2 agent, to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP Funding II L.L.C., as issuer, and The Bank of New York. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001).
10.46   The Amended and Restated Series 2000-3 Supplement, dated as of June, 2001, between AESOP Funding II L.L.C., as issuer, and The Bank of New York, as trustee and Series 2000-3 agent, to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP Funding II L.L.C., as issuer, and The Bank of New York. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001).
10.47   The Amended and Restated Series 2000-4 Supplement, dated as of June, 2001, between AESOP Funding II L.L.C., as issuer, and The Bank of New York, as trustee and Series 2000-4 agent, to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP Funding II L.L.C., as issuer, and The Bank of New York. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001).
10.48   The Amended and Restated Series 2001-1 Supplement, dated as of June, 2001, between AESOP Funding II L.L.C., as issuer, and The Bank of New York, as trustee and Series 2001-1 agent, to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP Funding II L.L.C., as issuer, and The Bank of New York. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001).
10.49   The Amended and Restated Series 2001-2 Supplement, dated as of June, 2001, between AESOP Funding II L.L.C., as issuer, and The Bank of New York, as trustee and Series 2001-2 agent, to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP Funding II L.L.C., as issuer, and The Bank of New York. (Incorporated by reference to Avis Group Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001).
10.50   Base Indenture dated as of June 30, 1999 between Greyhound Funding LLC and The Chase Manhattan Bank, as Indenture Trustee. (Incorporated by reference to Greyhound Funding LLC's Amendment to its Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 19, 2001) (File No. 333-40708).

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10.51   Supplemental Indenture No. 1 dated as of October 28, 1999 between Greyhound Funding LLC and The Chase Manhattan Bank to the Base Indenture dated as of June 30, 1999. (Incorporated by reference to Greyhound Funding LLC's Amendment to its Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 19, 2001) (File No. 333-40708).
10.52   Series 2001-1 Indenture Supplement between Greyhound Funding LLC and The Chase Manhattan Bank, as Indenture Trustee, dated as of October 25, 2001 (Incorporated by reference to Greyhound Funding LLC's Annual Report on Form 10-K for the year ended December 31, 2001).
10.53   Form of Notes (included in Exhibit 10.55).
10.54   Series 1999-2 Indenture Supplement between Greyhound Funding LLC and The Chase Manhattan Bank, as Indenture Trustee, dated as of October 28, 1999. (Incorporated by reference to Greyhound Funding LLC's Annual Report on Form 10-K for the year ended December 31, 2001).
10.55   Series 1999-3 Indenture Supplement among Greyhound Funding LLC, PHH Vehicle Management Services, LLC, as Administrator, certain CP Conduit Purchasers, certain APA Banks, certain Funding Agents and The Chase Manhattan Bank, as Administrative Agent and Indenture Trustee, dated as of October 28, 1999. (Incorporated by reference to Greyhound Funding LLC's Annual Report on Form 10-K for the year ended December 31, 2001).
10.56   Second Amended and Restated Mortgage Loan Purchase and Servicing Agreement, dated as of October 31, 2000 among the Bishop's Gate Residential Mortgage Trust, Cendant Mortgage Corporation, Cendant Mortgage Corporation, as Servicer and PHH Corporation. (Incorporated by reference to PHH Corporation's Annual Report on Form 10-K for the year ended December 31, 2001).
10.57   Purchase Agreement dated as of April 25, 2000 by and between Cendant Mobility Services Corporation and Cendant Mobility Financial Corporation. (Incorporated by reference to PHH Corporation's Annual Report on Form 10-K for the year ended December 31, 2001).
10.58   Receivables Purchase Agreement dated as of April 25, 2000 by and between Cendant Mobility Financial Corporation and Apple Ridge Services Corporation. (Incorporated by reference to PHH Corporation's Annual Report on Form 10-K for the year ended December 31, 2001).
10.59   Transfer and Servicing Agreement dated as of April 25, 2000 by and between Apple Ridge Services Corporation, Cendant Mobility Financial Corporation, Apple Ridge Funding LLC and Bank One, National Association. (Incorporated by reference to PHH Corporation's Annual Report on Form 10-K for the year ended December 31, 2001).
10.60   Master Indenture among Apple Ridge Funding LLC, Bank One, National Association and The Bank Of New York dated as of April 25, 2000. (Incorporated by reference to PHH Corporation's Annual Report on Form 10-K for the year ended December 31, 2001).
10.61   Master Indenture and Servicing Agreement dated as of August 29, 2002 by and among Sierra Receivables Funding Company, LLC, as Issuer, Fairfield Acceptance Corporation-Nevada, as Master Servicer and Wachovia Bank, National Association, as Trustee and as Collateral Agent.
10.62   Series 2002-1 Supplement to Master Indenture and Servicing Agreement dated as of August 29, 2002 among Sierra Receivables Funding Company, LLC, as Issuer, Fairfield Acceptance Corporation-Nevada, as Master Servicer and Wachovia Bank, National Association, as Trustee and as Collateral Agent.
10.63   Master Loan Purchase Agreement dated as of August 29, 2002 among Fairfield Acceptance Corporation-Nevada, as Seller, Fairfield Resorts, Inc., as Co-Originator, Fairfield Myrtle Beach, Inc., as Co-Originator, each VB Subsidiary referred to therein, each VB Partnership referred to therein and Sierra Deposit Company, LLC, as Purchaser.

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10.64   Series 2002-1 Supplement dated as of August 29, 2002 to Master Loan Purchase Agreement dated as of August 29, 2002 among Fairfield Acceptance Corporation-Nevada, as Seller, Fairfield Resorts, Inc., as Co-Originator, Fairfield Myrtle Beach, Inc., as Co-Originator, each VB Subsidiary referred to therein, each VB Partnership referred to therein and Sierra Deposit Company, LLC, as Purchaser.
10.65   Master Loan Purchase Agreement dated as of August 29, 2002 between Trendwest Resorts, Inc., as Seller and Sierra Deposit Company, LLC, as Purchaser.
10.66   Series 2002-1 Supplement dated as of August 29, 2002 to Master Loan Purchase Agreement dated as of August 29, 2002 between Trendwest Resorts, Inc., as Seller and Sierra Deposit Company, LLC, as Purchaser.
10.67   Master Loan Purchase Agreement dated as of August 29, 2002 between EFI Development Funding, Inc., as Seller and Sierra Deposit Company, LLC, as Purchaser.
10.68   Series 2002-1 Supplement dated as of August 29, 2002 to Master Loan Purchase Agreement dated as of August 29, 2002 between EFI Development Funding, Inc., as Seller and Sierra Deposit Company, LLC, as Purchaser.
10.69   Master Pool Purchase Agreement dated as of August 29, 2002 between Sierra Deposit Company, LLC, as Depositor and Sierra Receivables Funding Company, LLC, as Issuer.
10.70   Series 2002-1 Supplement dated as of August 29, 2002 to Master Pool Purchase Agreement dated as of August 29, 2002 between Sierra Deposit Company, LLC, as Depositor and Sierra Receivables Funding Company, LLC, as Issuer.
10.71   Asset and Stock Purchase Agreement by and among Budget Group, Inc. and certain of its Subsidiaries, Cendant Corporation and Cherokee Acquisition Corporation dated as of August 22, 2002.
10.72   First Amendment to Asset and Stock Purchase Agreement by and among Budget Group, Inc. and certain of its Subsidiaries, Cendant Corporation and Cherokee Acquisition Corporation dated as of September 10, 2002.
10.73   Amended and Extended Employment Agreement dated as of July 1, 2002 by and between Cendant Corporation and Henry R. Silverman.
10.74   Series 2002-2 Supplement dated as of September 12, 2002 to the Amended and Restated Base Indenture dated as of July 30, 1997 among Aesop Funding II, L.L.C., Avis Rent A Car System, Inc., JPMorgan Chase Bank, Certain CP Conduit Purchasers, Certain Funding Agents, Certain APA Banks and The Bank of New York, as Trustee (incorporated by reference to Avis Group Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002).
12   Statement Re: Computation of Ratio of Earnings to Fixed Charges*
21   Subsidiaries of Registrant*
23   Consent of Deloitte & Touche LLP
99.1   Pro Forma Financial Information for the year ended December 31, 2001.*
99.2   Press Release issued by Cendant Corporation on August 14, 2002, announcing the certification by Cendant executives of Cendant's financial statements (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2002).
99.3   Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*
Previously filed on Form 10-K of the Company filed on April 1, 2002.

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QuickLinks

DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT CONSTITUTING PART OF SECTION 10(A) PROSPECTUS FOR FORM S-8 REGISTRATION STATEMENTS
TABLE OF CONTENTS
PART I
PART II
PART III
PART IV
SIGNATURES
CERTIFICATIONS
Cendant Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS (In millions, except share data)
Cendant Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unless otherwise noted, all amounts are in millions, except per share amounts)
EXHIBIT INDEX


                                                                   EXHIBIT 10.61

                                                                  EXECUTION COPY


                    MASTER INDENTURE AND SERVICING AGREEMENT


                           Dated as of August 29, 2002

                                  by and among

                    SIERRA RECEIVABLES FUNDING COMPANY, LLC,
                                    as Issuer

                                       and

                   FAIRFIELD ACCEPTANCE CORPORATION - NEVADA,
                               as Master Servicer

                                       and

                      WACHOVIA BANK, NATIONAL ASSOCIATION,
                                   as Trustee

                                       and

                      WACHOVIA BANK, NATIONAL ASSOCIATION,
                               as Collateral Agent



                                TABLE OF CONTENTS




                                                                                                 PAGE
                                                                                                
                                    ARTICLE I
                                   DEFINITIONS

Section 1.1      Definitions........................................................................2

Section 1.2      Other Definitional Provisions.....................................................15

Section 1.3      Intent and Interpretation of Documents............................................16

                                   ARTICLE II
                                    THE NOTES

Section 2.1      Form Generally....................................................................17

Section 2.2      Denominations.....................................................................17

Section 2.3      Execution, Authentication and Delivery............................................17

Section 2.4      Authentication Agent..............................................................18

Section 2.5      Registration of Transfer and Exchange of Notes....................................19

Section 2.6      Mutilated, Destroyed, Lost or Stolen Notes........................................20

Section 2.7      Persons Deemed Owners.............................................................21

Section 2.8      Appointment of Paying Agent.......................................................22

Section 2.9      Cancellation......................................................................22

Section 2.10     New Issuances.....................................................................22

Section 2.11     Book-Entry Notes..................................................................23

Section 2.12     Notices to Clearing Agency or Foreign Clearing Agency.............................23

Section 2.13     Definitive Notes..................................................................24

Section 2.14     Global Note.......................................................................24

Section 2.15     Meetings of Noteholders...........................................................24

Section 2.16     Confidentiality...................................................................25

Section 2.17     144A Information..................................................................25

                                   ARTICLE III
                  REPRESENTATIONS AND WARRANTIES OF THE ISSUER

Section 3.1      Representations and Warranties Regarding the Issuer...............................25

Section 3.2      Representations and Warranties Regarding the Loan Files...........................29

Section 3.3      Rights of Obligors and Release of Loan Files......................................29



                                        i


                                TABLE OF CONTENTS
                                   (continued)




                                                                                                 PAGE
                                                                                                
                              ARTICLE IV
                    ADDITIONAL COVENANTS OF ISSUER

Section 4.1      Affirmative Covenants.............................................................30

Section 4.2      Negative Covenants of the Issuer..................................................38

                               ARTICLE V
                      SERVICING OF PLEDGED LOANS

Section 5.1      Responsibility for Loan Administration............................................40

Section 5.2      Standard of Care..................................................................41

Section 5.3      Records...........................................................................41

Section 5.4      Loan Schedules....................................................................41

Section 5.5      Enforcement.......................................................................41

Section 5.6      Trustee and Collateral Agent to Cooperate.........................................42

Section 5.7      Other Matters Relating to the Master Servicer.....................................42

Section 5.8      Servicing Compensation............................................................43

Section 5.9      Costs and Expenses................................................................43

Section 5.10     Representations and Warranties of the Master Servicer.............................43

Section 5.11     Additional Covenants of the Master Servicer.......................................44

Section 5.12     Master Servicer not to Resign.....................................................47

Section 5.13     Merger or Consolidation of, or Assumption of the Obligations of Master Servicer...47

Section 5.14     Examination of Records............................................................48

Section 5.15     Subservicing Agreements...........................................................48

                                   ARTICLE VI
                                     REPORTS

Section 6.1      Noteholder Statements.............................................................49

Section 6.2      Monthly Servicing Reports.........................................................49

Section 6.3      Other Data........................................................................49

Section 6.4      Annual Master Servicer's Certificate..............................................49

Section 6.5      Notices to FAC....................................................................49



                                       ii


                                TABLE OF CONTENTS
                                   (continued)




                                                                                                 PAGE
                                                                                                
                                   ARTICLE VII
            RIGHTS OF NOTEHOLDERS; ACCOUNTS AND PRIORITY OF PAYMENTS

Section 7.1      Collection Accounts...............................................................50

Section 7.2      Lockbox Accounts..................................................................50

Section 7.3      Tax Treatment.....................................................................50

                                  ARTICLE VIII
                                   INDEMNITIES

Section 8.1      Liabilities to Obligors...........................................................50

Section 8.2      Tax Indemnification...............................................................50

Section 8.3      Master Servicer's Indemnities.....................................................51

Section 8.4      Operation of Indemnities..........................................................51

                                   ARTICLE IX
                                EVENTS OF DEFAULT

Section 9.1      Events of Default.................................................................51

Section 9.2      Acceleration of Maturity; Rescission and Annulment................................51

Section 9.3      Collection of Indebtedness and Suits for Enforcement by Trustee...................52

Section 9.4      Trustee May File Proofs of Claim..................................................53

Section 9.5      Remedies..........................................................................54

Section 9.6      Optional Preservation of Collateral...............................................55

Section 9.7      Application of Monies Collected During Event of Default...........................55

Section 9.8      Limitation on Suits by Individual Noteholders.....................................55

Section 9.9      Unconditional Rights of Noteholders to Receive Principal and Interest.............56

Section 9.10     Restoration of Rights and Remedies................................................56

Section 9.11     Waiver of Event of Default........................................................56

Section 9.12     Waiver of Stay or Extension Laws..................................................56

Section 9.13     Sale of Series Collateral.........................................................57

Section 9.14     Action on Notes...................................................................57

Section 9.15.    Control by Series of Noteholders..................................................57

                                    ARTICLE X
                                SERVICER DEFAULTS

Section 10.1     Servicer Defaults.................................................................58



                                       iii


                                TABLE OF CONTENTS
                                   (continued)




                                                                                                 PAGE
                                                                                                
Section 10.2     Appointment of Successor..........................................................60

Section 10.3     Notification to Noteholders.......................................................60

Section 10.4     Waiver of Past Defaults...........................................................61

Section 10.5     Termination of Master Servicer's Authority........................................61

Section 10.6     Matters Related to Successor Master Servicer......................................61

                                   ARTICLE XI
                THE TRUSTEE; THE COLLATERAL AGENT; THE CUSTODIAN

Section 11.1     Duties of Trustee.................................................................62

Section 11.2     Certain Matters Affecting the Trustee.............................................64

Section 11.3     Trustee Not Liable for Recitals in Notes or Use of Proceeds of Notes..............65

Section 11.4     Trustee May Own Notes; Trustee in its Individual Capacity.........................66

Section 11.5     Trustee's Fees and Expenses; Indemnification......................................66

Section 11.6     Eligibility Requirements for Trustee..............................................67

Section 11.7     Resignation or Removal of Trustee.................................................67

Section 11.8     Successor Trustee.................................................................68

Section 11.9     Merger or Consolidation of Trustee................................................68

Section 11.10    Appointment of Co-Trustee or Separate Trustee.....................................68

Section 11.11    Trustee May Enforce Claims Without Possession of Notes............................69

Section 11.12    Suits for Enforcement.............................................................70

Section 11.13    Rights of Noteholders to Direct the Trustee.......................................70

Section 11.14    Representations and Warranties of the Trustee.....................................70

Section 11.15    Maintenance of Office or Agency...................................................70

Section 11.16    No Assessment.....................................................................71

Section 11.17    UCC Filings and Title Certificates................................................71

Section 11.18    Replacement of the Custodian......................................................71

                                   ARTICLE XII
                                   TERMINATION

Section 12.1     Termination of Agreement..........................................................71

Section 12.2     Final Payment.....................................................................71

Section 12.3     Defeasance........................................................................72



                                       iv


                                TABLE OF CONTENTS
                                   (continued)




                                                                                                 PAGE
                                                                                                
Section 12.4     Release of Collateral.............................................................72

                                  ARTICLE XIII
                            MISCELLANEOUS PROVISIONS

Section 13.1     Amendment.........................................................................72

Section 13.2     Reserved..........................................................................74

Section 13.4     Governing Law.....................................................................75

Section 13.5     Notices...........................................................................75

Section 13.6     Severability of Provisions........................................................77

Section 13.7     Assignment........................................................................77

Section 13.8     Notes Non-assessable and Fully Paid...............................................77

Section 13.9     Further Assurances................................................................77

Section 13.10    No Waiver; Cumulative Remedies....................................................77

Section 13.11    Counterparts......................................................................77

Section 13.12    Third-Party Beneficiaries.........................................................77

Section 13.13    Actions by the Noteholders........................................................78

Section 13.14    Merger and Integration............................................................78

Section 13.15    No Bankruptcy Petition............................................................78

Section 13.16    Headings..........................................................................78



                                        v


                                    EXHIBITS


                                                                                               
Exhibit A        Payment and Release Certificates.................................................A-1



                                       vi


                                    SCHEDULES

1.  Schedule of Trustee's fees.

                                       vii


                    MASTER INDENTURE AND SERVICING AGREEMENT

     THIS MASTER INDENTURE AND SERVICING AGREEMENT dated as of August 29, 2002
is by and between SIERRA RECEIVABLES FUNDING COMPANY, LLC, a limited liability
company organized under the laws of the State of Delaware as issuer, FAIRFIELD
ACCEPTANCE CORPORATION-NEVADA, a Delaware corporation, as master servicer,
WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as trustee
and as collateral agent. This Agreement may be supplemented and amended from
time to time in accordance with Article XIII. If a conflict exists between the
terms and provisions of this Agreement and any Series Supplement, the terms and
provisions of the Series Supplement shall be controlling with respect to the
related Series.

                                    RECITALS

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

     In connection with one or more Series of Notes issued under this Agreement
and a Series Supplement, the Issuer may enter into agreements with other
entities that will provide credit enhancement or other protection and benefits
for the Holders of a Series of Notes or a Class of such Series of Notes and the
Issuer will incur obligations under the terms of such agreement. All covenants
and agreements made by the Issuer herein are for the benefit and security of the
Noteholders of the respective Series and, to the extent and as provided for in
the relevant Series Supplements, the Series Enhancers.

     The Issuer is entering into this Agreement, and the Trustee is accepting
the trusts created hereby, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged. All things necessary have been
done to make the Notes, when executed by the Issuer and authenticated and
delivered by the Trustee hereunder and under the Series Supplements and duly
issued by the Issuer, the valid obligations of the Issuer, and to make this
Agreement a valid agreement of the Issuer, enforceable in accordance with their
and its terms. All covenants and agreements made by the Issuer herein are for
the benefit and security of the Noteholders and, to the extent and as provided
for in the relevant Series Supplement, the Series Enhancers.

     NOW THEREFORE, in consideration of the mutual agreements herein contained,
each party agrees as follows for the benefit of the other parties and for the
benefit of the Noteholders and, to the extent and as provided for in the
relevant Series Supplements, the Series Enhancers.



                                    ARTICLE I

                                   DEFINITIONS

     Section 1.1    DEFINITIONS

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

     "ACCOUNT" shall mean any Collection Account and any other Series Account.

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

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

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

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

     "AGENT MEMBERS" shall mean members of, or participants in Euroclear or
Clearstream.

     "AGGREGATE PRINCIPAL AMOUNT" shall mean, as of any day of calculation, an
amount equal to the sum of the principal amount outstanding for all Series of
Notes or, if used with respect to a Series, an amount equal to the sum of the
principal amount outstanding for that Series of Notes.

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

     "AMORTIZATION EVENT" shall have, with respect to any Series, the meaning
assigned to that term in the applicable Series Supplement.

     "AUTHENTICATION AGENT" shall mean a Person designated by the Trustee to
authenticate Notes on behalf of the Trustee.

                                        2


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

     "BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, Title 11 of
the United States Code, as amended.

     "BEARER NOTES" shall have the meaning set forth in Section 2.1.

     "BENEFIT PLAN" shall mean any employee benefit plan as defined in Section
3(3) of ERISA in respect of which the Issuer, any eligible Originator, any
eligible Seller or any ERISA Affiliate of the Issuer is, or at any time during
the immediately preceding six years was, an "employer" as defined in Section
3(5) of ERISA.

     "BOOK-ENTRY NOTES" shall mean security entitlements to the Notes, ownership
and transfers of which shall be made through book entries by a Clearing Agency
or a Foreign Clearing Agency, as described in Section 2.11.

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

     "CENDANT" shall mean Cendant Corporation or any successor thereof.

     "CLASS" shall mean, with respect to any Series, any one of the classes of
Notes of that Series.

     "CLEARING AGENCY" shall mean an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.

     "CLEARING AGENCY PARTICIPANT" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.

     "CLEARSTREAM" shall mean Clearstream Banking, societe anonyme, a
professional depository incorporated under the laws of Luxembourg, and its
successors.

     "CLOSING DATE" shall mean, with respect to any Series, the closing date
specified in the related Series Supplement.

     "CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.

     "COLLATERAL" shall mean the Series Collateral for any one or more Series.

                                        3


     "COLLATERAL AGENCY AGREEMENT" shall mean the Collateral Agency Agreement
dated as of January 15, 1998 by and between Fleet National Bank as predecessor
Collateral Agent, Fleet Securities, Inc. as deal agent and the secured parties
named therein, as amended by the First Amendment to Collateral Agency Agreement
dated as of July 31, 1998, as further amended by the Second Amendment to
Collateral Agreement dated as of July 25, 2000, as further amended by the Third
Amendment to Collateral Agency Agreement dated as of July 1, 2001, and as
further amended by the Fourth Amendment to Collateral Agency Agreement dated as
of August 29, 2002 by and among the Collateral Agent, the Trustee and other
secured parties, as such Collateral Agency Agreement may be amended,
supplemented or otherwise modified from time to time in accordance therewith.

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

     "COLLECTION ACCOUNT" shall mean with respect to any Series the account
described in Section 7.1 hereof and established in the respective Series
Supplement for the deposit of Collections related to that Series.

     "COLLECTIONS," with respect to any Pledged Loan, shall have the meaning
assigned thereto in the applicable Purchase Agreement.

     "CORPORATE TRUST OFFICE" shall mean the office of the Trustee at which at
any particular time its corporate trust business is administered, which office
at the date of the execution of this Agreement is located at 401 South Tryon
Street, NC-1179, 12th Floor, Charlotte, NC 28288-1179, Attention: Structured
Finance Trust Services, Sierra Receivables Funding Company, LLC Series 2002-1.

     "COUPONS" shall have the meaning set forth in Section 2.1.

     "CREDIT CARD ACCOUNT" shall mean an arrangement whereby an Obligor makes
Scheduled Payments under a Loan via pre-authorized debit to a Major Credit Card.

     "CREDIT STANDARDS AND COLLECTION POLICIES" shall mean the Credit Standards
and Collection Policies of FAC and FRI, EFI, Trendwest or any other Seller, as
attached to the applicable Purchase Agreement and as amended from time to time
in accordance with the applicable Purchase Agreement and the restrictions of
Section 4.2(c).

     "CUSTODIAL AGREEMENT" shall mean each of (i) the custodial agreement dated
as of August 29, 2002 by and between the Issuer, EFI, Trendwest, Wachovia
National Bank, as Custodian, the Trustee and the Collateral Agent and (ii) the
Fourth Amended and Restated Custodial Agreement dated as of August 29, 2002 by
and among Wells Fargo Bank Nevada, N.A. (successor by merger to First Security
Trust Company of Nevada) as Custodian, the Collateral Agent, the Trustee, the
Issuer and other parties named therein, as the same may be amended, supplemented
or otherwise modified from time to time thereafter in accordance with the terms
hereof.

     "CUSTODIAN" shall mean, at any time, the custodian under the applicable
Custodial Agreement.

                                        4


     "CUSTOMARY PRACTICES" shall, with respect to the servicing and
administration of any Pledged Loans, have the meaning assigned to that term in
the Purchase Agreement under which such Loan was transferred from the Seller to
the Depositor.

     "CUT-OFF DATE" shall mean, with respect to the Pledged Loans for any
Series, the date stated as the Cut-Off Date in the related Series Supplement.

     "DEBT" of any Person shall mean (a) indebtedness of such Person for
borrowed money, (b) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) obligations of such Person to pay the
deferred purchase price of property or services, (d) obligations of such Person
as lessee under leases which have been or should be, in accordance with
generally accepted accounting principles, recorded as capital leases, (e)
obligations secured by any lien, security interest or other charge upon property
or assets owned by such Person, even though such Person has not assumed or
become liable for the payment of such obligations, (f) obligations of such
Person under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred to in clauses (a) through (e) above, and (g)
liabilities in respect of unfunded vested benefits under Benefit Plans covered
by Title IV of ERISA.

     "DEBTOR RELIEF LAWS" shall mean the Bankruptcy Code and all other
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments, or similar
debtor relief laws from time to time in effect affecting the rights of creditors
generally.

     "DEFINITIVE NOTES" shall have the meaning set forth in Section 2.11.

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

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

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

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

     "EFI" shall mean EFI Development Funding, Inc., a wholly-owned indirect
subsidiary of Cendant, and its successors and assigns.

     "ELIGIBLE INSTITUTION" shall mean any depository institution the short term
unsecured senior indebtedness of which is rated at least "F-l" by Fitch, "A-l"
by S&P or "P-l" by Moody's,

                                        5


and the long term unsecured indebtedness rating of which is rated at least "A"
by Fitch, "A" by S&P or "A-2" by Moody's.

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

     "ERISA AFFILIATE" shall mean with respect to any Person, (i) any
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as such Person; (ii) a trade
or business (whether or not incorporated) under common control (within the
meaning of Section 414(c) of the Code) with such Person; or (iii) a member of
the same affiliated service group (within the meaning of Section 414(n) of the
Code) as such Person, any corporation described in clause (i) or any trade or
business described in clause (ii).

     "ERISA LIABILITIES" shall have the meaning set forth in Section 4.2(g).

     "EUROCLEAR OPERATOR" shall mean Euroclear Bank S.A./N.V., as operator of
the Euroclear System, and its successor and assigns in such capacity.

     "EUROCLEAR PARTICIPANTS" shall mean the participants of the Euroclear
System, for which the Euroclear System holds securities.

     "EVENT OF DEFAULT" shall mean, with respect to any Series, each event which
is stated to constitute an Event of Default under the applicable Series
Supplement.

     "EXCHANGE ACT" shall mean the U. S. Securities Exchange Act of 1934, as
amended.

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

     "FACILITY DOCUMENTS" shall mean, collectively, this Agreement, the Series
Supplements, the Purchase Agreements, the Series Purchase Supplements, the Pool
Purchase Agreement, the Series Pool Purchase Supplements, the Custodial
Agreements, the Lockbox Agreements, the Title Clearing Agreements, the Loan
Conveyance Documents, the Collateral Agency Agreement, the Administrative
Services Agreements, the Financing Statements and all other agreements,
documents and instruments delivered pursuant thereto or in connection therewith,
and "FACILITY DOCUMENT" shall mean any of them.

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

     "FITCH" shall mean Fitch, Inc. or any successor thereto.

     "FOREIGN CLEARING AGENCY" shall mean Clearstream and the Euroclear
Operator.

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

                                        6


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

     "GLOBAL NOTE" shall have the meaning specified in Section 2.14.

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

     "INITIAL CLOSING DATE" shall mean August 29, 2002.

     "INSOLVENCY EVENT" shall mean, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Debtor Relief Law now or hereafter in
effect, or the filing of a petition against such Person in an involuntary case
under any applicable Debtor Relief Law now or hereafter in effect, which case
remains unstayed and undismissed within 30 days of such filing, or the
appointing of a receiver, conservator, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its property, or the ordering of the winding-up or liquidation of such Person's
business; or (b) the commencement by such Person of a voluntary case under any
applicable Debtor Relief Law now or hereafter in effect, or the consent by such
Person to the entry of an order for relief in an involuntary case under any such
Debtor Relief Law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for such Person or for any substantial part of its property,
or the making by such Person of any general assignment for the benefit of
creditors, or the failure by such Person generally to pay its debts as such
debts become due or the admission by such Person of its inability to pay its
debts generally as they become due.

     "INSOLVENCY PROCEEDING" shall mean any proceeding relating to an Insolvency
Event.

     "INSTALLMENT CONTRACT" shall mean an installment sale contract as defined
in the applicable Purchase Agreement.

     "INSURANCE PROCEEDS" shall have the meaning assigned to that term in the
applicable Purchase Agreement.

     "INVESTMENT COMPANY ACT" shall mean the U.S. Investment Company Act of
1940, as amended.

                                        7


     "ISSUER" shall mean Sierra Receivables Funding Company, LLC, a Delaware
limited liability company and its successors and assigns.

     "ISSUER ORDER" shall mean a written order or request dated and signed in
the name of the Issuer by an Authorized Officer of the Issuer.

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

     "LLC AGREEMENT" shall mean the Limited Liability Agreement of Sierra
Receivables Funding Company, LLC dated as of August 29, 2002 as amended,
supplemented, restated or otherwise modified from time to time.

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

     "LOAN BALANCE" shall mean the outstanding principal balance due under or in
respect of a Pledged Loan.

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

     "LOAN DOCUMENTS" shall mean, with respect to any Pledged Loan have the
meaning assigned to that term in the Purchase Agreement under which such Pledged
Loan was transferred from the Seller to the Depositor.

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

                                        8


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

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

     "LOCKBOX ACCOUNT" shall mean any of the accounts established pursuant to a
Lockbox Agreement.

     "LOCKBOX AGREEMENT" shall have the meaning assigned to such term in the
applicable Purchase Agreement.

     "LOCKBOX BANK" shall mean any of the commercial banks holding one or more
Lockbox Accounts.

     "LOT" shall mean a fully or partially developed parcel of real estate.

     "MAJOR CREDIT CARD" shall mean a credit card issued by any VISA USA, Inc.,
MasterCard International Incorporated, American Express Company, Discover Bank
or Diners Club International Ltd. credit card entity.

     "MAJORITY HOLDERS" shall mean with respect to all Notes issued and
outstanding, the Holders of fifty-one percent or more of the Aggregate Principal
Amount of all Notes and, with respect to any Series, the Holders of fifty-one
percent or more of the Aggregate Principal Amount of that Series.

     "MASTER SERVICER" shall mean Fairfield Acceptance Corporation - Nevada or,
if the conditions set forth in Section 5.12 are satisfied, Trendwest, in either
case in its capacity as master servicer pursuant to this Agreement and, after
any Service Transfer, the Successor Master Servicer.

     "MATERIAL ADVERSE EFFECT" shall mean, with respect to any Person and any
event or circumstance, a material adverse effect on:

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

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

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

                                        9


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

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

     "MEMBER" shall have the meaning assigned thereto in the LLC Agreement.

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

     "MONTHLY SERVICING REPORT" shall mean each monthly report prepared by the
Master Servicer as provided in Section 6.2 and in the Series Supplements.

     "MOODY'S" shall mean Moody's Investors Service, Inc. or any successor
thereto.

     "MORTGAGE" shall mean any mortgage, deed of trust, purchase money deed of
trust or deed to secure debt encumbering the related Timeshare Property, granted
by the related Obligor to the Originator of a Loan to secure payments or other
obligations under such Loan.

     "MULTIEMPLOYER PLAN" shall have the meaning set forth in Section 3(37) of
ERISA.

     "NOMINEE" shall have the meaning set forth in the Purchase Agreements.

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

     "NOTE REGISTER" shall have the meaning specified in Section 2.5.

     "NOTE REGISTRAR" shall have the meaning specified in Section 2.5.

     "NOTEHOLDER" or "HOLDER" shall mean the Person in whose name a Note is
registered in the Note Register.

     "OBLIGOR" shall mean, with respect to any Loan, the Person or Persons
obligated to make Scheduled Payments thereon.

     "OFFICER'S CERTIFICATE" shall mean, unless otherwise specified in this
Agreement, a certificate delivered to the Trustee signed by any Vice President
or more senior officer of the Issuer or the Master Servicer, as the case may be,
or, in the case of a Successor Master Servicer, a certificate signed by any Vice
President or more senior officer or the financial controller (or an officer
holding an office with equivalent or more senior responsibilities) of such
Successor Master Servicer, and delivered to the Trustee.

                                       10


     "OPINION OF COUNSEL" shall mean a written opinion of counsel who may be
counsel for, or an employee of, the Person providing the opinion and who shall
be reasonably acceptable to the Trustee.

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

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

     "PAYING AGENT" shall mean, with respect to any Series of Notes, the Trustee
or any successor thereto, in its capacity as paying agent.

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

     "PERFORMANCE GUARANTOR" shall mean Cendant Corporation, a Delaware
corporation.

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

     "PERMITTED INVESTMENTS" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities on or before the first Payment Date
after the date of acquisition; (ii) time deposits and certificates of deposit
having maturities on or before the first Payment Date after the date of
acquisition, maintained with or issued by any commercial bank having capital and
surplus in excess of $500,000,000 and having a short term senior unsecured debt
rating of at least "F-l" by Fitch, "A-1" by S&P or "P-l" by Moody's; (iii)
repurchase agreements having maturities on or before the first Payment Date
after the date of acquisition for underlying securities of the types described
in clauses (i) and (ii) above or clause (iv) below with any institution having a
short term senior unsecured debt rating of at least "F-l" by Fitch, "A-l" by
S&P, or "P-l" by Moody's; (iv) commercial paper maturing on or before the first
Payment Date after the date of acquisition and having a short term senior
unsecured debt rating of at least "F-l" by Fitch, "A-l" by S&P or "P-l" by
Moody's; (v) money market funds rated "Aaa" by Moody's which invest solely in
any of the foregoing, including any such funds in which the Trustee or an
Affiliate of the Trustee acts as an investment advisor or provides other
investment related services; and (vi) with respect to any Series Accounts any
other investments permitted by the applicable Series Supplement; PROVIDED,
HOWEVER, that no obligation of any Seller shall constitute a Permitted
Investment.

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

                                       11


     "PLAN" shall mean an employee benefit plan or other retirement arrangement
subject to ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended from time to time.

     "PLAN INSOLVENCY" shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.

     "PLEDGED LOAN" shall mean a Loan listed on a Loan Schedule.

     "PLEDGED ASSETS" shall mean with respect to any Series the assets
designated in the related Series Supplement as the "Series ____ Pledged Assets."

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

     "POOL ASSETS" shall have the meaning set forth in the Pool Purchase
Agreement.

     "POOL PURCHASE AGREEMENT" shall mean the purchase agreement dated August
29, 2002 by and between the Depositor and the Issuer.

     "POST OFFICE BOX" shall mean each post office box to which Obligors are
directed to mail payments in respect of the Pledged Loans.

     "PRIMARY CUSTODIAL DOCUMENTS" shall have the meaning specified in Section
4.1(k).

     "PRINCIPAL AMOUNT" shall mean the initial principal amount of a Series,
plus additional principal amounts issued as part of that Series less principal
payments previously paid as of such date.

     "PROCEEDING" shall have the meaning specified in Section 9.3.

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

     "PURCHASE AGREEMENT" shall have the meaning assigned thereto in the Pool
Purchase Agreement.

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

     "RATING AGENCY CONDITION" shall mean, with respect to any action, that each
Rating Agency shall have notified the Issuer and the Trustee in writing that
such action will not result in a reduction or withdrawal of the then existing
rating of any outstanding Series or Class with respect to which it is a Rating
Agency; provided, however, that if such Series or Class has not been rated, the
Rating Agency Condition with respect to any such action shall be defined in the
related Series Supplement or, if not defined therein, shall not apply.

                                       12


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

     "RECORDS" shall, with respect to any Pledged Loan, have the meaning
assigned thereto in the applicable Purchase Agreement.

     "REGISTERED NOTES" shall have the meaning set forth in Section 2.1.

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

     "REORGANIZATION" shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning of Section 4241
of ERISA.

     "REPORTABLE EVENT" shall mean any of the events described in Section 4043
of ERISA.

     "RESORT" shall have the meaning set forth in the applicable Purchase
Agreement.

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

     "S&P" shall mean Standard & Poor's Ratings Services or any successor
thereto.

     "SALE" shall have the meaning specified in Section 9.13(a).

     "SCHEDULED PAYMENT" shall mean the scheduled monthly payment of principal
and interest on a Pledged Loan.

     "SECURITIES ACT" shall mean the U.S. Securities Act of 1933, as amended.

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

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

     "SERIES ACCOUNT" shall mean any deposit, trust, escrow or similar account
maintained for the benefit of the Noteholders of any Series or Class, as
specified in any Series Supplement.

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

                                       13


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

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

     "SERIES ISSUANCE DATE" shall mean, with respect to any Series, the date on
which the Notes of such Series are to be originally issued in accordance with
Section 2.10 and the related Series Supplement.

     "SERIES POOL PURCHASE SUPPLEMENT" shall mean with respect to any Series,
the supplement to the Pool Purchase Agreement which provides for the sale of
Loans to the Issuer which Loans will provide the collateral for such Series.

     "SERIES PURCHASE SUPPLEMENT" shall mean with respect to any Series, each of
the supplements to the respective Purchase Agreements which supplements provide
for the sale of Loans to the Depositor which Loans will provide the collateral
for such Series.

     "SERIES SUPPLEMENT" shall mean with respect to any Series, the Supplement
to this Agreement which sets forth the terms of such Series.

     "SERVICER DEFAULT" shall mean the defaults specified in Section 10.1.

     "SERVICE TRANSFER" shall have the meaning set forth in Section 10.1.

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

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

     "SUBSERVICING AGREEMENT" shall mean either the agreement between the Master
Servicer and Equivest Capital, Inc. relating to the servicing of Pledged Loans
originated by EFI, the agreement between the Master Servicer and Trendwest
relating to the servicing of Pledged Loans originated by Trendwest or if FAC is
no longer the Master Servicer, the agreement between the Master Servicer and FAC
relating to the servicing of the Pledged Loans originated by FAC or, with
respect to any other Seller, the agreement between the Master Servicer and such
Seller relating to the servicing of the Pledged Loans originated by such Seller.

                                       14


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

     "SUCCESSOR MASTER SERVICER" shall have the meaning set forth in Section
10.2.

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

     "TERMINATION DATE" shall have the meaning specified in Section 12.1.

     "TERMINATION NOTICE" shall have the meaning specified in Section 10.1.

     "TIMESHARE PROPERTY" shall have the meaning assigned thereto in the
applicable Purchase Agreement.

     "TIMESHARE PROPERTY REGIME" shall have the meaning assigned thereto in the
applicable Purchase Agreement.

     "TIMESHARE UPGRADE" shall have the meaning assigned thereto in the
applicable Purchase Agreement.

     "TITLE CLEARING AGREEMENT" shall have the meaning assigned thereto in the
applicable Purchase Agreement.

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

     "TRUSTEE" shall mean Wachovia Bank, National Association or its successor
in interest, or any successor trustee appointed as provided in this Agreement.

     "TRUSTEE FEE LETTER" shall mean the schedule of fees attached as Schedule
1, and all amendments thereof and supplements thereto.

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

     "UDI" shall have the meaning assigned thereto in the respective Purchase
Agreements.

     Section 1.2    OTHER DEFINITIONAL PROVISIONS.

     (a)  With respect to terms used in this Agreement and not otherwise defined
herein such terms shall have the meanings ascribed to them in the Pool Purchase
Agreement.

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

                                       15


     (c)  As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
Section 1.1, and accounting terms partly defined in Section 1.1 to the extent
not defined, shall have the respective meanings given to them under generally
accepted accounting principles and as in effect from time to time. To the extent
that the definitions of accounting terms herein are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained herein or in any such certificate or other document shall
control.

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

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

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

     Section 1.3    INTENT AND INTERPRETATION OF DOCUMENTS

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

                                       16


                                   ARTICLE II

                                    THE NOTES

     Section 2.1    FORM GENERALLY.

     The Notes of any Series or Class shall be issued in fully registered form
without interest coupons (the "REGISTERED NOTES") unless the applicable Series
Supplement provides, in accordance with then applicable laws, that such Notes be
issued in bearer form ("BEARER NOTES") with attached interest coupons and a
special coupon (collectively the "COUPONS"). Such Registered Notes or Bearer
Notes, as the case may be, shall be substantially in the form provided in the
applicable Series Supplement with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Agreement or the applicable Series Supplement, and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon, as may, consistently herewith, be determined by the officers executing
such Notes, as evidenced by their execution of such Notes. Any portion of the
text of any Note may be set forth on the reverse or subsequent pages thereof,
with an appropriate reference thereto on the face of the Note.

     The Notes shall be typewritten, word processed, printed, lithographed or
engraved or produced by any combination of these methods, all as determined by
the officers executing such Notes, as evidenced by their execution of such
Notes. If specified in any Series Supplement, the Notes of any Series or Class
shall be issued upon initial issuance as one or more notes evidencing the
aggregate original principal amount of such Series or Class as described in
Section 2.10.

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

     Section 2.2    DENOMINATIONS.

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

     Section 2.3    EXECUTION, AUTHENTICATION AND DELIVERY.

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

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

                                       17


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

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

     Section 2.4    AUTHENTICATION AGENT.

     (a)  The Trustee may appoint one or more Authentication Agents with respect
to the Notes which shall be authorized to act on behalf of the Trustee in
authenticating the Notes in connection with the issuance, delivery, registration
of transfer, exchange or repayment of the Notes. Whenever reference is made in
this Agreement to the authentication of Notes by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication on behalf of the Trustee by an Authentication Agent and a
certificate of authentication executed on behalf of the Trustee by an
Authentication Agent. Each Authentication Agent must be acceptable to the Issuer
and the Master Servicer.

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

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

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

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

     (f)  Pursuant to an appointment made under this Section 2.4, the Notes may
have endorsed thereon, in lieu of or in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in substantially
the following form:

                                       18


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

                                               --------------------------------

                                               --------------------------------
                                               as Authentication Agent
                                               for the Trustee


                                               By:
                                                   ----------------------------
                                               Authorized Signatory"


     Section 2.5    REGISTRATION OF TRANSFER AND EXCHANGE OF NOTES.

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

     The Trustee may revoke such appointment and remove any Note Registrar if
the Trustee determines in its sole discretion that such Note Registrar failed to
perform its obligations under this Agreement in any material respect. Any Note
Registrar shall be permitted to resign as Note Registrar upon thirty (30) days'
notice to the Issuer and the Trustee; provided, however, that such resignation
shall not be effective and such Note Registrar shall continue to perform its
duties as Note Registrar until the Trustee has appointed a successor Note
Registrar (which may be the Trustee) reasonably acceptable to the Issuer.

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

     At the option of a Registered Noteholder, subject to the provisions of this
Section 2.5 and any restrictions contained in the applicable Series Supplement,
Registered Notes (of the same Series and Class) may be exchanged for other
Registered Notes of authorized denominations of like tenor and aggregate
principal amount, upon surrender of the Registered Notes to be exchanged at any
such office or agency; Registered Notes, including Registered Notes received in
exchange for Bearer Notes, may not be exchanged for Bearer Notes. At the option
of the Holder of a Bearer Note, subject to applicable laws and regulations,
Bearer Notes may be exchanged for other Bearer Notes or Registered Notes (of the
same Series and Class) of authorized denominations of like tenor and aggregate
principal amount, upon surrender of the

                                       19


Bearer Notes to be exchanged at an office or agency of the Note Registrar
located outside the United States. Each Bearer Note surrendered pursuant to this
Section shall have attached thereto all unmatured Coupons.

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

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

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

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

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

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

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

     Section 2.6    MUTILATED, DESTROYED, LOST OR STOLEN NOTES.

     If (a) any mutilated Note (together, in the case of Bearer Notes, with all
unmatured Coupons (if any) appertaining thereto) is surrendered to the Note
Registrar, or the Note Registrar receives evidence to its satisfaction of the
destruction, loss or theft of any Note, and (b) in case of

                                       20


destruction, loss or theft there is delivered to the Note Registrar such
security or indemnity as may be required by it to hold the Issuer, the Note
Registrar and the Trustee harmless, then, in the absence of notice to the
Issuer, the Note Registrar or the Trustee that such Note has been acquired by a
protected purchaser (as defined in the New York UCC), the Issuer shall execute,
and the Trustee shall authenticate and the Note Registrar shall deliver (in the
case of Bearer Notes, outside the United States), in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Note, a replacement Note of like
tenor and aggregate principal amount, bearing a number not contemporaneously
outstanding; provided, however, that if any such mutilated, destroyed, lost or
stolen Note shall have become or within seven days shall be due and payable, or
shall have been selected or called for redemption, instead of issuing a
replacement Note, the Issuer may pay such Note without surrender thereof, except
that any mutilated Note shall be surrendered. If, after the delivery of such
replacement Note or payment of a destroyed, lost or stolen Note pursuant to the
proviso to the preceding sentence, a protected purchaser of the original Note in
lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer and the Trustee shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a
protected purchaser and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expense
incurred by the Issuer or the Trustee in connection therewith.

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

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

     The provisions of this Section 2.6 are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.

     Section 2.7    PERSONS DEEMED OWNERS.

     The Trustee, the Paying Agent, the Note Registrar, the Depositor, the
Issuer and any agent of any of them may (a) prior to due presentation of a
Registered Note for registration of transfer, treat the Person in whose name any
Registered Note is registered as the owner of such Registered Note for the
purpose of receiving distributions pursuant to the terms of the applicable
Series Supplement and for all other purposes whatsoever, and (b) treat the
bearer of a Bearer Note or Coupon as the owner of such Bearer Note or Coupon for
the purpose of receiving distributions pursuant to the terms of the applicable
Series Supplement and for all other purposes

                                       21


whatsoever; and, in any such case, neither the Trustee, the Paying Agent, the
Note Registrar, the Depositor, the Issuer nor any agent of any of them shall be
affected by any notice to the contrary.

     Section 2.8    APPOINTMENT OF PAYING AGENT.

     The Paying Agent shall make distributions to Noteholders from the
applicable Collection Account or other applicable Series Account pursuant to the
provisions of the applicable Series Supplement and shall report the amounts of
such distributions to the Issuer. Any Paying Agent shall have the revocable
power to withdraw funds from the applicable Collection Account or applicable
Series Account for the purpose of making the distributions referred to above.
The Issuer may revoke such power and remove the Paying Agent if the Issuer
determines in its sole discretion that the Paying Agent shall have failed to
perform its obligations under this Agreement in any material respect. The Issuer
reserves the right at any time to vary or terminate the appointment of a Paying
Agent for the Notes, and to appoint additional or other Paying Agents, provided
that it will at all times maintain the Trustee as a Paying Agent. In the event
that any Paying Agent shall resign, the Issuer may appoint a successor to act as
Paying Agent. Any reference in this Agreement to the Paying Agent shall include
any co-paying agent unless the context requires otherwise.

     Section 2.9    CANCELLATION.

     All Notes surrendered for payment, registration of transfer, exchange or
redemption shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly cancelled by it. The Issuer may
at any time deliver to the Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
lawful manner whatsoever, and all Notes so delivered shall be promptly cancelled
by the Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes cancelled as provided in this Section, except as expressly permitted
by this Agreement. All cancelled Notes held by the Trustee shall be destroyed
unless the Issuer shall direct by a timely order that they be returned to it.

     Section 2.10   NEW ISSUANCES.

     (a)  Pursuant to one or more Series Supplements, the Issuer may from time
to time issue one or more new Series of Notes. The total principal amount of
Notes that may be authenticated and delivered and Outstanding under this
Agreement is not limited.

     (b)  On or before the Series Issuance Date relating to any new Series, the
parties hereto will execute and deliver a Series Supplement which will specify
the terms of such new Series. The terms of such Series Supplement may modify or
amend the terms of this Agreement solely as applied to such new Series. Subject
to the conditions set forth in the Series Supplement, the Trustee shall execute
the Series Supplement and the Issuer shall execute the Notes of such Series and
deliver the Notes to the Trustee for authentication and delivery.

                                       22


     Section 2.11   BOOK-ENTRY NOTES.

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

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

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

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

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

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

     Section 2.12   NOTICES TO CLEARING AGENCY OR FOREIGN CLEARING AGENCY.

     Whenever a notice or other communication is required to be given to the
Noteholders of any Series or Class with respect to which Book-Entry Notes have
been issued, unless and until Definitive Notes shall have been issued to the
related beneficial owners pursuant to Section 2.13,

                                       23


the Trustee shall give all such notices and communications to the Clearing
Agency or Foreign Clearing Agency, as applicable.

     Section 2.13   DEFINITIVE NOTES.

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

     Section 2.14   GLOBAL NOTE.

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

     Section 2.15   MEETINGS OF NOTEHOLDERS.

     To the extent and as more specifically provided by the Series Supplement
for any Series issued in whole or in part in Bearer Notes, the Trustee may at
any time call a meeting of the

                                       24


Noteholders of such Series, for the purpose of approving, as provided in
subsection 13.1(b), a modification of or amendment to, or obtaining a waiver of,
any covenant or condition set forth in the applicable Series Supplement or this
Agreement.

     Section 2.16   CONFIDENTIALITY. The Trustee and the Collateral Agent hereby
agree not to disclose to any Person any of the names or addresses of the Obligor
under any Pledged Loan or other information contained in the Loan Schedule or
the data transmitted to the Trustee or the Collateral Agent hereunder, except
(i) as may be required by law, rule, regulation or order applicable to it or in
response to any subpoena or other valid legal process, (ii) as may be necessary
in connection with any request of any federal or state regulatory authority
having jurisdiction over it or the National Association of Insurance
Commissioners, (iii) in connection with the performance of its duties hereunder,
(iv) to a Successor Master Servicer appointed pursuant to Section 10.2, (v) in
enforcing the rights of Noteholders and (vi) as requested by any Person in
connection with the financing statements filed pursuant to this Agreement or any
Series Supplement. The Trustee and the Collateral Agent hereby agree to take
such measures as shall be reasonably requested by the Issuer of it to protect
and maintain the security and confidentiality of such information. The Trustee
and the Collateral Agent shall use reasonable efforts to provide the Issuer with
written notice five days prior to any disclosure pursuant to this Section 2.16.

     Section 2.17   144A INFORMATION. The Issuer agrees to furnish to the
Trustee, for each Noteholder or any prospective transferee of a Note at such
Noteholder's (or transferee's) request, all information with respect to the
Issuer or the Master Servicer, the Pledged Loans or the Notes required pursuant
to Rule 144A promulgated by the Securities and Exchange Commission under the
Securities Act of 1933, as amended, to enable such Noteholder to effect resales
of the Notes (or interests therein) pursuant to such rule.

                                   ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE ISSUER

     Section 3.1    REPRESENTATIONS AND WARRANTIES REGARDING THE ISSUER. The
Issuer hereby represents and warrants to the Trustee and the Collateral Agent on
the date of execution of this Agreement and to Noteholders of a Series as of the
Series Issuance Date or any Addition Date for that Series as follows:

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

                                       25


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

     (c)  GOVERNMENTAL AND OTHER CONSENTS. All approvals, authorizations,
consents, orders of any court or governmental agency or body required in
connection with the execution and delivery by the Issuer of any of the Facility
Documents to which the Issuer is a party, the consummation by the Issuer of the
transactions contemplated hereby or thereby, the performance by the Issuer of
and the compliance by the Issuer with the terms hereof or thereof, have been
obtained, except where the failure so to do would not have a Material Adverse
Effect on the Issuer.

     (d)  ENFORCEABILITY OF FACILITY DOCUMENTS. Each of the Facility Documents
to which the Issuer is a party have been duly and validly executed and delivered
by the Issuer and constitute the legal, valid and binding obligation of the
Issuer, enforceable against the Issuer in accordance with their respective
terms, except as enforceability may be subject to or limited by Debtor Relief
Laws or by general principles of equity (whether considered in a suit at law or
in equity).

     (e)  NO LITIGATION. Except, with respect to a Series, as disclosed in a
schedule to the Series Supplement for such Series, there are no proceedings or
investigations pending or, to the best knowledge of the Issuer, threatened,
against the Issuer before any court, regulatory body, administrative agency, or
other tribunal or governmental instrumentality (i) asserting the invalidity of
this Agreement or any of the other Facility Documents, (ii) seeking to prevent
the consummation of any of the transactions contemplated by this Agreement or
any of the other Facility Documents, (iii) seeking any determination or ruling
that would adversely affect the performance by the Issuer of its obligations
under this Agreement or any of the other Facility Documents to which the Issuer
is a party, (iv) seeking any determination or ruling that would adversely affect
the validity or enforceability of this Agreement or any of the other Facility
Documents or (v) seeking any determination or ruling which would be reasonably
likely to have a Material Adverse Effect on the Issuer.

     (f)  USE OF PROCEEDS. All proceeds of the issuance of the Notes shall be
used by the Issuer to acquire Loans from the Depositor under the Pool Purchase
Agreement, to pay costs

                                       26


related to the issuance of the Notes, to pay principal and/or interest on any
Notes or to otherwise fund costs and expenses permitted to be paid under the
terms of the Facility Documents.

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

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

     (i)  LOCATION OF CHIEF EXECUTIVE OFFICE AND RECORDS. As of the date hereof,
the principal place of business and chief executive office of the Issuer is
located at 10750 West Charleston Boulevard, Suite 130, Mail Stop 2046, Las
Vegas, Nevada 89135. As of the date hereof, the principal place of business and
chief executive office of the Master Servicer is located at 10750 West
Charleston Boulevard, Suite 130, Las Vegas, Nevada 89135. As of the date hereof,
neither the Issuer nor the Master Servicer operates its business or maintains
the Records at any other locations. As of the date hereof, the issuer is a
limited liability company organized under the law of the State of Delaware,
whose correct name is set forth in the signature pages hereof.

     (j)  LOCKBOX ACCOUNTS. Except in the case of any Lockbox Account pursuant
to which only collections in respect of loans subject to a PAC or Credit Card
Account are deposited, the Issuer has filed or has caused to be filed a standing
delivery order with the United States Postal Service authorizing each Lockbox
Bank to receive mail delivered to the related Post Office Box. The account
numbers of all Lockbox Accounts, together with the names, addresses, ABA numbers
and names of contact persons of all the Lockbox Banks maintaining such Lockbox
Accounts and the related Post Office Boxes, are specified in the exhibits to the
respective Purchase Agreements. From and after the Initial Closing Date the
Trustee shall hold all right and title to and interest in all of the monies,
checks, instruments, depository transfers or automated clearing house electronic
transfers and other items of payment and their proceeds and all monies and
earnings, if any, thereon in the Lockbox Accounts. The Issuer has no other
lockbox accounts for the collection of Scheduled Payments in respect of Pledged
Loans except for the Lockbox Accounts.

     (k)  NO TRADE NAMES. Subject to the Issuer's rights under Section 4.2(p),
the Issuer has no trade names, fictitious names, assumed names or "doing
business as" names, and has not had any such names or had any other legal name
at any time since its formation.

                                       27


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

     (m)  FACILITY DOCUMENTS. The Pool Purchase Agreement and the Series Pool
Purchase Supplement are the only agreements pursuant to which the Issuer
purchases the Pledged Loans and the related Pledged Assets. The Issuer has
furnished to the Trustee and the Collateral Agent, true, correct and complete
copies of each Facility Document to which the Issuer is a party, each of which
is in full force and effect. Neither the Issuer nor any Affiliate thereof is in
default of any of its obligations thereunder in any material respect. Upon each
Purchase pursuant to the Pool Purchase Agreement or a Series Pool Purchase
Supplement, the Issuer shall be the lawful owner of, and have good title to,
each Pledged Loan and all related Pledged Assets, free and clear of any Liens
(other than the Lien of the applicable Series Supplement and any Permitted
Encumbrances on the related Timeshare Properties), or shall have a
first-priority perfected security interest therein. All such Pledged Loans and
other related Pledged Assets are purchased without recourse to the Depositor
except as described in the Pool Purchase Agreement. The Purchases by the Issuer
under the Pool Purchase Agreement and the Series Pool Purchase Supplement
constitute either sales or first-priority perfected security interests,
enforceable against creditors of the Depositor.

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

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

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

     (q)  SOLVENCY. The Issuer, both prior to and immediately after giving
effect to any Purchase occurring on any day (i) is not "insolvent" (as such term
is defined in the Bankruptcy Code); (ii) is able to pay its debts as they become
due; and (iii) does not have unreasonably small capital for the business in
which it is engaged or for any business or transaction in which it is about to
engage.

     (r)  ERISA. There has been no (i) occurrence or expected occurrence of any
Reportable Event with respect to any Benefit Plan subject to Title IV of ERISA
of the Issuer or any of its ERISA Affiliates, or any withdrawal from, or the
termination, Reorganization or Plan Insolvency of any Multiemployer Plan or (ii)
institution of proceedings or the taking of any other action by the Pension
Benefit Guaranty Corporation or the Issuer or any of its ERISA Affiliates

                                       28


or any such Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Plan Insolvency of, any such Plan.

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

     Section 3.2    REPRESENTATIONS AND WARRANTIES REGARDING THE LOAN FILES. The
Issuer represents and warrants to each of the Trustee, the Collateral Agent, the
Master Servicer and the Noteholders as to each Pledged Loan that:

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

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

     The representations and warranties of the Issuer set forth in this Section
3.2 shall be deemed to be remade without further act by any Person on and as of
each Closing Date and each Addition Date with respect to each Loan Granted by
the Issuer on and as of each such date. The representations and warranties set
forth in this Section 3.2 shall survive any Grant of the respective Loans by the
Issuer.

     Section 3.3    RIGHTS OF OBLIGORS AND RELEASE OF LOAN FILES.

     (a)  Notwithstanding any other provision contained in this Agreement,
including the Collateral Agent's, the Trustee's and the Noteholders' remedies
pursuant hereto and pursuant to the Collateral Agency Agreement, the rights of
any Obligor to any Timeshare Property subject to a Pledged Loan shall, so long
as such Obligor is not in default thereunder, be superior to those of the
Collateral Agent, the Trustee and the Noteholders, and none of the Collateral
Agent, the Trustee or the Noteholders, so long as such Obligor is not in default
thereunder, shall interfere with such Obligor's use and enjoyment of the
Timeshare Property subject thereto.

     (b)  If pursuant to the terms of this Agreement or the Series Supplement,
the Collateral Agent or the Trustee shall acquire through foreclosure the
Issuer's interest in any portion of the Timeshare Property subject to a Pledged
Loan, the Collateral Agent and the Trustee hereby

                                       29


specifically agree to release or cause to be released any Timeshare Property
from any Lien under the appropriate Series Supplement upon completion of all
payments and the performance of all the terms and conditions required to be made
and performed by such Obligor under such Pledged Loan, and each of the
Collateral Agent and the Trustee hereby consents to any such release by, or at
the direction of, the Collateral Agent.

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

                                   ARTICLE IV

                         ADDITIONAL COVENANTS OF ISSUER

     Section 4.1    AFFIRMATIVE COVENANTS. The Issuer shall;

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

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

                                       30


     (c)  ADEQUATE CAPITALIZATION. Ensure that at all times it is adequately
capitalized to engage in the transactions contemplated by this Agreement and the
Series Supplements hereto and, in particular, that it shall limit its debt so
that at all times it has a positive net worth of not less than $5 million.

     (d)  KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain and implement
administrative and operating procedures (including without limitation an ability
to recreate records evidencing the Pledged Loans in the event of the destruction
or loss of the originals thereof) and keep and maintain, all documents, books,
records and other information reasonably necessary or advisable for the
collection of all Pledged Loans (including without limitation records adequate
to permit the daily identification of all Collections with respect to, and
adjustments of amounts payable under, each Pledged Loan).

     (e)  PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND LOANS. At its expense,
timely and fully perform and comply in all material respects with all material
provisions, covenants and other promises required to be observed by it under the
Pledged Loans.

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

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

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

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

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

          (3)  If the Issuer shall receive any Collections, the Issuer
     shall hold such Collections in trust for the benefit of the Trustee and the
     Noteholders of the appropriate Series and deposit such Collections into a
     Lockbox Account or the appropriate Collection Account within two Business
     Days following the Issuer's receipt thereof.

                                       31


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

     (i)  PERFECTED SECURITY INTEREST. Take such action with respect to each
Pledged Loan as is necessary to ensure that the Collateral Agent maintains on
behalf of the Trustee, a first priority perfected security interest in such
Pledged Loan and the Pledged Assets relating thereto, in each case free and
clear of any Liens (other than the Lien created by this Agreement and in the
case of any Timeshare Properties, any Permitted Encumbrance).

     (j)  NO RELEASE. Not take any action and shall use its best efforts not to
permit any action to be taken by others that would release any Person from any
of such Person's material covenants or material obligations under any document,
instrument or agreement included in the Series Collateral for any Series, or
which would result in the amendment, hypothecation, subordination, termination
or discharge of, or impair the validity or effectiveness of, any such document,
instrument or agreement except as expressly provided in this Agreement or such
other instrument or document.

     (k)  INSURANCE AND CONDEMNATION.

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

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

     (l)  CUSTODIAN.

          (i)       On or before each Closing Date and thereafter promptly upon
the generation of any documents, instruments and agreements evidencing or
otherwise relating to the Pledged Loans or related Pledged Assets received by
any of the Issuer or the Master Servicer, the Issuer shall deliver or cause to
be delivered directly to the Custodian for the benefit of the Collateral Agent
pursuant to the Custodial Agreement all such documents, instruments and

                                       32


agreements of the Issuer, including without limitation all original Pledged
Loans (or in the case of Pledged Loans consisting of a sales contract and a
separate promissory note, the original of such promissory note), installment
promissory notes, mortgages, and all ancillary and collateral documentation
executed in connection therewith (collectively, the "PRIMARY CUSTODIAL
DOCUMENTS"). Such Primary Custodial Documents may be provided in microfiche or
other electronic form to the extent permitted under the Custodial Agreement. The
Issuer shall cause the Custodian to hold, maintain and keep custody of all such
Primary Custodial Documents for the benefit of the Collateral Agent in a secure
fire retardant location at an office of the Custodian, which location shall be
reasonably acceptable to the Collateral Agent and the Trustee.

          (ii)      The Issuer shall cause the Custodian at all times to
maintain control of the Primary Custodial Documents for the benefit of the
Collateral Agent on behalf of the Trustee and the Noteholders, in each case
pursuant to the Custodial Agreement. Each of the Issuer and the Master Servicer
may access the Primary Custodial Documents at the Custodian's storage facility
only for the purposes and upon the terms and conditions set forth herein and in
the Custodial Agreement. Each of the Issuer and the Master Servicer may only
remove Primary Custodial Documents for collection services and other routine
servicing requirements from such facility in accordance with the terms of the
Custodial Agreement, all as set forth and pursuant to the "Bailment Agreement"
(as defined in and attached as an exhibit to the Custodial Agreement).

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

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

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

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

          (iii)     Ensure that, to the extent that it shares the same officers
     or other employees as any of its members, managers or other Affiliates, the
     salaries of and the expenses related to providing benefits to such officers
     and other employees shall be fairly

                                       33


     allocated among such entities, and each such entity shall bear its fair
     share of the salary and benefit costs associated with all such common
     officers and employees.

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

          (v)       Ensure that all material transactions between the Issuer and
     any of its Affiliates shall be only on an arm's-length basis and shall not
     be on terms more favorable to either party than the terms that would be
     found in a similar transaction involving unrelated third parties. All such
     transactions shall receive the approval of the Issuer's board of directors
     including at least one Independent Director (defined below).

          (vi)      Maintain a principal executive and administrative office
     through which its business is conducted and a telephone number separate
     from those of its members, managers and other Affiliates. To the extent
     that the Issuer and any of its members, managers or other Affiliates have
     offices in contiguous space, there shall be fair and appropriate allocation
     of overhead costs (including rent) among them, and each such entity shall
     bear its fair share of such expenses.

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

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

          (ix)      Ensure that decisions with respect to its business and daily
     operations shall be independently made by the Issuer (although the officer
     making any particular decision

                                       34


     may also be an officer or director of an Affiliate of the Issuer) and shall
     not be dictated by an Affiliate of the Issuer.

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

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

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

          (xiii)    Except as provided herein and in any other Facility
     Document, not enter into any guaranty, or otherwise become liable, with
     respect to or hold its assets or creditworthiness out as being available
     for the payment of any obligation of any Affiliate of the Issuer nor shall
     the Issuer make any loans to any Person.

          (xiv)     Ensure that any financial reports required of the Issuer
     shall comply with generally accepted accounting principles and shall be
     issued separately from, but may be consolidated with, any reports prepared
     for any of its Affiliates so long as such consolidated reports contain
     footnotes describing the effect of the transactions between the Issuer and
     such Affiliate and also state that the assets of the Issuer are not
     available to pay creditors of the Affiliate.

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

     (n)  COMPUTER FILES. Mark or cause to be marked each Pledged Loan in its
computer files as described in Section 3.2(b).

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

                                       35


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

     (q)  LOAN SCHEDULE. At least once each calendar month, provide to the
Trustee with respect to each Series an amendment to the Loan Schedule, or cause
the Master Servicer to provide an amendment to the Loan Schedule, listing for
the Pledged Loans added to the Series Collateral for that Series and the Pledged
Loans released from the Series Collateral for that Series and amending the Loan
Schedule to reflect terms or discrepancies in such schedule that become known to
the Issuer since the filing of the original Loan Schedule for that Series or
since the most recent amendment thereto.

     (r)  SEGREGATION OF COLLECTIONS. (a) Prevent the deposit into any Series
     Account of any funds other than Collections or other funds to be deposited
     into such accounts under this Agreement, a Series Supplement or the other
     Facility Documents (provided that, this covenant shall not be breached to
     the extent that funds are inadvertently deposited into any of such accounts
     and are promptly segregated and removed from the account); and

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

     (s)  FILINGS; FURTHER ASSURANCES. (i) On or prior to each Closing Date, the
     Issuer shall have caused at its sole expense the Financing Statements,
     assignments and amendments thereof necessary to perfect the security
     interest in the Series Collateral to be filed or recorded in the
     appropriate offices.

          (ii)      The Issuer shall, at its sole expense, from time to time
     authorize, prepare, execute and deliver, or authorize and cause to be
     prepared, executed and delivered, all such Financing Statements,
     continuation statements, amendments, instruments of further assurance and
     other instruments, in such forms, and shall take such other actions, as
     shall be required by the Master Servicer or the Trustee or as the Master
     Servicer or the Trustee otherwise deems reasonably necessary or advisable
     to perfect the Lien created by a Series Supplement in the Series
     Collateral. The Master Servicer agrees, at its sole expense, to cooperate
     with and assist the Issuer in taking any such action (whether at the
     request of the Issuer or the Trustee). Without limiting the foregoing, the
     Issuer shall from time to time, at its sole expense, authorize, execute,
     file, deliver and record all such supplements and amendments hereto and to
     the Series Supplements and all such Financing Statements, amendments
     thereto, continuation statements, instruments of further assurance, or
     other

                                       36


     statements, specific assignments or other instruments or documents and take
     any other action that is reasonably necessary to, or that any of the Master
     Servicer or the Trustee deems reasonably necessary or advisable to: (i)
     Grant more effectively all or any portion of the Series Collateral; (ii)
     maintain or preserve the Lien Granted under a Series Supplement (and the
     priority thereof) or carry out more effectively the purposes hereof or
     thereof; (iii) perfect, maintain the perfection of, publish notice of, or
     protect the validity of any Grant made or to be made pursuant to any Series
     Supplement; (iv) enforce any of the Pledged Loans or any of the other
     Pledged Assets (including without limitation by cooperating with the
     Trustee, at the expense of the Issuer, in filing and recording such
     Financing Statements against such Obligors as the Master Servicer or the
     Trustee shall deem necessary or advisable from time to time); (v) preserve
     and defend title to any Pledged Loans or all or any other part of the
     Pledged Assets, and the rights of the Trustee in such Pledged Loans or
     other related Pledged Assets, against the claims of all Persons and
     parties; or (vi) pay any and all taxes levied or assessed upon all or any
     part of any Series Collateral.

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

          (iv)      The Issuer hereby authorizes the Trustee, and gives the
Collateral Agent its irrevocable power of attorney (which authorization is
coupled with an interest and is irrevocable), in the name of the Issuer or
otherwise, to execute, deliver, file and record any Financing Statement,
continuation statement, amendment, specific assignment or other writing or paper
and to take any other action that the Trustee in its sole discretion, may deem
necessary or appropriate to further perfect the Lien created hereby. Any
expenses incurred by the Trustee or the Collateral Agent pursuant to the
exercise of its rights under this Section 4.l(r)(iv) shall be for the sole
account and responsibility of the Issuer.

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

                                       37


     Section 4.2    NEGATIVE COVENANTS OF THE ISSUER. So long as any of the
Notes are outstanding, the Issuer shall not:

     (a)  SALES, LIENS, ETC., AGAINST RECEIVABLES AND RELATED SECURITY. Except
for the releases contemplated under the respective Series Supplements sell,
assign (by operation of law or otherwise) or otherwise dispose of, or create or
suffer to exist, any Lien (other than the Lien created by the Series Supplements
or, with respect to Timeshare Properties relating to Pledged Loans, any
Permitted Encumbrances thereon) upon or with respect to, any Pledged Loan or any
other Pledged Assets, or any interests in either thereof, or upon or with
respect to any Series Collateral under any Series Supplements. The Issuer shall
immediately notify the Trustee and the Collateral Agent of the existence of any
Lien on any Pledged Loan or any other Pledged Assets, and the Issuer shall
defend the right, title and interest of each of the Issuer and the Collateral
Agent, Trustee and Noteholders in, to and under the Pledged Loans and all other
Pledged Assets, against all claims of third parties.

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

     (c)  CHANGE IN BUSINESS OR CREDIT STANDARD AND COLLECTION POLICIES.
(i) Make any change in the character of its business or (ii) make any change in
the Credit Standards and Collection Policies, or (iii) deviate from the exercise
of Customary Practices, which change or deviation would, in any such case,
materially impair the value or collectibility of any Pledged Loan.

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

     (e)  STOCK, MERGER, CONSOLIDATION, ETC. Consolidate with or merge into or
with any other Person, or purchase or otherwise acquire all or substantially all
of the assets or capital stock, or other ownership interest of, any Person or
sell, transfer, lease or otherwise dispose of all or substantially all of its
assets to any Person, except as expressly permitted under the terms of this
Agreement.

     (f)  CHANGE IN NAME, ETC. Use any trade names, fictitious names, assumed
names or "doing business as" names.

                                       38


     (g)  ERISA MATTERS. (i) Engage or permit any ERISA Affiliate to engage in
any prohibited transaction for which an exemption is not available or has not
previously been obtained from the U.S. Department of Labor; (ii) permit to exist
any accumulated funding deficiency (as defined in Section 302(a) of ERISA and
Section 412(a) of the Code) or funding deficiency with respect to any Benefit
Plan other than a Multiemployer Plan; (iii) fail to make any payments to any
Multiemployer Plan that the Issuer or any of its ERISA Affiliates may be
required to make under the agreement relating to such Multiemployer Plan or any
law pertaining thereto; (iv) terminate any Benefit Plan so as to result in any
liability; (v) permit to exist any occurrence of any Reportable Event that
represents a material risk of a liability of the Issuer or any of its ERISA
Affiliates under ERISA or the Code; PROVIDED, HOWEVER, that the ERISA Affiliates
of the Issuer may take or allow such prohibited transactions, accumulated
funding deficiencies, payments, terminations and Reportable Events described in
clauses (i) through (v) above so long as such events occurring within any fiscal
year of the Issuer, in the aggregate, involve a payment of money by or an
incurrence of liability of any such ERISA Affiliate (collectively, "ERISA
LIABILITIES") in an amount that does not exceed $2,000,000.

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

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

     (j)  GUARANTEES. Guarantee, endorse or otherwise be or become contingently
liable (including by agreement to maintain balance sheet tests) in connection
with the obligations of any other Person, except endorsements of negotiable
instruments for collection in the ordinary course of business and reimbursement
or indemnification obligations as provided for under this Agreement or as
contemplated by the Facility Documents.

     (k)  LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into, or be a party
to any transaction with any Affiliate, except for:

          (i)       the transactions contemplated hereby and by the other
                    Facility Documents; and

          (ii)      to the extent not otherwise prohibited under this Agreement,
                    other transactions upon fair and reasonable terms materially
                    no less favorable to the Issuer than would be obtained in a
                    comparable arm's-length transaction with a Person not an
                    Affiliate.

     (l)  LINES OF BUSINESS. Conduct any business other than that described in
the LLC Agreement, or enter into any transaction with any Person which is not
contemplated by or incidental to the performance of its obligations under the
Facility Documents to which it is a party.

                                       39


     (m)  LIMITATION ON INVESTMENTS. Make or suffer to exist any loans or
advances to, or extend any credit to, or make any investments (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of indebtedness, acquisition of the business or assets or
otherwise) in, any Affiliate or any other Person except for (i) Permitted
Investments and (ii) the purchase of Loans pursuant to the terms of the Pool
Purchase Agreement.

     (n)  INSOLVENCY PROCEEDINGS. Seek dissolution or liquidation in whole or in
part of the Issuer.

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

     (p)  PLACE OF BUSINESS; CHANGE OF NAME. Change (x) its type or jurisdiction
of organization from that listed in Section 3.1(i), (y) its name or (z) the
location of its Records relating to the Series Collateral or its chief executive
office from the location listed in Section 3.1(i), unless in any such event the
Issuer shall have given the Trustee and the Collateral Agent at least thirty
(30) days prior written notice thereof and, in the case of (x) or (y) shall take
all action necessary or reasonably requested by the Trustee or the Collateral
Agent within 30 days of such request, to amend its existing Financing Statements
and file additional Financing Statements in all applicable jurisdictions
necessary or advisable to maintain the perfection of the Lien of the Collateral
Agent under each Series Supplement.

                                    ARTICLE V

                           SERVICING OF PLEDGED LOANS

     Section 5.1    RESPONSIBILITY FOR LOAN ADMINISTRATION. The Master Servicer
shall manage, administer, service and make collections on the Pledged Loans on
behalf of the Trustee and Issuer. Without limiting the generality of the
foregoing, but subject to all other provisions hereof, the Trustee and the
Issuer grant to the Master Servicer a limited power of attorney to execute and
the Master Servicer is hereby authorized and empowered to so execute and
deliver, on behalf of itself, the Issuer and the Trustee or any of them, any and
all instruments of satisfaction or cancellation or of partial or full release or
discharge and all other comparable instruments with respect to the Pledged
Loans, any related Mortgages and the related Timeshare Properties, but only to
the extent deemed necessary by the Master Servicer.

     The Trustee, the Issuer and the Collateral Agent, at the request of a
Servicing Officer, shall furnish the Master Servicer with any reasonable
documents or take any action reasonably requested, necessary or appropriate to
enable the Master Servicer to carry out its servicing and administrative duties
hereunder (subject, in the case of requests for documents contained in any Loan
Files, to the requirements of Section 4.1(l)(ii)).

     Fairfield Acceptance Corporation - Nevada is hereby appointed as the Master
Servicer until such time as another entity becomes the Master Servicer under
subsection 5.12(b) or until such time as any Service Transfer shall be effected
under Article X.

                                       40


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

     Section 5.3    RECORDS. The Master Servicer shall, during the period it is
Master Servicer hereunder, maintain such books of account, computer data files
and other records as will enable the Trustee to determine the status of each
Pledged Loan and will enable such Loan to be serviced in accordance with the
terms of this Agreement by a Successor Master Servicer following a Service
Transfer.

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

     Section 5.5    ENFORCEMENT.

     (a)  The Master Servicer will, consistent with Section 5.2, act with
respect to the Pledged Loans in such manner as will maximize the receipt of
Collections in respect of such Pledged Loans (including, to the extent
necessary, instituting foreclosure proceedings against the Timeshare Property,
if any, underlying a Pledged Loan or disposing of the underlying Timeshare
Property, if any).

     (b)  The Master Servicer may sue to enforce or collect upon Pledged Loans,
in its own name, if possible, or as agent for the Issuer. If the Master Servicer
elects to commence a legal proceeding to enforce a Pledged Loan, the act of
commencement shall be deemed to be an automatic assignment of the Pledged Loan
to the Master Servicer for purposes of collection only. If, however, in any
enforcement suit or legal proceeding it is held that the Master Servicer may not
enforce a Pledged Loan on the grounds that it is not a real party in interest or
a holder entitled to enforce the Pledged Loan, the Trustee on behalf of the
Issuer shall, at the Master Servicer's expense, take such steps as the Master
Servicer and the Trustee may mutually agree are necessary (such agreement not to
be unreasonably withheld) to enforce the Pledged Loan, including bringing suit
in its name or the name of the Issuer. The Master Servicer shall provide to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred thereby.

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

     (d)  The Master Servicer will not extend, amend, waive or otherwise modify
the terms of any Pledged Loan (other than as a result of a Timeshare Upgrade or
in accordance with Customary Practices) or permit the rescission or cancellation
of any Pledged Loan, whether for

                                       41


any reason relating to a negative change in the related Obligor's
creditworthiness or inability to make any payment under the Pledged Loan or
otherwise.

     (e)  Except as otherwise provided in a Series Supplement and with respect
to the Series Collateral for that Series, the Master Servicer shall have
discretion to sell Defaulted Loans free and clear of the Lien of the applicable
Series Supplements, in exchange for cash, in accordance with Customary Practices
and Credit Standards and Collection Policies. All proceeds of any such sale of a
Defaulted Loan shall be deposited by the Master Servicer into the applicable
Series Collection Account.

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

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

     Section 5.6    TRUSTEE AND COLLATERAL AGENT TO COOPERATE. Upon request of a
Servicing Officer, the Trustee and the Collateral Agent shall perform such other
acts as are reasonably requested by the Master Servicer (including without
limitation the execution of documents) and otherwise cooperate with the Master
Servicer in enforcement of the Trustee's rights and remedies with respect to
Pledged Loans.

     Section 5.7    OTHER MATTERS RELATING TO THE MASTER SERVICER. The Master
Servicer is hereby authorized and empowered to:

     (a)  advise the Trustee in connection with the amount of withdrawals from
Accounts in accordance with the provisions of this Agreement and any Series
Supplement;

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

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

     Prior to the occurrence of an Event of Default hereunder, the Trustee
agrees that, except to the extent it is directed to take instructions from a
different party under the terms of a Series

                                       42


Supplement, it shall promptly follow the instructions of the Master Servicer
duly given to withdraw funds from the Accounts.

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

     Section 5.9    COSTS AND EXPENSES. The costs and expenses incurred by the
Master Servicer in carrying out its duties hereunder, including without
limitation the fees and expenses incurred in connection with the enforcement of
Pledged Loans, shall be paid by the Master Servicer and the Master Servicer
shall be entitled to reimbursement hereunder from the Issuer as provided herein
and in the respective Series Supplements. Failure by the Master Servicer to
receive reimbursement shall not relieve the Master Servicer of its obligations
under this Agreement and the Series Supplements.

     Section 5.10   REPRESENTATIONS AND WARRANTIES OF THE MASTER SERVICER. The
Master Servicer hereby represents and warrants to the Trustee and the Collateral
Agent as of the date of this Agreement and represents to the Noteholders of a
Series as of the Series Issuance Date for that Series:

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

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

     (c)  BINDING OBLIGATIONS. Each of the Facility Documents to which Master
Servicer is a party constitutes a legal, valid and binding obligation of the
Master Servicer enforceable against the Master Servicer in accordance with its
terms, except as such enforceability may be subject to or limited by applicable
Debtor Relief Laws and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity).

     (d)  NO CONFLICT; NO VIOLATION. The execution and delivery by the Master
Servicer of each of the Facility Documents to which the Master Servicer is a
party, and the performance by the Master Servicer of the transactions
contemplated by such agreements and the fulfillment by the Master Servicer of
the terms hereof and thereof applicable to the Master Servicer, will not

                                       43


conflict with, violate, result in any breach of the terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default under any
provision of any existing law or regulation or any order or decree of any court
applicable to the Master Servicer or its certificate of incorporation or bylaws
or any material indenture, contract, agreement, mortgage, deed of trust or other
material instrument, to which the Master Servicer is a party or by which it is
bound, except where such conflict, violation, breach or default would not have a
Material Adverse Effect.

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

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

     Section 5.11   ADDITIONAL COVENANTS OF THE MASTER SERVICER. The Master
Servicer further agrees as provided in this Section 5.11.

     (a)  CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. The Master Servicer will
not add or terminate any bank as a Lockbox Bank from those listed in the
exhibits to the respective Purchase Agreements or make any change in its
instructions to Obligors regarding payments to be made to any Lockbox Bank,
unless the Trustee shall have received (i) 30 Business Days' prior notice of
such addition, termination or change and (ii) prior to the effective date of
such addition, termination or change, (x) fully executed copies of the new or
revised Lockbox Agreements executed by each new Lockbox Bank, the Issuer, the
Trustee and the Master Servicer and (y) copies of all agreements and documents
signed by either the Issuer or the respective Lockbox Bank with respect to any
new Lockbox Account.

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

                                       44


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

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

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

     (f)  NOTICE TO OBLIGORS. The Master Servicer will ensure that the Obligor
of each Pledged Loan either:

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

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

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

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

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

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

     (h)  INSTRUMENTS. The Master Servicer will not remove any portion of the
Pledged Loans or other collateral that consists of money or is evidenced by an
instrument, certificate or other writing (including any Pledged Loan) from the
jurisdiction in which it is then held unless the Trustee has first received an
Opinion of Counsel to the effect that the Lien created by the appropriate Series
Supplement with respect to such property will continue to be maintained after

                                       45


giving effect to such action or actions; provided, however, that each Custodian,
the Collateral Agent and the Master Servicer may remove Loans from such
jurisdiction to the extent necessary to satisfy any requirement of law or court
order, in all cases in accordance with the provisions of the Custodial
Agreement, the Collateral Agency Agreement and this Agreement.

     (i)  LOAN SCHEDULE. With respect to each Series, the Master Servicer will
promptly amend the related Loan Schedule to reflect terms or discrepancies that
become known to the Master Servicer at any time.

     (j)  SEGREGATION OF COLLECTIONS. The Master Servicer will:

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

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

     (k)  TERMINATE OR REJECT LOANS. Without limiting anything in subsection
4.2(b), the Master Servicer will not terminate any Pledged Loan prior to the end
of the term of such Loan, whether such early termination is made pursuant to an
equitable cause, statute, regulation, judicial proceeding or other applicable
law, unless prior to such termination, the Issuer consents and any related
Pledged Assets have been released from the Lien of the respective Series
Supplement.

     (l)  CHANGE IN BUSINESS OR CREDIT STANDARDS AND COLLECTION POLICIES. The
Master Servicer will not make any change in the Credit Standards and Collection
Policies or deviate from the exercise of Customary Practices, which change or
deviation would materially impair the value or collectibility of any Pledged
Loan.

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

                                       46


     Section 5.12   MASTER SERVICER NOT TO RESIGN.

     (a)  RESIGNATION. The entity then serving as Master Servicer shall not
resign from the obligations and duties hereby imposed on it hereunder except as
provided in 5.12(b) or except upon determination that (i) the performance of its
duties hereunder is no longer permissible under applicable law, (ii) there is no
reasonable action which can be taken to make the performance of its duties
hereunder permissible under applicable law and (iii) a Successor Master Servicer
shall have been appointed and accepted the duties as Master Servicer pursuant to
Section 10.2. Any such determination permitting the resignation of the Master
Servicer pursuant to clause (i) of the preceding sentence shall be evidenced by
an Opinion of Counsel to such effect delivered to the Trustee. No such
resignation shall be effective until a Successor Master Servicer shall have
assumed the responsibilities and obligations of the Master Servicer in
accordance with Section 10.2.

     (b)  TRANSFER TO CERTAIN CENDANT AFFILIATES. FAC, as Master Servicer, may
resign as Master Servicer and be replaced by Trendwest, and Trendwest, as Master
Servicer, may resign as Master Servicer and be replaced by FAC, in either case,
only upon the following terms and conditions:

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

          (ii)      Cendant shall have given its written consent to the
substitution by delivering such written consent to the Trustee and the
Performance Guaranty shall be amended to cover the performance of the new Master
Servicer;

          (iii)     the entity which is to become the new Master Servicer, shall
enter into a written supplement to this Agreement and deliver such supplement to
the Trustee, the Collateral Agent and the Issuer and in such supplement the new
Master Servicer shall assume all of the rights, obligations and responsibilities
of the Master Servicer under this Agreement and each Series Supplement; and

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

     Section 5.13   MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF MASTER SERVICER.

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

          (i)       the corporation formed by such consolidation or into which
the Master Servicer is merged or the Person which acquires by conveyance or
transfer the properties and assets of the Master Servicer substantially as an
entirety shall be a corporation organized and existing under the laws of the
United States of America or any state or the District of Columbia and, if the
Master Servicer is not the surviving entity, shall expressly assume by an
agreement

                                       47


supplemental hereto, executed and delivered to the Trustee in form satisfactory
to the Trustee, the performance of every covenant and obligation of the Master
Servicer hereunder;

          (ii)      the Master Servicer has delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance or transfer and such supplemental agreement
comply with this Section 5.13, and all conditions precedent provided for herein
relating to such transaction have been satisfied;

          (iii)     the Rating Agency Condition has been satisfied with respect
to such consolidation, amendment, merger, conveyance or transfer; and

          (iv)      immediately prior to and after the consummation of such
merger, consolidation, conveyance or transfer, no event which, with notice or
passage of time or both, would become a Servicer Default under the terms of this
Agreement shall have occurred and be continuing.

     Section 5.14   EXAMINATION OF RECORDS. Each of the Issuer and the Master
Servicer shall clearly and unambiguously identify each Pledged Loan in its
respective computer or other records to reflect that such Pledged Loan has been
Granted to the Collateral Agent pursuant to this Agreement or pursuant to a
Series Supplement. Each of the Issuer and the Master Servicer shall, prior to
the sale or transfer to a third party of any Loan similar to the Pledged Loans
held in its custody, examine its computer and other records to determine that
such Loan is not a Pledged Loan.

     Section 5.15   SUBSERVICING AGREEMENTS. The Master Servicer, including any
Successor Master Servicer, may enter into the Subservicing Agreements with the
Subservicers for the servicing and administration of all or a part of the
Pledged Loans for which the Master Servicer is responsible hereunder, provided
that, in each case, the Subservicing Agreement is not inconsistent with this
Agreement or any Series Supplement. References in this Agreement and the Series
Supplements to actions taken or to be taken by the Master Servicer include
actions taken or to be taken by a Subservicer. As part of its servicing
activities hereunder, the Master Servicer shall monitor the performance and
enforce the obligations of each Subservicer retained by it under the related
Subservicing Agreement. Subject to the terms of the Subservicing Agreement, the
Master Servicer shall have the right to remove a Subservicer retained by it at
any time it considers to be appropriate provided that no subservicer shall be
removed unless Cendant has given its prior written consent to the Master
Servicer and the Trustee. Upon the resignation or removal of a Master Servicer,
all Subservicing Agreements shall also be terminated unless accepted or
reaffirmed by the Successor Master Servicer.

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

                                       48


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

                                   ARTICLE VI

                                     REPORTS

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

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

     Section 6.3    OTHER DATA. In addition, the Master Servicer shall at the
reasonable request of the Trustee, the Issuer or a Rating Agency, furnish to the
Trustee, the Issuer or such Rating Agency such underlying data as can be
generated by the Master Servicer's existing data processing system without undue
modification or expense; PROVIDED, HOWEVER, nothing in this Section 6.3 shall
permit any of the Trustee, the Issuer or any Rating Agency to materially change
or modify the ongoing data reporting requirements under this Article VI.

     Section 6.4    ANNUAL MASTER SERVICER'S CERTIFICATE. The Master Servicer
will deliver to the Issuer, the Trustee and each Rating Agency within forty-five
(45) days after the end of each fiscal year, beginning with the fiscal year,
ending December 31, 2002, an Officer's Certificate stating that (a) a review of
the activities of the Master Servicer during the preceding calendar year (or, in
the case of the first such Officer's Certificate, the period since the Initial
Closing Date) and of its performance under this Agreement and the Series
Supplements during such period was made under the supervision of the officer
signing such certificate and (b) to the Master Servicer's knowledge, based on
such review, the Master Servicer has fully performed all of its obligations
under this Agreement and all Series Supplements for the relevant time period,
or, if there has been a default in the performance of any such obligation,
specifying each such default known to such officer and the nature and status
thereof.

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

                                       49


                                   ARTICLE VII

                             RIGHTS OF NOTEHOLDERS;
                        ACCOUNTS AND PRIORITY OF PAYMENTS

     Section 7.1    COLLECTION ACCOUNTS. The Trustee shall pursuant to the terms
of the respective Series Supplements establish for each Series and maintain in
the name of the Trustee, a segregated account in its name designated as the
"Sierra Receivables Funding Company, LLC Collection Account" and indicating in
the designation, the applicable Series and each such designation.

     Section 7.2    LOCKBOX ACCOUNTS. The Issuer has established or has caused
to be established and shall maintain or cause to be maintained a system of
operations, accounts and instructions with respect to the Obligors and Lockbox
Accounts at the Lockbox Banks as described in Sections 3.1(j), 4.l(g), 4.l(r)
and 4.2(d). Pursuant to the Lockbox Agreement to which it is party, each Lockbox
Bank shall be irrevocably instructed to initiate an electronic transfer of all
funds on deposit in the relevant Lockbox Account or to the extent the Lockbox
Account is operated under an intercreditor agreement all funds in the Lockbox
Account and derived from Pledged Loans for a specific Series, to the appropriate
Collection Accounts on the Business Day on which such funds become available.
Prior to the occurrence of an Event of Default the Trustee shall be authorized
to allow the Master Servicer to effect or direct deposits into the Lockbox
Accounts. The Trustee is hereby irrevocably authorized and empowered, as the
Issuer's attorney-in-fact, to endorse any item deposited in a Lockbox Account,
or presented for deposit in any Lockbox Account or a Collection Account,
requiring the endorsement of the Issuer, which authorization is coupled with an
interest and is irrevocable.

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

     Section 7.3    TAX TREATMENT. The Issuer has structured this Agreement and
the Notes with the intention that the Notes will qualify under applicable tax
law as indebtedness of the Issuer, and the Issuer and each Noteholder by
acceptance of its Note agree to treat the Notes (or beneficial interest therein)
as indebtedness for purposes of federal, state and local income or franchise
taxes or any other tax imposed on or measured by income.

                                  ARTICLE VIII

                                   INDEMNITIES

     Section 8.1    LIABILITIES TO OBLIGORS. No obligation or liability to any
Obligor under any of the Pledged Loans is intended to be assumed by the Trustee
or the Noteholders under or as a result of this Agreement and the transactions
contemplated hereby and, to the maximum extent permitted by law, the Trustee and
the Noteholders expressly disclaim any such obligation and liability.

     Section 8.2    TAX INDEMNIFICATION. The Issuer agrees to pay, and to
indemnify, defend and hold harmless the Trustee and the Noteholders from, any
taxes which may at any time be

                                       50


asserted with respect to, and as of the date of, the Grant of the Pledged Loans
to the Collateral Agent for the benefit of the Trustee and the Noteholders,
including without limitation any sales, gross receipts, general corporation,
personal property, privilege or license taxes (but not including any federal,
state or other income or intangible asset taxes arising out of the issuance of
the Notes or distributions with respect thereto, other than any such intangible
asset taxes in respect of a jurisdiction in which the indemnified person is not
otherwise subject to tax on its intangible assets) and costs, expenses and
reasonable counsel fees in defending against the same.

     Section 8.3    MASTER SERVICER'S INDEMNITIES. Each entity serving as Master
Servicer shall defend and indemnify the Trustee, the Issuer and the Noteholders
against any and all costs, expenses, losses, damages, claims and liabilities,
including reasonable fees and expenses of counsel and expenses of litigation, in
respect of any action taken, or failure to take any action by such entity as
Master Servicer (but not by any predecessor or successor Master Servicer) with
respect to this Agreement, the Series Supplements or any Pledged Loan; PROVIDED,
HOWEVER, that such indemnity shall apply only in respect of any negligent action
taken, or negligent failure to take any action, or reckless disregard of duties
hereunder, or bad faith or willful misconduct by the Master Servicer. This
indemnity shall survive any Service Transfer (but a Master Servicer's
obligations under this Section 8.3 shall not relate to any actions of any
Successor Master Servicer after a Service Transfer) and any payment of the
amount owing hereunder or under the Series Supplement or any release by the
Issuer of any such Pledged Loan.

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

                                   ARTICLE IX

                                EVENTS OF DEFAULT

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

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

     Section 9.2    ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.

     (a)  If an Event of Default for a Series has occurred and is continuing,
then on the terms set forth in the Series Supplement, the Notes of that Series
may be declared to be immediately due and payable, by a notice in writing to the
Issuer (and to the Trustee if declared by Series Noteholders), and upon any such
declaration the unpaid principal amount of the Notes

                                       51


of that Series, together with accrued or accreted and unpaid interest thereon
through the date of acceleration, shall become immediately due and payable.

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

     Section 9.3    COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE. The Issuer covenants that if the Notes of a Series are accelerated
following the occurrence of an Event of Default, and such acceleration has not
been rescinded and annulled, the Issuer shall, upon demand of the Trustee, pay
to it, for the benefit of the Noteholders, the whole amount then due and payable
on the Notes of the Series for principal and interest, with interest upon the
overdue principal and upon overdue installments of interest, as determined for
such Series and each Class within that Series in the respective Series
Supplement, to the extent that payment of such interest shall be legally
enforceable; and, in addition thereto, such further amount as shall be
sufficient to cover the reasonable costs and expenses of collection, including
the compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel; PROVIDED, HOWEVER, the amount due under this Section 9.3
shall not exceed the aggregate proceeds from the sale of the relevant Series
Collateral and amounts otherwise held by the Issuer and available for such
purpose.

     Until such demand is made by the Trustee, the Issuer shall pay the
principal of and interest on the Notes of the affected Series to the Trustee for
the benefit of the registered Holders to be applied as provided in the Series
Supplements, whether or not the Notes are overdue.

     If the Issuer fails to pay such amounts forthwith upon such demand, then
the Trustee for the benefit of the Noteholders of the affected Series and as
trustee of an express trust, may, with the prior written consent of or at the
direction of the Series Majority Holders, institute suits in equity, actions at
law or other legal, judicial or administrative proceedings (each, a
"PROCEEDING") for the collection of the sums so due and unpaid, and may
prosecute such Proceeding to judgment or final decree, and may enforce the same
against the Issuer and collect the monies adjudged or decreed to be payable in
the manner provided by law out of the Series Collateral for such Series wherever
situated. In the event a Proceeding shall involve the liquidation of Series
Collateral, the Trustee shall pay all costs and expenses for such Proceeding and
shall be reimbursed for such costs and expenses from the resulting liquidation
proceeds. In the event that the Trustee determines that liquidation proceeds
will not be sufficient to fully reimburse the Trustee, the Trustee shall receive
indemnity satisfactory to it against such costs and expenses from the
Noteholders (which indemnity may include, at the Trustee's option, consent by
each Noteholder authorizing the Trustee to be reimbursed from amounts available
in the appropriate Collection Accounts).

     If an Event of Default occurs and is continuing with respect to a Series,
the Trustee may, and with the prior written consent of or at the direction of
the Series Majority Holders, shall, proceed to protect and enforce its rights
and the rights of the Series Noteholders hereunder and

                                       52


under the applicable Series Supplement and under the Notes, by such appropriate
Proceedings as are necessary to effectuate, protect and enforce any such rights,
whether for the specific enforcement of any covenant, agreement, obligation or
indemnity in this Agreement or the applicable Series Supplement or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.

     Section 9.4    TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of
any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other Proceeding relative to the Issuer
or the property of the Issuer or its creditors, the Trustee (irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise) shall be entitled and empowered, by
intervention in such Proceeding or otherwise,

          (a)       with respect to each Series, to file a proof of claim for
the whole amount of principal and interest owing and unpaid in respect of the
Notes of such Series and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel) and of the Noteholders of such Series
allowed in such Proceeding, and

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

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

     Nothing contained herein shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes of
any Series or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Noteholder in any such Proceeding.

                                       53


     Section 9.5    REMEDIES.

     (a)  If an Event of Default shall have occurred and be continuing with
respect to a Series, the Trustee and the Collateral Agent (upon direction by the
Trustee) may, with the prior written consent of or at the direction of the
Majority Holders of the affected Series, do one or more of the following
(subject to Section 9.6):

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

          (2)       obtain possession of the Pledged Loans related to the
     affected Series in accordance with the terms of the Custodial Agreement and
     sell the Series Collateral or any portion thereof or rights or interests
     therein, at one or more public or private sales called and conducted in any
     manner permitted by law and in accordance with Section 9.13;

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

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

PROVIDED, HOWEVER, that neither the Trustee nor the Collateral Agent may sell or
otherwise liquidate the Series Collateral which constitutes Loans and Pledged
Assets following an Event of Default other than an Event of Default described in
the Series Supplement resulting from an Insolvency Event, unless either (i) the
Holders of 100% of the Aggregate Principal Amount of the Notes of the affected
Series then outstanding consent thereto, (ii) the proceeds of such sale or
liquidation distributable to the Noteholders of the Series are sufficient to
discharge in full the amounts then due and unpaid upon the Notes of such Series
for principal and accrued interest and the fees and other amounts required to be
paid prior to payment of amounts due on the Notes of such Series pursuant to
Section 9.7 or (iii) the Holders of 66 2/3% of the Aggregate Principal Amount of
such Series consent thereto and the Trustee determines that the Series
Collateral will not continue to provide sufficient funds for the payment of
principal of, and interest on, the Notes of such Series as they would have
become due if such Notes would not have been declared due and payable.

     For purposes of clause (ii) or clause (iii) of the preceding paragraph and
Section 9.6, the Trustee may, but need not, obtain and rely upon an opinion of
an independent accountant or an independent investment banking firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the distributions and other amounts receivable with respect to

                                       54


the Series Collateral to make the required payments of principal of and interest
on the Notes, and any such opinion shall be conclusive evidence as to such
feasibility or sufficiency. The Issuer shall bear the reasonable costs and
expenses of any such opinion.

     (b)  In addition to the remedies provided in Section 9.5(a), if so provided
in the Series Supplement, the Trustee may, and at the request of the Majority
Holders of such Series shall, institute a Proceeding in its own name and as
trustee of an express trust solely to compel performance of a covenant,
agreement, obligation or indemnity or to cure the representation or warranty or
statement, the breach of which gave rise to the Event of Default; and the
Trustee may enforce any equitable decree or order arising from such Proceeding.

     Section 9.6    OPTIONAL PRESERVATION OF COLLATERAL. If the Notes of a
Series have been accelerated following an Event of Default and such acceleration
and its consequences have not been rescinded and annulled, to the extent
permitted by law, the Trustee may, and at the request of Holders of 66 2/3% of
the Aggregate Principal Amount of the Notes of the affected Series shall, elect
to retain the Series Collateral securing the Notes intact for the benefit of the
Holders of the Notes and in such event it shall deposit all funds received with
respect to the Series Collateral into the Collection Account for such Series and
apply such funds in accordance with the payment priorities set forth in the
respective Series Supplements, as if there had not been such an acceleration;
PROVIDED THAT, the Trustee shall have determined that the distributions and
other amounts receivable with respect to the Series Collateral are sufficient to
provide the funds required to pay the principal of and interest on the Notes of
such Series as and when such principal and interest would have become due and
payable pursuant to the terms of the Series Supplement and of such Notes if
there had not been a declaration of acceleration of maturity of the Notes.

     Until the Trustee has elected, or has determined not to elect, to retain
the Series Collateral pursuant to this Section 9.6, the Trustee shall continue
to apply all distributions received on such Series Collateral in accordance with
the respective Series Supplement. If the Trustee determines to retain the Series
Collateral as provided in this Section 9.6, such determination shall be deemed
to be a rescission and annulment (but not a waiver) of the aforementioned Event
of Default and its consequences pursuant to Section 9.2, but no such rescission
and annulment shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.

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

     Section 9.8    LIMITATION ON SUITS BY INDIVIDUAL NOTEHOLDERS. Subject to
Section 9.9, no Noteholder shall have any right to institute any Proceeding with
respect to this Agreement or the Series Supplement under which its Notes were
issued, or for the appointment of a receiver or trustee, or for any other remedy
hereunder or thereunder, unless:

                                       55


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

     (b)  the Majority Holders of such Series shall have made written requests
to the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder and under the Series Supplement;

     (c)  such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request; and

     (d)  the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such Proceeding,

it being understood and intended that no one or more Noteholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Agreement or the Series Supplement to affect, disturb or prejudice the
rights of any other Noteholders or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Agreement
or the Series Supplement, except in the manner herein provided.

     Section 9.9    UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL AND
INTEREST. Notwithstanding any other provision in this Agreement or any Series
Supplement, the Holder of any Note shall have the right, which right is absolute
and unconditional, to receive payment of the principal and interest on such Note
on or after the respective due dates thereof expressed in such Note or in this
Agreement or the Series Supplement and to institute suit for the enforcement of
any such payment, and such right shall not be impaired without the consent of
such Noteholder.

     Section 9.10   RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any
Noteholder has instituted any Proceeding to enforce any right or remedy under
this Agreement or any Series Supplement and such Proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Noteholder, then and in every such case the Issuer, the
Trustee and the Noteholders shall, subject to any determination in such
Proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the
Noteholders shall continue as though no such Proceeding had been instituted.

     Section 9.11   WAIVER OF EVENT OF DEFAULT. Prior to the Trustee's
acquisition of a money judgment or decree for payment, in either case for the
payment of all amounts owing by the Issuer in connection with a Series
Supplement and the Notes issued thereunder the Holders of 66 2/3% of the
Aggregate Principal Amount of Notes of such Series have the right to waive any
Event of Default with respect to such Series and its consequences.

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

     Section 9.12   WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead, or in any manner

                                       56


whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Agreement; and the Issuer (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not, on the basis of any such law,
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.

     Section 9.13   SALE OF SERIES COLLATERAL.

     (a)  The power to effect any sale (a "SALE") of any portion of the Series
Collateral pursuant to Section 9.5 shall not be exhausted by any one or more
Sales as to any portion of such Series Collateral remaining unsold, but shall
continue unimpaired until the entire Series Collateral shall have been sold or
all amounts payable on the Notes of the affected Series and the respective
Series Supplement with respect thereto shall have been paid, whichever occurs
later. The Trustee may from time to time postpone any Sale by public
announcement made at the time and place of such Sale. The Trustee hereby
expressly waives its right to any amount fixed by law as compensation for any
Sale. The Trustee may reimburse itself from the proceeds of any sale for the
reasonable costs and expenses incurred in connection with such sale. The net
proceeds of such sale shall be applied as provided in the applicable Series
Supplement.

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

     Section 9.14   ACTION ON NOTES. The Trustee's right to seek and recover
judgment on the Notes or under this Agreement or a Series Supplement shall not
be affected by the seeking, obtaining or application of any other relief under
or with respect to this Agreement or the Series Supplement. None of the rights
or remedies of the Trustee or the Noteholders hereunder shall be impaired by the
recovery of any judgment by the Trustee or any Noteholder against the Issuer or
by the levy of any execution under such judgment upon any portion of the Series
Collateral or upon any of the assets of the Issuer.

     Section 9.15.  CONTROL BY SERIES OF NOTEHOLDERS. If an Event of Default
with respect to a Series has occurred and is continuing, the Majority Holders of
such Series or such other portion of the Holders of such Series as is specified
in the Series Supplement shall have the right to direct the time, method and
place of conducting any Proceeding for any remedy available to the Trustee with
respect to the Notes of such Series or exercising any trust or power conferred
on the Trustee; provided that

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

                                       57


          (ii)      any direction to the Trustee to sell or liquidate the Series
     Collateral which constitutes Loans and the related Pledged Assets shall be
     subject to the provisions of Sections 9.5 and 9.6;

          (iii)     if the conditions set forth in Section 9.6 have been
     satisfied and the Trustee elects to retain the Series Collateral pursuant
     to such Section, then any direction to the Indenture Trustee by Holders of
     Notes representing less than 66 2/3rds % of the Notes Principal Amount of
     such Series to sell or liquidate the Series Collateral shall be of no force
     and effect; and

          (iv)      the Trustee may take any other action deemed proper by the
     Trustee that is not inconsistent with such direction;

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

                                    ARTICLE X

                                SERVICER DEFAULTS

     Section 10.1   SERVICER DEFAULTS. If any one of the following events (each,
a "SERVICER DEFAULT") shall occur and be continuing:

     (a)  any failure by the Master Servicer to make any payment, transfer or
deposit on or before the date such payment, transfer or deposit is required to
be made or given under the terms of this Agreement or a Series Supplement and
such failure remains unremedied for two Business Days; PROVIDED, HOWEVER, that
if the Master Servicer is unable to make a payment, transfer or deposit when due
and such failure is as a result of circumstances beyond the Master Servicer's
control, the grace period shall be extended to three Business Days;

     (b)  failure on the part of the Master Servicer duly to observe or perform
any other covenants or agreements of the Master Servicer set forth in this
Agreement, a Series Supplement or any other Facility Document to which the
Master Servicer is a party and such failure continues unremedied for a period of
20 days after the earlier of the date on which the Master Servicer has actual
knowledge of the failure and the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Master Servicer
by the Trustee, or to the Master Servicer and the Trustee by any Noteholder;

     (c)  any representation and warranty made by the Master Servicer in this
Agreement shall prove to have been incorrect in any material respect when made
and has a material and adverse impact on the Trustee's interest in the Pledged
Loans and other Pledged Assets and the Master Servicer is not in compliance with
such representation or warranty within ten Business Days after the earlier of
the date on which the Master Servicer has actual knowledge of such breach and
the date on which written notice of such breach requiring that such breach be
remedied, shall have been given to the Master Servicer by the Trustee or to the
Master Servicer and the Trustee by any Noteholder;

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

                                       58


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

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

THEN, so long as such Master Servicer Default shall be continuing, either the
Trustee, or the Majority Holders of all Notes by notice then given in writing to
the Master Servicer and each Rating Agency (and to the Trustee if given by the
Majority Holders) (a "TERMINATION NOTICE"), may terminate all of the rights and
obligations of the Master Servicer as Master Servicer under this Agreement (such
termination being herein called a "SERVICE TRANSFER"). After receipt by the
Master Servicer of such Termination Notice and subject to the terms of Section
10.2(a), the Trustee shall automatically assume the responsibilities of the
Master Servicer hereunder until the date that a Successor Master Servicer shall
have been appointed pursuant to Section 10.2 and all authority and power of the
Master Servicer under this Agreement shall pass to and be vested in the Trustee
or such Successor Master Servicer, as the case may be, without further action on
the part of any Person, and, without limitation, the Trustee at the direction of
the Majority Holders is hereby authorized and empowered (upon the failure of the
Master Servicer to cooperate) to execute and deliver, on behalf of the Master
Servicer, as attorney-in-fact or otherwise, all documents and other instruments
upon the failure of the Master Servicer to execute or deliver such documents or
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such transfer of servicing rights.

     The Master Servicer agrees to cooperate with the Trustee and such Successor
Master Servicer in effecting the termination of the responsibilities and rights
of the Master Servicer to conduct servicing hereunder, including without
limitation the transfer to such Successor Master Servicer of all authority of
the Master Servicer to service the Pledged Loans provided for under this
Agreement, including without limitation all authority over any Collections which
shall on the date of transfer be held by the Master Servicer for deposit in a
Lockbox Account or which shall thereafter be received by the Master Servicer
with respect to the Pledged Loans, and in assisting the Successor Master
Servicer in enforcing all rights under this Agreement including, without
limitation, allowing the Successor Master Servicer's personnel access to the
Master Servicer's premises for the purpose of collecting payments on the Pledged
Loans made at such premises. The Master Servicer shall promptly transfer its
electronic records relating to the Pledged Loans to the Successor Master
Servicer in such electronic form as the Successor Master Servicer may reasonably
request and shall promptly transfer to the Successor Master Servicer all other
records, correspondence and documents necessary for the continued servicing of
the Pledged Loans in the manner and at such times as the Successor Master
Servicer shall reasonably request. The Master Servicer shall allow the Successor
Master Servicer access to the Master Servicer's officers and employees. To the
extent that compliance with this Section 10.1 shall require the Master Servicer
to disclose to the Successor Master Servicer information of any kind which the
Master Servicer reasonably deems to be confidential, the Successor Master
Servicer shall be required to enter into such customary licensing and
confidentiality agreements as the Master Servicer shall deem necessary to
protect its interest and as shall be satisfactory in form and substance to the
Successor Master Servicer. The Master Servicer hereby consents to the entry
against it of an order for preliminary, temporary or permanent injunctive relief
by any court

                                       59


of competent jurisdiction, to ensure compliance by the Master Servicer with the
provisions of this paragraph.

     Section 10.2   APPOINTMENT OF SUCCESSOR.

     (a)  APPOINTMENT. On and after the receipt by the Master Servicer of a
Termination Notice pursuant to Section 10.1, or any permitted resignation of the
Master Servicer pursuant to Section 5.13, the Master Servicer shall continue to
perform all servicing functions under this Agreement and all Series Supplements
until the date specified in the Termination Notice or otherwise specified by the
Trustee or until a date mutually agreed upon by the Master Servicer and the
Trustee. Upon receipt by the Master Servicer of a Termination Notice, the
Trustee or the Trustee, acting on behalf of the Majority Holders which gave the
Termination Notice, shall as promptly as possible after the giving of a
Termination Notice appoint a successor servicer (in any case, the "SUCCESSOR
MASTER SERVICER") and such Successor Master Servicer shall accept its
appointment by a written assumption in a form acceptable to the Trustee;
provided that such appointment shall be subject to satisfaction of the Rating
Agency Condition. In the event a Successor Master Servicer has not been
appointed and accepted the appointment by the date of termination stated in the
Termination Notice the Trustee shall automatically assume responsibility for
performing the servicing functions under this Agreement on the date of such
termination. In the event that a Successor Master Servicer has not been
appointed and has not accepted its appointment and the Trustee is legally unable
or otherwise not capable of assuming responsibility for performing the servicing
functions under this Agreement, the Trustee shall petition a court of competent
jurisdiction to appoint any established financial institution having a net worth
of not less than $100,000,000 and whose regular business includes the servicing
of receivables similar to the Pledged Loans or other consumer finance
receivables; PROVIDED, HOWEVER, pending the appointment of a Successor Master
Servicer, the Trustee will act as the Successor Master Servicer.

     (b)  DUTIES AND OBLIGATIONS OF SUCCESSOR MASTER SERVICER. Upon its
appointment, the Successor Master Servicer shall be the successor in all
respects to the Master Servicer with respect to servicing functions under this
Agreement and shall be subject to all the responsibilities and duties relating
thereto placed on the Master Servicer by the terms and provisions hereof, and
all references in this Agreement to the Master Servicer shall be deemed to refer
to the Successor Master Servicer.

     (c)  COMPENSATION OF SUCCESSOR MASTER SERVICER; COSTS AND EXPENSES OF
SERVICING TRANSFER. In connection with such appointment and assumption, the
Trustee may make such arrangements for the compensation of the Successor Master
Servicer as provided in the Series Supplements. The costs and expenses of
transferring servicing shall be paid by the Master Servicer which is resigning
or being replaced and to the extent such costs and expenses are not so paid,
shall be paid from Collections as provided in the Series Supplements.

     Section 10.3   NOTIFICATION TO NOTEHOLDERS. Upon the occurrence of any
Servicer Default or any event which, with the giving of notice or passage of
time or both, would become a Servicer Default, the Master Servicer shall give
prompt written notice thereof to the Trustee and the Issuer and the Trustee
shall give notice to the Noteholders at their respective addresses appearing in
the Note Register. Upon any termination or appointment of a Successor Master

                                       60


Servicer pursuant to this Article X, the Trustee shall give prompt written
notice thereof to the Issuer and to the Noteholders at their respective
addresses appearing in the Note Register.

     Section 10.4   WAIVER OF PAST DEFAULTS. If a Servicer Default is a Servicer
Default as described in subsection 10.1(f), the Majority Holders of the Notes of
the Series issued under the Series Supplement containing such Servicer Default
may waive such default and, with respect to a Servicer Default described in
subsections 10.1(a) through (e), the Majority Holders of all Notes may, on
behalf of all Holders, waive any default by the Master Servicer in the
performance of its obligations hereunder and its consequences. Upon any such
waiver of a past default, such default shall cease to exist, and any default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon except to the extent expressly so waived.

     Section 10.5   TERMINATION OF MASTER SERVICER'S AUTHORITY. All authority
and power granted to the Master Servicer under this Agreement shall
automatically cease and terminate upon termination of this Agreement pursuant to
Section 12.1, and shall pass to and be vested in the Issuer and without
limitation the Issuer is hereby authorized and empowered to execute and deliver,
on behalf of the Master Servicer, as attorney-in-fact or otherwise, all
documents and other instruments, and to do and accomplish all other acts or
things necessary or appropriate to effect the purposes of such transfer of
servicing rights upon termination of this Agreement. The Master Servicer shall
cooperate with the Issuer in effecting the termination of the responsibilities
and rights of the Master Servicer to conduct servicing on the Pledged Loans. The
Master Servicer shall transfer its electronic records relating to the Pledged
Loans to the Issuer in such electronic form as Issuer may reasonably request and
shall transfer all other records, correspondence and documents relating to the
Pledged Loans to the Issuer in the manner and at such times as the Issuer shall
reasonably request. To the extent that compliance with this Section 10.5 shall
require the Master Servicer to disclose information of any kind which the Master
Servicer deems to be confidential, the Issuer shall be required to enter into
such customary licensing and confidentiality agreements as the Master Servicer
shall deem necessary to protect its interests and as shall be reasonably
satisfactory in form and substance to the Issuer.

     Section 10.6   MATTERS RELATED TO SUCCESSOR MASTER SERVICER.

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

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

                                       61


     The Successor Master Servicer shall have no responsibility and shall not be
in default hereunder nor incur any liability for any failure, error, malfunction
or any delay in carrying out any of its duties under this Agreement if any such
failure or delay results from the Successor Master Servicer acting in accordance
with information prepared or supplied by a Person other than the Successor
Master Servicer or the failure of any such Person to prepare or provide such
information. The Successor Master Servicer shall have no responsibility, shall
not be in default and shall incur no liability (i) for any act or failure to act
by any third party, including the Master Servicer, the Issuer or the Trustee or
for any inaccuracy or omission in a notice or communication received by the
Successor Master Servicer from any third party or (ii) which is due to or
results from the invalidity, unenforceability of any Pledged Loan under
applicable law or the breach or the inaccuracy of any representation or warranty
made with respect to any Pledged Loan.

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

                                   ARTICLE XI

                THE TRUSTEE; THE COLLATERAL AGENT; THE CUSTODIAN

     Section 11.1   DUTIES OF TRUSTEE.

     (a)  The Trustee, prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee shall have actual knowledge and after the
curing of all such Events of Default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Default of which a Responsible Officer of the Trustee
shall have actual knowledge has occurred and has not been cured or waived, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise, as a
prudent institutional trustee would exercise or use under the circumstances in
the conduct of such institution's own affairs. The Trustee is hereby authorized
and empowered to make the withdrawals and payments from the Accounts in
accordance with the instructions set forth in this Agreement and the Series
Supplements until the termination of this Agreement in accordance with Section
12.1 unless this appointment is earlier terminated pursuant to the terms hereof.

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

                                       62


     (c)  Subject to Section 11.1(a), no provision of this Agreement shall be
construed to relieve the Trustee from liability for its own gross negligence,
reckless disregard of its duties, bad faith or misconduct; PROVIDED, HOWEVER,
that:

          (i)       the Trustee shall not be personally liable for an error of
     judgment made in good faith by a Responsible Officer or employees of the
     Trustee, unless it shall be proved that the Trustee was negligent in
     ascertaining the pertinent facts;

          (ii)      the Trustee shall not be personally liable with respect to
     any action taken, suffered or omitted to be taken by it in good faith in
     accordance with this Agreement or at the direction of the Majority Holders
     relating to the time, method and place of conducting any proceeding for any
     remedy available to the Trustee, or exercising or omitting to exercise any
     trust or power conferred upon the Trustee, under this Agreement;

          (iii)     the Trustee shall not be charged with knowledge of any
     failure by any other party hereto to comply with its obligations hereunder
     or of the occurrence of any Event of Default or Servicer Default unless a
     Responsible Officer of the Trustee obtains actual knowledge of such failure
     based upon receipt of written information or other communication or a
     Responsible Officer of the Trustee receives written notice of such failure
     from the Master Servicer or any Noteholder. In the absence of receipt of
     notice or actual knowledge by a Responsible Officer the Trustee may
     conclusively assume there is no Event of Default or Servicer Default; and

          (iv)      Prior to the occurrence of an Event of Default of which a
     Responsible Officer of the Trustee shall have actual knowledge or have
     received notice and after all the curing of all such Events of Default
     which may have occurred, the duties and obligations of the Trustee shall be
     determined solely by the express provisions of this Agreement, the Trustee
     shall not be liable except for the performance of such duties and
     obligations as are specifically set forth in this Agreement, no implied
     covenants or obligations shall be read into this Agreement against the
     Trustee and, in the absence of bad faith, willful misconduct or negligence
     on the part of the Trustee, the Trustee may conclusively rely, as to the
     truth of the statements and the correctness of the opinions expressed
     therein, upon any certificates or opinions furnished to the Trustee and
     conforming to the requirements of this Agreement.

     (d)  The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it (which
adequate indemnity may include, at the Trustee's option, consent by the Series
Majority Holders authorizing the Trustee to be reimbursed for any funds from
amounts available in the Collection Account for such Series), and none of the
provisions contained in this Agreement shall in any event require the Trustee to
perform, or be responsible for the manner of performance of, any of the
obligations of the Master Servicer under this Agreement except during such time,
if any, as the Trustee shall be the successor to, and be vested with the rights,
duties, powers and privileges of, the Master Servicer in accordance with the
terms of this Agreement.

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

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

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

     (h)  The Trustee shall have no duty to (A) see to any recording, filing or
depositing of this Agreement or any agreement referred to herein or any
financing statement or continuation statement evidencing a security interest, or
to see to the maintenance of any such recording or filing or depositing or to
any rerecording, refiling or redepositing of any thereof, (B) see to any
insurance, (C) see to the payment or discharge of any tax, assessment, or other
governmental charge or any lien or encumbrance of any kind owing with respect
to, assessed or levied against, any part of any Series Collateral other than
from funds available in the related Series Collection Account, or (D) confirm or
verify the contents of any reports or certificates of the Master Servicer
delivered to the Trustee pursuant to this Agreement believed by the Trustee to
be genuine and to have been signed or presented by the proper party or parties.

     Section 11.2   CERTAIN MATTERS AFFECTING THE TRUSTEE. Except for its own
gross negligence, reckless disregard of its duties, bad faith or misconduct:

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

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

     (c)  the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Agreement, or to institute, conduct or defend any
litigation hereunder or in relation hereto, at the request, order or direction
of any of the Noteholders, pursuant to the provisions of this Agreement, unless
such Noteholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby; nothing contained herein shall, however, relieve the Trustee
of the obligations, upon the occurrence of any Servicer Default of which a
Responsible Officer of the Trustee shall have actual knowledge or have received
notice (which has not been cured), to

                                       64


exercise such of the rights and powers vested in it by this Agreement, and to
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs;

     (d)  neither the Trustee nor any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be personally liable for any
action taken, suffered or omitted to be taken by the Trustee or such Person in
good faith and believed by such Person to be authorized or within the discretion
or rights or powers conferred upon it by this Agreement, nor for any action
taken or omitted to be taken by any other party hereto;

     (e)  the Trustee shall not be bound to make any investigation into the
facts of matters stated in any Monthly Servicing Report, any other report or
statement delivered to the Trustee by the Master Servicer, resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, bond or other paper or document, unless requested in writing so
to do by the Majority Holders; PROVIDED, HOWEVER, that if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely to
be incurred by it in the making of such investigation is, in the opinion of the
Trustee, not assured to the Trustee by the security afforded to it by the terms
of this Agreement, the Trustee may require indemnity satisfactory to the Trustee
against such cost, expense or liability as a condition to taking any such
action.

     (f)  the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent, attorney or custodian
appointed with due care by it hereunder;

     (g)  except as may be required by Section 11.1(b), the Trustee shall not be
required to make any initial or periodic examination of any documents or records
related to the Pledged Loans for the purpose of establishing the presence or
absence of defects, the compliance by the Master Servicer or the Issuer with
their respective representations and warranties or for any other purpose;

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

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

     Section 11.3   TRUSTEE NOT LIABLE FOR RECITALS IN NOTES OR USE OF PROCEEDS
OF NOTES. The Trustee assumes no responsibility for the correctness of the
recitals contained herein and in the Notes (other than the certificate of
authentication on the Notes) or for any statements, representations or
warranties made herein by any Person other than the Trustee (except as expressly
set forth herein). Except as set forth in Section 11.14, the Trustee makes no
representations as to the validity, enforceability or sufficiency of this
Agreement or of the Notes (other than the certificate of authentication on the
Notes) or of any Pledged Loan or related document. The Trustee shall not be
accountable for the use or application of funds properly withdrawn from any
Account on the instructions of the Master Servicer or for the use or

                                       65


application by the Issuer of the proceeds of any of the Notes, or for the use or
application of any funds paid to the Issuer in respect of the Pledged Loans. The
Trustee shall not be responsible for the legality or validity of this Agreement
or the validity, priority, perfection or sufficiency of the security for the
Notes issued or intended to be issued hereunder. The Trustee shall have no
responsibility for filing any financing or continuation statement in any public
office at any time or to otherwise perfect or maintain the perfection of any
security interest or lien granted to it hereunder or to record this Agreement.

     Section 11.4   TRUSTEE MAY OWN NOTES; TRUSTEE IN ITS INDIVIDUAL CAPACITY.
Wachovia Bank, National Association, in its individual or any other capacity,
may become the owner or pledgee of Notes with the same rights as it would have
if it were not the Trustee. Wachovia Bank, National Association and its
Affiliates may generally engage in any kind of business with the Issuer or the
Master Servicer as though Wachovia Bank, National Association were not acting in
such capacity hereunder and without any duty to account therefor. Nothing
contained in this Agreement shall limit in any way the ability of Wachovia Bank,
National Association and its Affiliates to act as a trustee or in a similar
capacity for other interval ownership and lot contract and installment note
financings pursuant to agreements similar to this Agreement.

     Section 11.5   TRUSTEE'S FEES AND EXPENSES; INDEMNIFICATION. The Trustee
shall be entitled to receive from time to time pursuant to the Series
Supplements and the Trustee Fee Letter, (a) such compensation as shall be agreed
to between the Issuer and the Trustee (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
for all services rendered by it in the execution of the trust hereby created and
in the exercise and performance of any of the powers and duties hereunder as the
Trustee and to be reimbursed for its out-of-pocket expenses (including
reasonable attorneys' fees), incurred or paid in establishing, administering and
carrying out its duties under this Agreement or the Collateral Agency Agreement
and (b) subject to Section 8.3, the Issuer and the Master Servicer agree,
jointly and severally, to pay, reimburse, indemnify and hold harmless the
Trustee (without reimbursement from any Account or otherwise) upon its request
for any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever
(including without limitation fees, expenses and disbursements of counsel) which
may at any time (including without limitation at any time following the
termination of this Agreement and payment on account of the Notes) be imposed
on, incurred by or asserted against the Trustee in any way relating to or
arising out of this Agreement, any Series Supplement, the Collateral Agency
Agreement or any other Facility Document to which the Trustee is a party or the
transactions contemplated hereby or any action taken or omitted by the Trustee
under or in connection with any of the foregoing except for those liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the gross negligence, reckless
disregard of its duties, bad faith or willful misconduct of the Trustee and
except that if the Trustee is appointed Successor Master Servicer pursuant to
Section 10.2, the provisions of this Section 11.5 shall not apply to expenses,
disbursements and advances made or incurred by the Trustee in its capacity as
Successor Master Servicer. The agreements in this Section 11.5 shall survive the
termination of this Agreement, the resignation or removal of the Trustee and all
amounts payable on account of the Notes.

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

     Section 11.6   ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee hereunder
(if other than Wachovia Bank, National Association) shall at all times be an
Eligible Institution and a corporation or banking association organized and
doing business under the laws of the United States of America or any state
thereof authorized under such laws to exercise corporate trust powers, and such
Trustee (including Wachovia Bank, National Association) shall have a combined
capital and surplus of at least $25,000,000 (or, in the case of a successor to
the initial Trustee, $100,000,000) and subject to supervision or examination by
federal or state authority. If such corporation or banking association publishes
reports of condition at least annually, pursuant to law or to the requirements
of federal or state supervising or examining authority, then for the purpose of
this Section 11.6, the combined capital and surplus of such corporation or
banking association shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. In case at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section 11.6, the Trustee shall resign immediately in the manner and with
the effect specified in Section 11.7.

     Section 11.7   RESIGNATION OR REMOVAL OF TRUSTEE.

     (a)  The Trustee may at any time resign and be discharged from the trust
hereby created by giving 60 days prior written notice thereof to the Issuer, the
Master Servicer, the Noteholders and each Rating Agency. Upon receiving such
notice of resignation, the Issuer shall promptly arrange to appoint a successor
trustee meeting the requirements of Section 11.6 and the Master Servicer shall
notify the Trustee and each Rating Agency of such appointment by written
instrument, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor Trustee. If no successor Trustee shall
have been so appointed and have accepted within 30 days after the giving of such
notice of resignation, a successor Trustee shall be appointed by Majority
Holders. The successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment, become the Trustee. If no successor Trustee shall have been
so appointed by the Issuer or the Noteholders and shall have accepted
appointment in the manner hereinafter provided, any Noteholder, on behalf of
itself and all others similarly situated, or the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor Trustee.

     (b)  If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 11.6 and shall fail to resign after written
request therefor by the Issuer or the Master Servicer, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged a bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Issuer, the Master Servicer or the Majority Holders may
remove the Trustee and promptly appoint a successor Trustee by written
instrument, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor Trustee.

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     (c)  At any time the Majority Holders may remove the Trustee and promptly
appoint a successor Trustee by written instrument, one copy of which instrument
shall be delivered to the Trustee so removed and one copy to the successor
Trustee.

     (d)  Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 11.7 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 11.8.

     Section 11.8   SUCCESSOR TRUSTEE.

     (a)  Any successor Trustee, appointed as provided in Section 11.7, shall
execute, acknowledge and deliver to the Issuer, the Master Servicer and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee herein. The predecessor Trustee shall deliver to the successor
Trustee all money, documents and other property held by it hereunder; and Issuer
and the predecessor Trustee shall execute and deliver such instruments and do
such other things as may reasonably be required for fully and certainly vesting
and confirming in the successor Trustee all such rights, power, duties and
obligations.

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

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

     Section 11.9   MERGER OR CONSOLIDATION OF TRUSTEE. Any Person into which
the Trustee may be merged or converted or with which it may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any Person succeeding to the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
PROVIDED, such corporation shall be eligible under the provisions of Section
11.6, without the execution or filing of any paper or any further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding.

     Section 11.10  APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.

     (a)  Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Series Collateral may at the time be located, the Trustee shall
have the power and may execute and deliver all instruments to appoint one or
more Persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Series Collateral and to vest in
such Person or Persons, in such capacity and for the benefit of the Noteholders,
such title to the Series Collateral, or any part thereof, and subject to the
other provisions of this Section 11.10, such powers, duties, obligations, rights
and trusts as the Trustee may consider necessary or desirable.

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No co-trustee or separate trustee hereunder shall be required to meet the terms
of eligibility as a successor trustee under Section 11.6 and no notice to the
Noteholders of the appointment of any co-trustee or separate trustee shall be
required under Section 11.8.

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

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

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

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

     (c)  Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article XI. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer.

     (d)  Any separate trustee or co-trustee may at any time constitute the
Trustee its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect to this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or a
successor trustee.

     Section 11.11  TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES. All
rights of action and claims under this Agreement or the Notes may be prosecuted
and enforced by the Trustee without the possession of any of the Notes or the
production thereof in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as trustee. Any
recovery of judgment shall, after provision for the payment of the

                                       69


reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the Noteholders in respect of which such judgment
has been obtained.

     Section 11.12  SUITS FOR ENFORCEMENT. If an Event of Default or a Servicer
Default shall occur and be continuing, the Trustee, in its discretion, may,
subject to the provisions of Article IX and Section 10.1, proceed to protect and
enforce its rights and the rights of the Noteholders under this Agreement by a
suit, action or proceeding in equity or at law or otherwise, whether for the
specific performance of any covenant or agreement contained in this Agreement or
in aid of the execution of any power granted in this Agreement or for the
enforcement of any other legal, equitable or other remedy as the Trustee, being
advised by counsel, shall deem most effectual to protect and enforce any of the
rights of the Trustee or the Noteholders.

     Section 11.13  RIGHTS OF NOTEHOLDERS TO DIRECT THE TRUSTEE. The Majority
Holders of a Series shall, with respect to such Series, have the right to direct
the time, method, and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee; PROVIDED, HOWEVER, that, subject to Section 11.1, the Trustee shall
have the right to decline to follow any such direction if the Trustee being
advised by counsel determines that the action so directed may not lawfully be
taken, or if the Trustee in good faith shall, by a Responsible Officer or
Responsible Officers of the Trustee, determine that the proceedings so directed
would be illegal or involve it in personal liability or be unduly prejudicial to
the rights of Noteholders not parties to such direction, or if the Trustee has
not been offered reasonable security or indemnity, as contemplated by Section
11.2, by such Holders; AND PROVIDED FURTHER, that nothing in this Agreement
shall impair the right of the Trustee to take any action deemed proper by the
Trustee and which is not inconsistent with such direction by the Noteholders.

     Section 11.14  REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE. The Trustee
represents and warrants that:

     (a)  the Trustee is a national banking association with trust powers
organized, validly existing and in good standing under the laws of the United
States;

     (b)  the Trustee has full power, authority and right to execute, deliver
and perform this Agreement and the Series Supplements and has taken all
necessary action to authorize the execution, delivery and performance by it of
this Agreement and the Series Supplements; and

     (c)  this Agreement has been duly executed and delivered by the Trustee and
constitutes the legal, valid and binding agreement of the Trustee enforceable
against the Trustee in accordance with its terms, except as such enforceability
may be limited by Debtor Relief Laws and except as such enforceability may be
limited by general principles of equity (whether considered in a suit at law or
in equity).

     Section 11.15  MAINTENANCE OF OFFICE OR AGENCY. The Trustee will maintain
at its expense in The City of New York, State of New York, an office or offices
or agency or agencies where notices and demands to or upon the Trustee in
respect of the Notes and this Agreement may be served. The Trustee will give
prompt written notice to the Issuer, the Master Servicer and the Noteholders of
any change in the location of any such office or agency.

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     Section 11.16  NO ASSESSMENT. Wachovia Bank, National Association's
agreement to act as Trustee hereunder shall not constitute or be construed as
Wachovia Bank, National Association's assessment of the Issuer's or any
Obligor's creditworthiness or a credit analysis of any Loans.

     Section 11.17  UCC FILINGS AND TITLE CERTIFICATES. The Trustee and the
Noteholders expressly recognize and agree that the Collateral Agent may be
listed as the secured party of record on the various Financing Statements
required to be filed under this Agreement and the Series Supplements in order to
perfect the security interest in the Series Collateral, that such listings shall
be for administrative convenience only in creating a representative of the
secured party to take certain actions under the Facility Documents on behalf of
one or more secured parties including the Trustee and that such listing will not
affect in any way the respective status of the other secured parties under the
Collateral Agency Agreement as the holders of their respective interests in
other collateral. In addition, such listing shall impose no duties on the
Collateral Agent other than those expressly and specifically undertaken in
accordance with this Agreement and the Collateral Agency Agreement.

     Section 11.18  REPLACEMENT OF THE CUSTODIAN. Each of the Issuer and the
Master Servicer agree not to replace either of the Custodians unless the Rating
Agency Condition has been satisfied with respect to such replacement.

                                   ARTICLE XII

                                   TERMINATION

     Section 12.1   TERMINATION OF AGREEMENT. The respective obligations and
responsibilities of the Issuer, the Master Servicer and the Trustee created
hereby (other than the obligation of the Trustee to make payments to Noteholders
as hereafter set forth) shall terminate (the "TERMINATION DATE") on the day
after the Payment Date following the date on which funds shall have been
deposited in the appropriate Collection Accounts sufficient to pay the Aggregate
Principal Amount of all Series plus all interest accrued on the Notes of all
Series accrued through the day preceding such Payment Date; PROVIDED THAT, all
amounts required to be paid on such Payment Date pursuant to this Agreement
shall have been paid.

     Section 12.2   FINAL PAYMENT.

     (a)  Written notice of any termination of a Series or of all Series shall
be given (subject to at least two Business Days' prior notice from the Master
Servicer to the Trustee) by the Trustee to the Noteholders and each Rating
Agency then rating any Notes mailed not later than the fifth day of the month of
such final payment specifying (a) the Payment Date and (b) the amount of any
such final payment. The Trustee shall give such notice to the Registrar at the
time such notice is given to the Noteholders.

     (b)  On or after the final Payment Date, upon written request of the
Trustee, the Noteholders shall surrender their Notes to the office specified in
such request.

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     Section 12.3   DEFEASANCE. The Issuer's obligations with respect to any
Series of Notes may be defeased prior to payment of the Notes of that Series if
so provided in the applicable Series Supplement and subject to the terms and
conditions contained in that Series Supplement.

     Section 12.4   RELEASE OF COLLATERAL. Upon the termination of this
Agreement pursuant to Sections 12.1, the Trustee shall release all liens and
assign to the Issuer (without recourse, representation or warranty) all right,
title and interest of the Trustee in and to the Series Collateral and all
proceeds thereof. The Trustee shall execute and deliver such instruments of
assignment, in each case without recourse, representation or warranty, as shall
be reasonably requested by the Issuer to release the security interest of the
Trustee in the Series Collateral.

                                  ARTICLE XIII

                            MISCELLANEOUS PROVISIONS

     Section 13.1   AMENDMENT.

     (a)  SUPPLEMENTAL INDENTURES AND AMENDMENTS WITHOUT CONSENT OF THE
NOTEHOLDERS. The Issuer, the Trustee, the Collateral Agent and the Master
Servicer, at any time and from time to time, without the consent of any of the
Noteholders, may enter into one or more amendments or indentures supplemental to
this Agreement or into a Series Supplement in form satisfactory to the Trustee
for any of the following purposes:

          (i)       to add to the covenants of the Issuer for the benefit of the
     Noteholders or to surrender any right or power conferred upon the Issuer;

          (ii)      to Grant any additional property to the Trustee or the
     Collateral Agent or to be held by the Custodian, in each case, for the
     benefit of the Trustee and the Holders of the Notes of one or more Series;

          (iii)     to correct or amplify the description of any property at any
     time subject to the Lien of a Series Supplement, or to better assure,
     convey and confirm unto the Trustee or the Collateral Agent or deliver to
     the Custodian, in each case for the benefit of the Trustee and the
     Noteholders, any property subject to the Lien of a Series Supplement;

          (iv)      to cure any ambiguity, correct, modify or supplement any
     provision which is defective or inconsistent with any other provision
     herein; PROVIDED THAT, such correction, modification or supplement shall
     not alter in any material respect, the amount or timing of payments to or
     other rights of the Noteholders;

          (v)       to modify transfer restrictions on a Series of Notes, so
     long as any such modifications comply with the Securities Act and the
     Investment Company Act;

          (vi)      to provide for the issuance of a new Series of Notes; or

          (vii)     make any other changes which do not, in the aggregate,
     materially and adversely affect the rights of any Noteholders.

                                       72


PROVIDED THAT, (x) in each case, the Issuer shall have satisfied the Rating
Agency Condition with respect to such corrections, amendments, modifications or
clarifications and (y), with respect to any changes described in subsection
(vii), the Issuer shall have delivered to the Trustee an Officer's Certificate
of the Issuer and an Officer's Certificate of the Master Servicer both to the
effect that such change will not adversely affect the rights of any Noteholders
and evidence that any additional conditions to such amendment contained in one
or more Series Supplements have been satisfied.

     Subject to Section 13.1(c), the Trustee is hereby authorized to join in the
execution of any such amendment or supplemental indenture and to make any
further appropriate agreements and stipulations that may be therein contained.
So long as any of the Notes are outstanding, at the cost of the Issuer, the
Trustee shall provide to each Rating Agency then rating any Notes a copy of any
proposed amendment or supplemental indenture prior to the execution thereof by
the Trustee and, as soon as practicable after the execution by the Issuer, the
Trustee and the Collateral Agent of any such amendment or supplemental
indenture, provide to each Rating Agency a copy of the executed amendment or
supplemental indenture, as the case may be.

     (b)  AMENDMENTS AND SUPPLEMENTAL INDENTURES WITH CONSENT OF THE
NOTEHOLDERS. With the consent of the Majority Holders of each affected Series
and upon satisfaction of the Rating Agency Condition, the Issuer and the Trustee
may enter into an amendment or indentures supplemental hereto for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Agreement or any Series Supplement, or modifying in any
manner the rights of the Holders of the Notes under this Agreement or any Series
Supplement; PROVIDED THAT, no such amendment or supplemental indenture shall,
without the consent of all affected Noteholders:

          (i)       reduce in any manner the amount of, or change the timing of,
     principal, interest and other payments required to be made on any Note;

          (ii)      change the application of proceeds of any Series Collateral
     to the payment of Notes of such Series;

          (iii)     reduce the percentage of Noteholders required to take or
     approve any action under this Agreement or any Series Supplement; or

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

     It shall not be necessary in connection with any consent of the Noteholders
under this Section 13.1(b) for the Noteholders to approve the specific form of
any proposed amendment or supplemental indenture, but it shall be sufficient if
such consent shall approve the substance thereof. The Trustee will not be
permitted to enter into any such supplemental indenture or amendment if, as a
result of such supplemental indenture or amendment, the ratings of any

                                       73


outstanding Series or Class of Notes (if then rated) would be reduced without
the consent of each affected Noteholder.

     Promptly after the execution by the Issuer, the Trustee, the Collateral
Agent and the Master Servicer of any amendment or supplemental indenture
pursuant to this Section 13.1(b), the Trustee, at the expense of the Issuer
shall mail to the Noteholders, the Luxembourg Stock Exchange (if and for so long
as any Class of Notes is listed thereon) and each Rating Agency rating any of
the Notes, a copy thereof.

     (c)  EXECUTION OF AMENDMENTS AND SUPPLEMENTAL INDENTURES. In executing or
accepting the additional trusts created by any amendment or supplemental
indenture permitted by this Section 13.1 or the modifications thereby of the
trusts created by this Agreement or any Series Supplement, the Trustee shall be
entitled to receive, and (subject to Sections 11.1 and 11.2) shall be fully
protected in relying in good faith upon, an Opinion of Counsel stating that the
execution of such amendment or supplemental indenture is authorized or permitted
by this Agreement and that all conditions precedent applicable thereto under
this Agreement have been satisfied. The Trustee may, but shall not be obligated
to, enter into any such amendment or supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Agreement, any Series
Supplement, or otherwise.

     (d)  EFFECT OF AMENDMENTS AND SUPPLEMENTAL INDENTURES. Upon the execution
of any amendment or supplemental indenture under this Section 13.1, this
Agreement shall be modified in accordance therewith, and such amendment or
supplemental indenture shall form a part of this Agreement for all purposes; and
every Holder of a Note theretofore and thereafter authenticated and delivered
hereunder shall be bound thereby.

     (e)  REFERENCE IN NOTES TO AMENDMENTS AND SUPPLEMENTAL INDENTURES. Notes
executed, authenticated and delivered after the execution of any amendment or
supplemental indenture pursuant to this Section 13.1 may, and if required by the
Trustee shall, bear a notation in form approved by the Trustee as to any matter
provided for in such amendment or supplemental indenture. If the Issuer shall so
determine, new Notes, so modified as to conform in the opinion of the Trustee
and the Issuer to any such amendment or supplemental indenture, may be prepared
and executed by the Issuer and authenticated and delivered by the Trustee or its
authenticating agent in exchange for outstanding Notes.

     (f)  In determining whether the requisite percentage of Noteholders have
concurred in any direction, waiver or consent, Notes owned by the Issuer or an
Affiliate of the Issuer shall be considered as though they are not outstanding,
except that for the purposes of determining whether the Trustee shall be
protected in making such determination or relying on any such direction, waiver
or consent, only Notes which a Responsible Officer of the Trustee knows pursuant
to written notice (or in the case of the Issuer, by reference to the Note
Register if the Trustee is also the Note Registrar) are so owned shall be so
disregarded.

     Section 13.2   RESERVED.

     Section 13.3   LIMITATION ON RIGHTS OF THE NOTEHOLDERS.

                                       74


     (a)  The death or incapacity of any Noteholder shall not operate to
terminate this Agreement, nor shall such death or incapacity entitle such
Noteholder's legal representatives or heirs to claim an accounting or to take
any action or commence any proceeding in any court for a partition or winding up
of the Series Collateral, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.

     (b)  Nothing herein set forth, or contained in the terms of the Notes,
shall be construed so as to constitute the Noteholders from time to time as
partners or members of an association; nor shall any Noteholder be under any
liability to any third person by reason of any action taken by the parties to
this Agreement pursuant to any provision hereof.

     Section 13.4   GOVERNING LAW. This Agreement is governed by and shall be
construed in accordance with the laws of the State of New York and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.

     Section 13.5   NOTICES. All communications and notices hereunder shall be
in writing and shall be deemed to have been duly given if personally delivered
to, or transmitted by overnight courier, or transmitted by telex or telecopy and
confirmed by a mailed writing:

             If to the Issuer:

             SIERRA RECEIVABLES FUNDING COMPANY, LLC
             10750 West Charleston Boulevard
             Suite _____
             Las Vegas, Nevada 89135
             Fax number: ________________
             Attention: [-]
             (or such other address as may hereafter be furnished to the
             Trustee, the Master Servicer and the Collateral Agent in writing
             by the Issuer).

             If to the Master Servicer:

             FAIRFIELD ACCEPTANCE CORPORATION-NEVADA
             10750 West Charleston Boulevard
             Suite 130
             Las Vegas, Nevada 89135
             Fax number: 702-227-3114
             Attention: Ralph E. Turner
             (or such other address as may hereafter be furnished to the
             Trustee, the Issuer and the Collateral Agent in writing by the
             Master Servicer).

             If to the Trustee:

             WACHOVIA BANK, NATIONAL ASSOCIATION
             401 South Tryon Street
             NC - 1179
             12th Floor
             Charlotte, North Carolina 28288-1179

                                       75


             Fax: Number:704-383-6039
             Attention: Structured Finance Trust Services
                           Re: Sierra Receivables Funding Company, LLC
                           Series 2002-1
             (or such other address as may be furnished to the Master Servicer,
             the Issuer or the Collateral Agent in writing by the Trustee).

             If to the Collateral Agent:

             WACHOVIA BANK, NATIONAL ASSOCIATION
             401 South Tryon Street
             NC - 1179
             12th Floor
             Charlotte, North Carolina 28288-1179
             Fax: Number: 704-383-6039
             Attention: Structured Finance Trust Services
                           Re: Sierra Receivables Funding Company, LLC
                           Series 2002-1
             (or such other address as may be furnished in writing to the
             Trustee, the Issuer and the Master Servicer by the Collateral
             Agent).

             If to each Rating Agency:

             Fitch Ratings, Inc.
             One State Street Plaza
             New York, New York, 10004
             Fax number: 212-480-4438
             Attention: Timeshare Asset-Backed Group
             (or such other address as may be furnished in writing to the
             Trustee, the Issuer and the Master Servicer).

             Moody's Investor Service, Inc.
             99 Church Street
             New York, New York 10007
             Fax number: 212-553-4392
             (or such other address as may be furnished in writing to the
             Trustee, the Issuer and the Master Servicer).

             Standard & Poor's Ratings Services
             55 Water Street
             New York, New York 10041
             Fax number: 212-438-2655
             (or such other address as may be furnished in writing to the
             Trustee, the Issuer and the Master Servicer).

                                       76


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

     All communications and notices pursuant hereto to a Noteholder will be
given by first-class mail, postage prepaid, to the registered holders of such
Notes at their respective address as shown in the Note Register. Any notice so
given within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Noteholder receives such
notice.

     Section 13.6   SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Notes or
rights of the Noteholders thereof.

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

     Section 13.8   NOTES NON-ASSESSABLE AND FULLY PAID. It is the intention of
the Issuer that the Noteholders shall not be personally liable for obligations
of the Issuer and that the indebtedness represented by the Notes shall be
non-assessable for any losses or expenses of the Issuer or for any reason
whatsoever.

     Section 13.9   FURTHER ASSURANCES. Each of the Issuer, the Master Servicer
and the Collateral Agent agree to do and perform, from time to time, any and all
acts and to execute any and all further instruments required or reasonably
requested by the Trustee more fully to effect the purposes of this Agreement,
including without limitation the execution of any financing statements,
amendments thereto, or continuation statements relating to the Pledged Loans for
filing under the provisions of the UCC of any applicable jurisdiction.

     Section 13.10  NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and
no delay in exercising, on the part of the Trustee or the Noteholders, any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. No waiver of any
provision hereof shall be effective unless made in writing. The rights,
remedies, powers and privileges therein provided are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.

     Section 13.11  COUNTERPARTS. This Agreement may be executed in two or more
counterparts (and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one and the
same instrument.

     Section 13.12  THIRD-PARTY BENEFICIARIES. This Agreement will inure to the
benefit of and be binding upon the parties hereto, the Noteholders and their
respective successors and permitted

                                       77


assigns. Except as otherwise provided in this Article XIII, no other person will
have any right or obligation hereunder.

     Section 13.13  ACTIONS BY THE NOTEHOLDERS.

     (a)  Wherever in this Agreement a provision is made that an action may be
taken or a notice, demand or instruction given by the Noteholders, such action,
notice or instruction may be taken or given by any Noteholder, unless such
provision requires a specific percentage of the Noteholders. If, at any time,
the request, demand, authorization, direction, consent, waiver or other act of a
specific percentage of the Noteholders is required pursuant to this Agreement,
written notification of the substance thereof shall be furnished to all
Noteholders.

     (b)  Any request, demand, authorization, direction, consent, waiver or
other act by a Noteholder binds such Noteholder and every subsequent holder of
such Note issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done or omitted to be done by
the Trustee, the Issuer or the Master Servicer in reliance thereon, whether or
not notation of such action is made upon such Note.

     Section 13.14  MERGER AND INTEGRATION. Except as set forth in the Trustee
Fee Letter, and except as SPECIFICALLY stated otherwise herein, this Agreement
and the other Facility Documents set forth the entire understanding of the
parties relating to the subject matter hereof, and, except as set forth in such
Trustee Fee Letter, all prior understandings, written or oral, are superseded by
this Agreement and the other Facility Documents. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.

     Section 13.15  NO BANKRUPTCY PETITION. The Trustee, the Master Servicer,
the Collateral Agent and each Noteholder, by accepting a Note, hereby covenant
and agree that they will not at any time institute against the Issuer or the
Depositor, or join in instituting against the Issuer or the Depositor, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any Debtor Relief Law.

     Section 13.16  HEADINGS. The headings herein are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.

                                       78


     IN WITNESS WHEREOF, Issuer, the Master Servicer, the Trustee and the
Collateral Agent have caused this Agreement to be duly executed by their
respective officers as of the day and year first above written.

                                         SIERRA RECEIVABLES FUNDING COMPANY,
                                         LLC,
                                          as Issuer


                                         By:       /s/ Ralph E. Turner
                                            ------------------------------------
                                            Name: Ralph E. Turner
                                            Title: President and Treasurer


                                         FAIRFIELD ACCEPTANCE CORPORATION-
                                         NEVADA,
                                          as Master Servicer


                                         By:       /s/ Ralph E. Turner
                                            ------------------------------------
                                            Name: Ralph E. Turner
                                            Title: President and Treasurer


                                         WACHOVIA BANK, NATIONAL ASSOCIATION,
                                          as Trustee


                                         By:       /s/ Robert Ashbaugh
                                            ----------------------------------
                                            Name: Robert Ashbaugh
                                            Title: Vice President


                                         WACHOVIA BANK, NATIONAL ASSOCIATION,
                                          as Collateral Agent


                                         By:       /s/ Robin M. Belanger
                                            ----------------------------------
                                            Name: Robin M. Belanger
                                            Title: Vice President

          [Signature page for Master Indenture and Servicing Agreement]




                                                                   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

                                       -i-


                                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



                                      -ii-


                                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



                                      -iii-





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

                                        2


          (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.

                                        3


                                   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.

                                        4


          "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 Moody's 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.

                                        5


          "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 2002-1 Aggregate 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.

                                        6


          "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 2002-1 Aggregate 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

                                        7


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,

                                        8


     (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 2002-1 Aggregate 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.

                                        9


          "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.

                                       10


          "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 2002-1 Aggregate 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 2002-1 Aggregate 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

                                       11


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.

                                       12


          "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.

                                       13


          "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 Moody's and S&P and a short-term unsecured debt rating of at least
A-1 from S&P and P-1 from Moody's.

          "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 Moody's 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.

                                       14


          "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
2002-1 Aggregate 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 2002-1
Aggregate 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 2002-1 AGGREGATE 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.

                                       15


          "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.

                                       16


          "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.

                                       17


          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

                                       19


          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.

                                       20


          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

                                       23


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

                                       32


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

                                       33


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

                                       34


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;

                                       35


               (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.

                                       36


          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

                                       37


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:

                                       38


               (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

                                       39


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.

                                       40


                                   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 J.P. Morgan 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.
     100 Federal Street 11F
     Boston, MA 02110
     Attention: Jason Truong
     Telephone: (617) 434-7270
     Telecopy: (617) 434-1533
     (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
     100 North Tryon Street, 10th Floor
     Charlotte, North Carolina 28255
     Attention: Michelle M. Heath
     Telephone: (704) 386-7922
     Telecopy: (704) 388-0027
     (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.

                                       50


          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/ Ralph E. Turner
                                     --------------------------------------
                                     Name: Ralph E. Turner
                                     Title: President and Treasurer


                                 FAIRFIELD ACCEPTANCE
                                 CORPORATION-NEVADA,
                                 as Master Servicer

                                 By:      /s/ Ralph E. Turner
                                     --------------------------------------
                                     Name: Ralph E. Turner
                                     Title: President and Treasurer


                                 WACHOVIA BANK, NATIONAL ASSOCIATION,
                                 as Trustee

                                 By:      /s/ Rob Ashbaugh
                                     -----------------------------------
                                     Name: Rob Ashbaugh
                                     Title: Vice President


                                 WACHOVIA BANK, NATIONAL ASSOCIATION,
                                 as Collateral Agent

                                 By:      /s/ Robin M. Belanger
                                     -------------------------------------
                                     Name: Robin M. Belanger
                                     Title: Vice President

                  [Signature page for Series 2002-1 Supplement]




                                                                   EXHIBIT 10.63

                                                                  EXECUTION COPY

- --------------------------------------------------------------------------------

                         MASTER LOAN PURCHASE AGREEMENT

                           Dated as of August 29, 2002

                                 by and between

                    FAIRFIELD ACCEPTANCE CORPORATION-NEVADA,
                                    as Seller

                                       and

                            FAIRFIELD RESORTS, INC.,
                                as Co-Originator

                                       and

                          FAIRFIELD MYRTLE BEACH, INC.,
                                as Co-Originator

                                       and

                   SEA GARDENS BEACH AND TENNIS RESORT, INC.,
                          VACATION BREAK RESORTS, INC.,
                  VACATION BREAK RESORTS AT STAR ISLAND, INC.,
                               PALM VACATION GROUP
                                       and
                           OCEAN RANCH VACATION GROUP,
                             each as a VB Subsidiary

                                       and

                               PALM VACATION GROUP
                                       and
                           OCEAN RANCH VACATION GROUP,
                            each as a VB Partnership

                                       and

                           SIERRA DEPOSIT COMPANY, LLC
                                  as Purchaser

- --------------------------------------------------------------------------------



                                TABLE OF CONTENTS




                                                                                                          PAGE
                                                                                                          ----
                                                                                                         
RECITALS.....................................................................................................1

Section 1.    Definitions....................................................................................2

Section 2.    Purchase and Sale of Loans....................................................................17

Section 3.    Pool Purchase Price...........................................................................17

Section 4.    Payment of Purchase Price.....................................................................17

              (a)    Closing Dates..........................................................................17

              (b)    Manner of Payment of Additional Pool Purchase Price....................................17

              (c)    Scheduled Payments Under Loans and Cut-Off Date........................................18

Section 5.    Conditions Precedent to Sale of Loans.........................................................18

Section 6.    Representations and Warranties of the Seller, FRI, FMB and the VB Subsidiaries................18

              (a)      General Representations and Warranties of the Seller, FRI, FMB and the VB
                       Subsidiaries.........................................................................18

              (b)      Representations and Warranties Regarding the Loans...................................23

              (c)      Representations and Warranties Regarding the Loan Files..............................28

              (d)      Survival of Representations and Warranties...........................................29

              (e)      Indemnification of the Company.......................................................29

Section 7.    Repurchases or Substitution of Loans for Breach of Representations and Warranties.............29

Section 8.    Covenants of the Seller and FRI...............................................................29

              (a)    Affirmative Covenants of the Seller and FRI............................................29

              (b)    Negative Covenants of the Seller and FRI...............................................33

Section 9.    Representations and Warranties of the Company.................................................35

Section 10.   Covenants of the Company......................................................................36

Section 11.   Miscellaneous.................................................................................37

              (a)    Amendment..............................................................................37

              (b)    Assignment.............................................................................37

              (c)    Counterparts...........................................................................38

              (d)    Termination............................................................................38

              (e)    Governing Law..........................................................................38



                                        i


                                TABLE OF CONTENTS
                                   (continued)




                                                                                                          PAGE
                                                                                                          ----
                                                                                                         
              (f)    Notices................................................................................38

              (g)    Severability of Provisions.............................................................38

              (h)    Successors and Assigns.................................................................38

              (i)    Costs, Expenses and Taxes..............................................................39

              (j)    No Bankruptcy Petition.................................................................39

              (k)    Treatment of Timeshare Upgrades........................................................39



                                       ii


                                    SCHEDULES

Schedule 1 - Loan Schedule

Schedule 2 - Resorts

Schedule 3 - Environmental Issues

Schedule 4 - Lockbox Accounts

Schedule 5 - Litigation

                                    EXHIBITS

Exhibit A    Forms of Custodial Agreements

Exhibit B    Form of Assignment of Additional Loans

Exhibit C    Credit Standards and Collection Policies of Fairfield Acceptance
             Corporation - Nevada and Fairfield Resorts, Inc.

Exhibit D    Forms of Loans

Exhibit E    Forms of Lockbox Agreements

                                       iii


                         MASTER LOAN PURCHASE AGREEMENT

     THIS MASTER LOAN PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
August 29, 2002, is made by and between FAIRFIELD ACCEPTANCE CORPORATION-NEVADA,
a Delaware corporation, as seller (the "SELLER"), FAIRFIELD RESORTS, INC., a
Delaware corporation and the parent corporation of the Seller, as co-originator
("FRI"), FAIRFIELD MYRTLE BEACH, INC., a Delaware corporation and a wholly-owned
subsidiary of FRI, as co-originator ("FMB"), SEA GARDENS BEACH AND TENNIS
RESORT, INC., a Florida corporation ("SEA GARDENS"), VACATION BREAK RESORTS,
INC., a Florida corporation ("VBR"), VACATION BREAK RESORTS AT STAR ISLAND,
INC., a Florida corporation ("VBRS") (each of Sea Gardens, VBR and VBRS being
wholly-owned subsidiaries of Vacation Break, USA, Inc., a wholly-owned
subsidiary of FRI), PALM VACATION GROUP, a Florida general partnership ("PVG"),
OCEAN RANCH VACATION GROUP, a Florida general partnership ("ORVG") (each of Sea
Gardens, VBR, VBRS, PVG and ORVG are hereinafter collectively referred to as the
"VB SUBSIDIARIES" and PVG and ORVG are hereinafter collectively referred to as
the "VB PARTNERSHIPS") and SIERRA DEPOSIT COMPANY, LLC, a Delaware limited
liability company, as purchaser (hereinafter referred to as the "PURCHASER" or
the "COMPANY").

                                    RECITALS

     WHEREAS, FRI, FMB and the VB Subsidiaries have originated certain Loans in
connection with the sale to Obligors of Timeshare Properties at various Resorts;

     WHEREAS, in the ordinary course of their businesses, FRI purchases or will
purchase directly or indirectly from FMB and the VB Subsidiaries, and the Seller
purchases or will purchase from FRI, certain Loans and related property
(including an interest in the Timeshare Properties underlying such Loans);

     WHEREAS, each of FRI, FMB, the VB Subsidiaries, the Seller and the Company
wishes to enter into this Agreement and the related Master Loan Purchase
Agreement Supplement for each Series of Notes (each, a "PA SUPPLEMENT") in order
to, among other things, effect the sale to the Company on the related Closing
Date of Initial Loans and related Transferred Assets that FAC owns as of the
close of business on the related Cut-Off Date, and the sale to the Company of
Additional Loans (including Additional Upgrade Balances) and related Transferred
Assets that FAC will own from time to time thereafter as of the close of
business on the related Addition Cut-Off Dates; and

     WHEREAS, the Company intends to transfer and assign the Loans and related
Transferred Assets to the Issuer, which will then grant security interests in
the Loans and related Transferred Assets to Wachovia Bank, National Association,
as Collateral Agent on behalf of the Trustee and the holders of Notes issued
from time to time pursuant to a Master Indenture and Servicing Agreement of even
date herewith (the "INDENTURE AND SERVICING AGREEMENT"), together with any
Indenture Supplements thereto, each by and between Sierra Receivables Funding
Company, LLC as Issuer, FAC as Master Servicer, the Trustee and the Collateral
Agent.



     NOW, THEREFORE, in consideration of the purchase price set forth herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:

SECTION 1.   DEFINITIONS.

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

     "ADDITION CUT-OFF DATE" shall mean, for Additional Loans of any Series, the
date set forth in the related Assignment.

     "ADDITION DATE" shall mean, with respect to any Series, the Addition Date
as defined in the related PA Supplement.

     "ADDITIONAL LOAN" shall mean, with respect to any Series, each installment
contract or contract for deed or contract or note secured by a mortgage, deed of
trust, vendor's lien or retention of title, in each case relating to the sale of
one or more Timeshare Properties or Green Timeshare Properties to an Obligor and
each Additional Upgrade Balance, in each case constituting one of the Loans of
such Series purchased from the Seller on an Addition Cut-Off Date and listed on
Schedule 1 to the related Assignment.

     "ADDITIONAL POOL PURCHASE PRICE" shall have the meaning set forth in
Section 3.

     "ADDITIONAL UPGRADE BALANCE" shall mean, with respect to any Loan, any
future borrowing made by the related Obligor pursuant to a modification of the
Loan relating to a Timeshare Upgrade after the Cut-Off Date or the Addition
Cut-Off Date, as applicable, with respect to such Loan, together with all money
due or to become due in respect of such borrowing.

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

     "AGREEMENT" shall mean this Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.

     "AMORTIZATION EVENT" shall mean, with respect to any Series, one or more of
the events constituting an Amortization Event as defined in the related
Indenture Supplement.

     "ALLIANCE PROGRAM" shall mean any sales and marketing program pursuant to
which an Originator acquires recovered Timeshare Property interests from sold
out third-party unaffiliated resorts for resale.

     "ASSESSMENTS" shall mean any assessments made with respect to a Timeshare
Property, including but not limited to real estate taxes, recreation fees,
community club or property owners' association dues, water and sewer improvement
district assessments or other similar

                                        2


assessments, the nonpayment of which could result in the imposition of a Lien or
other encumbrance upon such Timeshare Property.

     "ASSIGNMENT" shall mean, with respect to any Series, an Assignment as
defined in the related PA Supplement.

     "ASSIGNMENT OF MORTGAGE" shall mean any assignment (including any
collateral assignment) of any Mortgage.

     "BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, Title 11 of
the United States Code, as amended.

     "BENEFIT PLAN" shall mean any employee benefit plan as defined in Section
3(3) of ERISA in respect of which the Company or any ERISA Affiliate of the
Company is, or at any time during the immediately preceding six years was, an
"employer" as defined in Section 3(5) of ERISA.

     "BUSINESS DAY" shall mean any day other than (i) a Saturday or Sunday or
(ii) a day on which banking institutions in New York, New York, Las Vegas,
Nevada, or the city in which the Corporate Trust Office of the Trustee is
located, or any other city specified in the PA Supplement for a Series, are
authorized or obligated by law or executive order to be closed.

     "CENDANT" shall mean Cendant Corporation or any successor thereof.

     "CLOSING DATE" shall mean, with respect to any Series, the Closing Date as
defined in the related PA Supplement.

     "COLLATERAL" shall have the meaning set forth in the Indenture and
Servicing Agreement.

     "COLLATERAL AGENCY AGREEMENT" shall mean the Collateral Agency Agreement
dated as of January 15, 1998 by and between Fleet National Bank as predecessor
Collateral Agent, Fleet Securities, Inc. as deal agent and the secured parties
named therein, as amended by the First Amendment to Collateral Agency Agreement
dated as of July 31, 1998, as further amended by the Second Amendment to
Collateral Agreement dated as of July 25, 2000, as further amended by the Third
Amendment to Collateral Agency Agreement dated as of July 1, 2001, and as
further amended by the Fourth Amendment to Collateral Agency Agreement dated as
of August 29, 2002 by and among the Collateral Agent, the Trustee and other
secured parties, as such Collateral Agency Agreement may be amended,
supplemented or otherwise modified from time to time in accordance therewith.

     "COLLATERAL AGENT" shall mean Wachovia Bank, National Association, as
Collateral Agent, its successors and assigns and any entity which is substituted
as Collateral Agent under the terms of the Collateral Agency Agreement.

     "COLLECTION ACCOUNT" shall mean the account or accounts established
pursuant to Section 7.1(a) of the Indenture and Servicing Agreement.

     "COLLECTIONS" shall mean, with respect to any Loan, all funds, cash
collections and other cash proceeds of such Loan, including without limitation
(i) all Scheduled Payments or

                                        3


recoveries made in the form of money, checks and like items to, or a wire
transfer or an automated clearinghouse transfer received in, any of the Lockbox
Accounts or received by the Issuer or the Master Servicer (or any Subservicer)
in respect of such Loan, (ii) all amounts received by the Issuer, the Master
Servicer (or any Subservicer) or the Trustee in respect of any Insurance
Proceeds relating to such Loan or the related Timeshare Property and (iii) all
amounts received by the Issuer, the Master Servicer (or any Subservicer) or the
Trustee in respect of any proceeds in respect of a condemnation of property in
any Resort, which proceeds relate to such Loan or the related Timeshare
Property.

     "COMPANY" shall have the meaning set forth in the preamble.

     "CONTAMINANTS" shall have the meaning set forth in Section 6(b)(xii).

     "CORPORATE TRUST OFFICE" shall have the meaning set forth in the Indenture
and Servicing Agreement.

     "CREDIT CARD ACCOUNT" shall mean an arrangement whereby an Obligor makes
Scheduled Payments under a Loan via pre-authorized debit to a Major Credit Card.

     "CREDIT STANDARDS AND COLLECTION POLICIES" shall mean the Credit Standards
and Collection Policies of FAC and FRI, a copy of which is attached to this
Agreement as Exhibit C, as the same may be amended from time to time in
accordance with the provisions of Section 8(b)(iii).

     "CUSTODIAL AGREEMENT" shall mean either (i) the custodial agreement dated
as of August 29, 2002 by and between the Issuer, FAC, EFI, Trendwest, Wachovia
Bank, National Association as Custodian, the Trustee and the Collateral Agent or
(ii) the Fourth Amended and Restated Custodial Agreement dated as of August 29,
2002 by and between Wells Fargo Bank Nevada, N.A. (successor by merger to First
Security Trust Company of Nevada), as Custodian, the Collateral Agent, the
Trustee, FRI, FAC, FMB, FFC II, FFC III, the Issuer and other parties named
therein, a copy of each of which is attached to this Agreement as Exhibit A, as
the same may be amended, supplemented or otherwise modified from time to time
thereafter in accordance with the terms hereof.

     "CUSTODIAN" shall mean, at any time, the custodian under either Custodial
Agreement at such time.

     "CUSTOMARY PRACTICES" shall mean the Master Servicer's practices with
respect to the servicing and administration of Loans as in effect from time to
time, which practices shall be consistent with the practices employed by prudent
lending institutions that originate and service instruments similar to the Loans
or other timeshare loans in the jurisdictions in which the Resorts are located.

     "CUT-OFF DATE" shall mean, with respect to any Series, the Cut-Off Date as
defined in the related PA Supplement.

     "DE MINIMUS LEVELS" shall have the meaning set forth in Section 6(b)(xii).

                                        4


     "DEBTOR RELIEF LAWS" shall mean the Bankruptcy Code and all other
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments or similar
debtor relief laws from time to time in effect affecting the rights of creditors
generally.

     "DEFAULTED LOAN" shall mean any 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 has been the
subject of a proceeding under a Debtor Relief Law or (d) for which cancellation
or foreclosure actions have been commenced.

     "DEFAULTED LOAN REPURCHASE CAP" shall mean, as of any date of
determination, an amount equal to the PRODUCT of (a) 10.5% MULTIPLIED BY (b) the
aggregate Loan principal balance of all Loans (calculated as of the Cut-Off Date
or related Addition Cut-Off Date, as applicable, for each Loan) sold by the
Seller to the Depositor pursuant to this Agreement on or prior to such date of
determination.

     "DEFECTIVE LOAN" shall mean, with respect to any Series, any Loan with any
uncured material breach of a representation or warranty of the Seller set forth
in Section 6(b) hereof and in the related PA Supplement.

     "DELINQUENT LOAN" shall mean, with respect to any Series, a Loan with any
portion of a Scheduled Payment delinquent more than 30 days, other than any Loan
that is a Defaulted Loan.

     "DEPOSITOR ADMINISTRATIVE SERVICES AGREEMENT" shall mean the administrative
services agreement dated as of August 29, 2002 by and between FAC as
administrator and the Company.

     "DUE DATE" shall mean, with respect to any Loan, the date on which an
Obligor is required to make a Scheduled Payment thereon.

     "DUE PERIOD" shall mean, with respect to any Payment Date, the immediately
preceding calendar month.

     "EFI" shall mean EFI Development Funding, Inc., a Delaware corporation and
a wholly-owned indirect Subsidiary of Cendant.

     "ELIGIBLE LOAN" shall mean, with respect to any Series, an Eligible Loan as
defined in the related PA Supplement.

     "ENVIRONMENTAL LAWS" shall have the meaning set forth in Section 6(b)(xii).

     "EQUITY PERCENTAGE" shall mean, with respect to a Loan, a fraction,
expressed as a percentage, the NUMERATOR of which is the EXCESS of (A) the
Timeshare Price of the related Timeshare Property relating to a Loan paid or to
be paid by an Obligor OVER (B) the outstanding principal balance of such Loan at
the time of sale of such Timeshare Property to such Obligor (LESS the amount of
any valid check presented by such Obligor at the time of such sale that has
cleared the payment system), and the DENOMINATOR of which is the Timeshare

                                        5


Price of the related Timeshare Property, PROVIDED that any cash downpayments or
principal payments made on any initial Loan that have been fully prepaid as part
of a Timeshare Upgrade and financed downpayments under such initial Loan
financed over a period not exceeding six months from the date of origination of
such Loan that have actually been paid within such six-month period shall be
included for purposes of calculating the numerator of such fraction.

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

     "ERISA AFFILIATE" shall mean, with respect to any Person, (i) any
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Internal Revenue Code) as such
Person; (ii) a trade or business (whether or not incorporated) under common
control (within the meaning of Section 414(c) of the Internal Revenue Code) with
such Person; or (iii) a member of the same affiliated service group (within the
meaning of Section 414(m) of the Internal Revenue Code) as such Person, any
corporation described in clause (i) or any trade or business described in clause
(ii).

     "ERISA LIABILITIES" shall have the meaning set forth in Section 8(b)(vi).

     "EVENT OF DEFAULT" shall mean, with respect to any Series, one or more of
the events constituting an Event of Default under the related Indenture
Supplement.

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

     "FACILITY DOCUMENTS" shall mean, collectively, this Agreement, each PA
Supplement, the Indenture and Servicing Agreement, each Indenture Supplement,
the Pool Purchase Agreement, each PPA Supplement, the Custodial Agreement, the
Lockbox Agreements, the Collateral Agency Agreement, the Title Clearing
Agreements, the Loan Conveyance Documents, the Depositor Administrative Services
Agreement, the Issuer Administrative Services Agreement, the Financing
Statements and all other agreements, documents and instruments delivered
pursuant thereto or in connection therewith.

     "FAIRSHARE PLUS AGREEMENT" shall mean the Amended and Restated FairShare
Vacation Plan Use Management Trust Agreement effective as of January 1, 1996 by
and between FRI, FMB and such other Subsidiaries and third party developers as
may be named by an amendment or addendum thereto, as the same may be amended,
restated, supplemented or otherwise modified from time to time thereafter in
accordance with the terms of this Agreement.

     "FAIRSHARE PLUS PROGRAM" shall mean the program pursuant to which the
occupancy and use of a Timeshare Property is assigned to the trust created by
the FairShare Plus Agreement in exchange for annual symbolic points that are
used to establish the location, timing, length of stay and unit type of a
vacation, including without limitation systems relating to reservations,
accounting and collection, disbursement and enforcement of assessments in
respect of contributed units.

                                        6


     "FCC" shall mean Fairfield Capital Corporation, a wholly-owned
special-purpose finance Subsidiary of FAC.

     "FFC II" shall mean Fairfield Funding Corporation II, a wholly-owned
special purpose finance Subsidiary of FAC.

     "FFC III" shall mean Fairfield Funding Corporation III, a wholly-owned
special purpose finance Subsidiary of FAC.

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

     "FMB" shall have the meaning set forth in the preamble.

     "FRI" shall have the meaning set forth in the preamble.

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

     "GRANT" shall have the meaning set forth in the Indenture and Servicing
Agreement.

     "GREEN LOAN" shall mean a Loan the proceeds of which are used to finance
the purchase of a Green Timeshare Property.

     "GREEN TIMESHARE PROPERTY" shall mean a Timeshare Property for which
construction on the related Resort has not yet begun or is subject to
completion.

     "INDEMNIFIED AMOUNTS" shall have the meaning set forth in Section 6(e).

     "INDENTURE AND SERVICING AGREEMENT" shall have the meaning set forth in the
recitals.

     "INDENTURE SUPPLEMENT" shall mean, with respect to any Series, an indenture
supplement to the Indenture and Servicing Agreement, executed and delivered in
connection with the issuance of the Notes of such Series pursuant to Section
2.10 of the Indenture and Servicing Agreement, and all amendments thereof and
supplements thereto.

     "INDEPENDENT DIRECTOR" shall mean an individual who is an Independent
Director as defined in the Limited Liability Company Agreement of the Company as
in effect on the date of this Agreement.

     "INITIAL CLOSING DATE" shall mean August 29, 2002.

     "INITIAL LOAN" shall mean, with respect to any Series, each Loan listed on
the related Loan Schedule on the Closing Date for such Series.

     "INSOLVENCY EVENT" shall mean, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable

                                        7


Debtor Relief Law now or hereafter in effect, or the filing of a petition
against such Person in an involuntary case under any applicable Debtor Relief
Law now or hereafter in effect, which case remains unstayed and undismissed
within 30 days of such filing, or the appointing of a receiver, conservator,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or the ordering of the
winding-up or liquidation of such Person's business; or (b) the commencement by
such Person of a voluntary case under any applicable Debtor Relief Law now or
hereafter in effect, or the consent by such Person to the entry of an order for
relief in an involuntary case under any such Debtor Relief Law, or the consent
by such Person to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or the making by such
Person of any general assignment for the benefit of creditors, or the failure by
such Person generally to pay its debts as such debts become due or the admission
by such Person of its inability to pay its debts generally as they become due.

     "INSOLVENCY PROCEEDING" shall mean any proceeding relating to an Insolvency
Event.

     "INSTALLMENT CONTRACT" shall mean, with respect to any Series, an
installment sale contract for deed and retained title in a related Timeshare
Property by and between an Originator and an Obligor.

     "INSURANCE PROCEEDS" shall mean proceeds of any insurance policy relating
to any Loan or the related Timeshare Property, including any refund of unearned
premium, but only to the extent such proceeds are not to be applied to the
restoration of any improvements on the related Timeshare Property or released to
the Obligor in accordance with Customary Practices.

     "INTERNAL REVENUE CODE" shall mean the United States Internal Revenue Code
of 1986, as amended from time to time.

     "ISSUER" shall mean Sierra Receivables Funding Company, LLC, a Delaware
limited liability company.

     "ISSUER ADMINISTRATIVE SERVICES AGREEMENT" shall mean the administrative
services agreement dated as of August 29, 2002 by and between FAC as
administrator and the Issuer.

     "KONA" shall have the meaning set forth in Section 11(l).

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

     "LOAN" shall mean, with respect to any Series, each installment contract or
contract for deed or contract or note secured by a mortgage, deed of trust,
vendor's lien or retention of title,

                                        8


in each case relating to the sale of one or more Timeshare Properties or Green
Timeshare Properties to an Obligor, that is listed on the Loan Schedule for such
Series on the related Closing Date and any Additional Loans that are listed from
time to time on such Loan Schedule in accordance with the related PA Supplement.

     "LOAN CONVEYANCE DOCUMENTS" shall mean, with respect to any Loan, (a) the
Assignment of Additional Loans in the form of Exhibit B, if applicable, and (b)
any such other releases, documents, instruments or agreements as may be required
by the Company, the Issuer or the Trustee in order to more fully effect the sale
(including any prior assignments) of such Loan and any related Transferred
Assets.

     "LOAN DOCUMENTS" shall mean, with respect to any Loan, all papers and
documents related to such Loan, including the original of all applicable
promissory notes, stamped as required by the Custodial Agreement, the original
of any related recorded or (to the extent permitted under this Agreement)
unrecorded Mortgage (or a copy of such recorded Mortgage if the original of the
recorded Mortgage is not available, certified to be a true and complete copy of
the original) and a copy of any recorded or (to the extent permitted under this
Agreement) unrecorded warranty deed transferring legal title to the related
Timeshare Property to the Obligor; PROVIDED, HOWEVER, that the Loan Documents
may be provided in microfiche or other electronic form to the extent permitted
under the Custodial Agreement.

     "LOAN FILE" shall mean, with respect to any Loan, the Loan Documents
pertaining to such Loan and any additional amendments, supplements, extensions,
modifications or waiver agreements required to be added to the Loan File
pursuant to this Agreement, the Credit Standards and Collection Policies and/or
Customary Practices.

     "LOAN POOL" shall mean, with respect to any Series, all Loans identified in
the Loan Schedule for such Series.

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

     "LOAN SCHEDULE" shall mean, with respect to any Series, the list of Loans
attached to the related PA Supplement as Schedule 1, as amended from time to
time on each Addition Date and Repurchase Date as provided in the related PA
Supplement, which list shall set forth the following information with respect to
each Loan therein as of the applicable date:

           (a)    the Loan number;

           (b)    the Obligor's name and the home address and telephone number
                  for such Obligor set forth in the Loan;

           (c)    the Resort in which the related Timeshare Property is
                  located;

           (d)    as to Fixed Weeks, the building, unit and week thereof; as
                  to UDIs, the phase number thereof; and as to all other
                  Timeshare Properties, the number of Points issued pursuant
                  to the FairShare Plus Program (if

                                        9


                   applicable) for which occupancy rights in such Timeshare
                   Property may be redeemed and which are represented thereby;

           (e)    the Loan Rate;

           (f)    whether the Obligor has elected a PAC with respect to the
                  Loan;

           (g)    the original term of the Loan;

           (h)    the original Loan principal balance and outstanding Loan
                  principal balance as of the Cut-Off Date or related Addition
                  Cut-Off Date, as applicable;

           (i)    the date of execution of the Loan;

           (j)    the amount of the Scheduled Payment on the Loan;

           (k)    the original Timeshare Price and Equity Percentage; and

           (l)    whether the related Timeshare Property has been deeded to
                  the Obligor.

The Loan Schedule also shall set forth the aggregate amounts described under
clause (h) above for all outstanding Loans. The Loan Schedule may be in the form
of more than one list, collectively setting forth all of the information
required.

     "LOCKBOX ACCOUNT" shall mean any of the accounts established pursuant to a
Lockbox Agreement.

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

     "LOCKBOX BANK" shall mean any of the commercial banks holding one or more
Lockbox Accounts for the purpose of receiving Collections.

     "LOT" shall mean a fully or partially developed parcel of real estate.

     "MAJOR CREDIT CARD" shall mean a credit card issued by any Visa USA, Inc.,
MasterCard International Incorporated, American Express Company, Discover Bank
or Diners Club International Ltd. credit card entity.

     "MASTER SERVICER" shall mean the master servicer under the Indenture and
Servicing Agreement.

     "MATERIAL ADVERSE EFFECT" shall mean, with respect to any Person and any
event or circumstance, a material adverse effect on:

                                       10


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

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

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

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

           (e)    the value, validity, enforceability or collectibility of the
     Loans pledged as collateral for any Series of Notes or any of the other
     Transferred Assets pledged as collateral for any Series of Notes.

     "MORTGAGE" shall mean any mortgage, deed of trust, purchase money deed of
trust or deed to secure debt encumbering the related Timeshare Property, granted
by the related Obligor to the Originator of a Loan to secure payments or other
obligations under such Loan.

     "MULTIEMPLOYER PLAN" shall have the meaning set forth in Section 3(37) of
ERISA.

     "NOMINEE" shall mean (a) Lawyer's Title Insurance Corporation under the
Eleventh Amended and Restated Title Clearing Agreement dated as of August 29,
2002, as amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof, by and among FRI, FAC, the Issuer, FFC III,
FFC II, FCC, the Trustee, the Collateral Agent, Lawyers Title Insurance
Corporation and certain other parties thereto; (b) Colorado Land Title Company
under the Ninth Amended and Restated Title Clearing Agreement (Colorado) dated
as of August 29, 2002, as amended, supplemented or otherwise modified from time
to time in accordance with the terms thereof, by and among FRI, FAC, the Issuer,
FFC III, FFC II, FCC, the Trustee, the Collateral Agent, Colorado Land Title
Company and certain other parties thereto; (c) Lawyers Title Insurance
Corporation under the Seventh Amended and Restated Title Clearing Agreement
(Westwinds) dated as of August 29, 2002, as amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof, by and among
FRI, FAC, FMB, FFC III, FFC II, FCC, the Issuer, the Collateral Agent, the
Trustee, Lawyers Title Insurance Corporation and certain other parties thereto;
(d) Lawyers Title Insurance Corporation under the Sixth Amended and Restated
Nashville Title Clearing Agreement dated as of August 29, 2002, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, by and among FRI, FAC, the Issuer, FFC III, FFC II, FCC, the
Trustee, the Collateral Agent, Lawyers Title Insurance Corporation and certain
other parties thereto; (e) Lawyers Title Insurance Corporation under the Sixth
Amended and Restated Seawatch Plantation Title Clearing Agreement dated as of
August 29, 2002, as amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof, by and among FRI, FAC, FMB, the
Issuer, FFC III, FFC II, FCC, the Trustee, the Collateral Agent, Lawyers Title
Insurance Corporation and certain other parties thereto; (f) First American
Title Insurance Company under the Eighth Amended and Restated Supplementary
Trust Agreement (Arizona) dated as of August 29, 2002, as amended,

                                       11


supplemented or otherwise modified from time to time in accordance with the
terms thereof, by and among FRI, FAC, the Issuer, FFC III, FFC II, FCC, the
Trustee, the Collateral Agent, First American Title Insurance Company and
certain other parties thereto; (g) Lawyer's Title of Nevada, Inc. under the
Second Amended and Restated Nevada Title Clearing Agreement dated as of August
29, 2002, as amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof, by and among FRI, FAC, FFC III, the Issuer,
the Trustee, the Collateral Agent, Lawyer's Title of Nevada, Inc. and certain
other parties thereto; and (h) such other nominees as shall be approved in
writing by the Collateral Agent pursuant to the terms of other title clearing
agreements (and similar documents, instruments and agreements) that may be
entered into from time to time by each of FRI, FAC, the Issuer and the
Collateral Agent (among other Persons) in accordance with the transactions
contemplated by this Agreement and the other Facility Documents relating to the
Loans and the Timeshare Properties.

     "NOTE" shall mean any Loan-backed note issued, executed and authenticated
in accordance with the Indenture and Servicing Agreement and any related
Indenture Supplement.

     "NOTEHOLDER" shall have the meaning set forth in the Indenture and
Servicing Agreement.

     "OBLIGOR" shall mean, with respect to any Loan, the Person or Persons
obligated to make Scheduled Payments thereon.

     "OPERATING AGREEMENT" shall mean the Seventh Amended and Restated Operating
Agreement dated as of July 1, 2001 by and between FRI, FMB, the VB Subsidiaries
and the Seller.

     "OPINION OF COUNSEL" shall mean a written opinion of counsel in form and
substance reasonably satisfactory to the recipient thereof.

     "ORIGINATOR" shall mean FRI, FMB or a VB Subsidiary, as the case may be, or
any other Subsidiary of Cendant Corporation that originates Loans in accordance
with the Credit Standards and Collection Policies for sale to FAC.

     "PAC" shall mean an arrangement whereby an Obligor makes Scheduled Payments
under a Loan via pre-authorized bank account debit.

     "PA SUPPLEMENT" shall have the meaning set forth in the recitals.

     "PAYMENT DATE" shall mean, with respect to any Series, the payment date set
forth in the related Indenture Supplement.

     "PERMITTED ENCUMBRANCE" shall mean, with respect to a Loan, any of the
following Liens against the related Timeshare Property: (i) the interest therein
of the Obligor and/or the Nominee, as the case may be, (ii) the Lien of due and
unpaid Assessments, (iii) covenants, conditions and restrictions, rights of way,
easements and other matters of public record, such exceptions appearing of
record being consistent with the normal business practices of FAC and

                                       12


FRI or specifically disclosed in the applicable land sales registrations filed
with the applicable regulatory agencies and (iv) other matters to which
properties of the same type as those underlying such Loan are commonly subject
that do not materially interfere with the benefits of the security intended to
be provided by such Timeshare Property.

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

     "PLAN" shall mean an employee benefit plan or other retirement arrangement
subject to ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended from time to time.

     "PLAN INSOLVENCY" shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.

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

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

     "POOL PURCHASE AGREEMENT" shall mean the master purchase agreement relating
to the Loans, dated the date hereof, by and between the Company and the Issuer,
and all amendments thereof and supplements thereto including, with respect to
any Series, the related PPA Supplement.

     "POOL PURCHASE PRICE" shall mean, with respect to any Series, the Pool
Purchase Price as defined in the related PA Supplement.

     "POST OFFICE BOX" shall mean each post office box to which Obligors are
directed to mail payments in respect of the Loans of any Series.

     "PPA SUPPLEMENT" shall mean any supplement to the Pool Purchase Agreement
relating to a particular Series of Notes.

     "PURCHASE" shall mean, with respect to any Series, a Purchase as defined in
the related PA Supplement.

     "PURCHASER" shall have the meaning set forth in the preamble.

     "QUALIFIED SUBSTITUTE LOAN" shall mean, with respect to any Series, a
substitute Loan that (i) is an Eligible Loan on the applicable date of
substitution for such substitute Loan, (ii) on such date of substitution has a
Loan Rate not less than the Loan Rate of the substituted Loan and (iii) is not
selected in a manner adverse to the Purchaser or its assignees.

                                       13


     "RECORDS" shall mean all copies of Loans (not including originals) and
other documents, books, records and other information (including without
limitation computer programs, tapes, discs, punch cards, data processing
software and related property and rights) maintained by the Seller or any of its
respective Affiliates (including without limitation each Originator, but not
including the Purchaser or the Issuer) with respect to Loans, the related
Transferred Assets and the related Obligors.

     "REORGANIZATION" shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning of Section 4241
of ERISA.

     "REPORTABLE EVENT" shall mean any of the events described in Section 4043
of ERISA.

     "REPURCHASE DATE" shall mean, with respect to any Series, the Repurchase
Date as defined in the related PA Supplement.

     "REPURCHASE PRICE" shall mean, with respect to any Series, the Repurchase
Price as defined in the related PA Supplement.

     "RESERVATION SYSTEM" shall mean the system with respect to Timeshare
Properties pursuant to which a reservation for a particular location, time,
length of stay and unit type is received, accepted, modified or canceled.

     "RESERVE ACCOUNT" shall, with respect to any Series, mean any reserve
account established pursuant to the related Indenture Supplement.

     "RESORT" shall mean each resort or development listed on Schedule 2 (as
such Schedule 2 may be amended from time to time with the written consent of the
Company and the Seller in connection with proposed sales of Additional Loans
relating to resorts or developments with respect to which Loans have not
previously been sold under this Agreement).

     "SCHEDULED PAYMENT" shall mean each scheduled monthly payment of principal
and interest on a Loan.

     "SELLER" shall have the meaning set forth in the preamble.

     "SERIES" shall mean any Series of Notes issued and established pursuant to
an Indenture Supplement.

     "SERIES TERMINATION DATE" shall mean, with respect to any Series, the
Series Termination Date as defined in the related PA Supplement.

     "STATE" shall mean any of the 50 United States or the District of Columbia.

     "SUBSERVICER" shall have the meaning set forth in the Indenture and
Servicing Agreement.

     "SUBSERVICING AGREEMENT" shall have the meaning set forth in the Indenture
and Servicing Agreement.

                                       14


     "SUBSIDIARY" shall mean, with respect to any Person, any corporation or
other entity of which more than 50% of the outstanding capital stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors of such corporation (notwithstanding that at the time capital
stock of any other class or classes of such corporation shall or might have
voting power upon the occurrence of any contingency) or other persons performing
similar functions is at the time directly or indirectly owned by such Person.

     "SUBSTITUTION ADJUSTMENT AMOUNT" shall, with respect to any Series, have
the meaning set forth in the related PA Supplement.

     "TIMESHARE PRICE" shall mean the original price of the Timeshare Property
paid by an Obligor, PLUS any accrued and unpaid interest and other amounts owed
by the Obligor.

     "TIMESHARE PROPERTY" shall mean the underlying ownership interest that is
the subject of a Loan, which ownership interest may be either a Fixed Week, a
UDI or the Points with respect thereto under the FairShare Plus Program.

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

     "TIMESHARE UPGRADE" shall mean the upgrade by an Obligor of the Obligor's
existing Timeshare Property to an upgraded Timeshare Property.

     "TITLE CLEARING AGREEMENT" shall mean, with respect to certain Loans that
are Installment Contracts, each of (a) the Eleventh Amended and Restated Title
Clearing Agreement dated as of August 29, 2002, as amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof, by
and among the Issuer, FRI, FAC, Lawyers Title Insurance Corporation, the
Collateral Agent and the other parties thereto; (b) the Ninth Amended and
Restated Title Clearing Agreement (Colorado) dated as of August 29, 2002, as
amended, supplemented or otherwise modified from time to time in accordance with
the terms thereof, by and among the Issuer, FRI, FAC, Colorado Land Title
Company, the Collateral Agent and the other parties thereto; (c) the Seventh
Amended and Restated Title Clearing Agreement (Westwinds) dated as of August 29,
2002, as amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof, by and among the Issuer, FRI, FAC, Lawyers
Title Insurance Corporation, the Collateral Agent and the other parties thereto;
(d) the Sixth Amended and Restated Nashville Title Clearing Agreement dated as
of August 29, 2002, as amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof, by and among the Issuer, FRI, FAC,
Lawyers Title Insurance Corporation, the Collateral Agent and the other parties
thereto; (e) the Sixth Amended and Restated Seawatch Plantation Title Clearing
Agreement dated as of August 29, 2002, as amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof, by and among
the Issuer, FRI, FAC, Lawyers Title Insurance Corporation, the Collateral Agent
and the other parties thereto; (f) the Eighth Amended and Restated

                                       15


Supplementary Trust Agreement (Arizona) dated as of August 29, 2002, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, by and among the Issuer, FRI, FAC, First American Title Insurance
Corporation, the Collateral Agent and the other parties thereto; (g) the Second
Amended and Restated Nevada Title Clearing Agreement dated as of August 29,
2002, as amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof, by and among the Issuer, FRI, FAC, Lawyer's
Title of Nevada, Inc., the Collateral Agent and the other parties thereto; and
(h) such other title clearing agreements and other similar documents,
instruments and agreements which may be entered into from time to time by each
of FRI, FAC, the Issuer and the Collateral Agent (among other Persons) in
accordance with the transactions contemplated by this Agreement and other
Facility Documents relating to the Timeshare Properties.

     "TRANSFERRED ASSETS" shall mean, with respect to any Series, any and all
right, title and interest of the Seller in, to and under:

           (a)    the Loans from time to time, including without limitation
     the Initial Loans as of the close of business on the Cut-Off Date and the
     Additional Loans as of the close of business on the related Addition
     Cut-Off Dates and all Scheduled Payments, other Collections and other funds
     received in respect of such Initial Loans and Additional Loans on or after
     the Cut-Off Date or Addition Cut-Off Date, as applicable, and any other
     monies due or to become due on or after the Cut-Off Date or Addition
     Cut-Off Date, as applicable, in respect of any such Loans, and any security
     therefor;

           (b)    (i) the Timeshare Properties relating to the Loans and (ii)
     the Title Clearing Agreements and the FairShare Plus Program (including
     without limitation the FairShare Plus Agreement) to the extent that they
     relate to such Timeshare Properties;

           (c)    any Mortgages relating to the Loans;

           (d)    any Insurance Policies relating to the Loans;

           (e)    the Loan Files and other Records relating to the Loans;

           (f)    the Loan Conveyance Documents relating to the Loans;

           (g)    all interest, dividends, cash, instruments, financial assets
     and other investment property and other property from time to time
     received, receivable or otherwise distributed in respect of, or in exchange
     for, or on account of, the sale or other disposition of the Transferred
     Assets, and including all payments under Insurance Policies (whether or not
     any of the Seller, the Purchaser, any Originator, the Master Servicer, the
     Issuer 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 Transferred Assets, and any security granted or purported to
     be granted in respect of any Transferred Assets; and

           (h)    all proceeds of any of the foregoing property described in
     clauses (a) through (g).

                                       16


     "TRENDWEST" shall mean Trendwest Resorts, Inc., a wholly-owned indirect
Subsidiary of Cendant.

     "TRUSTEE" shall mean Wachovia Bank, National Association, as Trustee under
the Indenture and Servicing Agreement, and its successors and assigns.

     "UCC" shall mean the Uniform Commercial Code, as amended from time to time,
as in effect in any specified jurisdiction.

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

     "VB PARTNERSHIPS" shall have the meaning set forth in the preamble.

     "VB SUBSIDIARIES" shall have the meaning set forth in the preamble.

SECTION 2.   PURCHASE AND SALE OF LOANS.

     The Seller may from time to time sell and assign to the Company, and the
Company may from time to time Purchase from the Seller, all the Seller's right,
title and interest in, to and under the Loans listed on the Loan Schedule with
respect to the related PA Supplement. The principal terms of the Purchase and
sale of Loans for each Series shall be set forth in the related PA Supplement.

SECTION 3.   POOL PURCHASE PRICE.

     Provisions with respect to the Purchase and sale of the Loans for each
Series shall be set forth in the related PA Supplement.

     The purchase price for any Additional Loans and other related Transferred
Assets (the "ADDITIONAL POOL PURCHASE PRICE") conveyed to the Company under this
Agreement and the related PA Supplement on each Addition Date shall be a dollar
amount equal to the aggregate outstanding principal balance of such Additional
Loans sold on such date, subject to adjustment to reflect such factors as the
Company and the Seller mutually agree will result in an Additional Pool Purchase
Price equal to the fair market value of such Additional Loans and other related
Transferred Assets.

SECTION 4.   PAYMENT OF PURCHASE PRICE.

           (a)    CLOSING DATES. On the terms and subject to the conditions of
this Agreement and the related PA Supplement, payment of the Pool Purchase Price
for each Series shall be made by the Company on the related Closing Date in
immediately available funds to the Seller to such accounts at such banks as the
Seller shall designate to the Company not less than one Business Day prior to
the such Closing Date.

           (b)    MANNER OF PAYMENT OF ADDITIONAL POOL PURCHASE PRICE. On the
terms and subject to the conditions in this Agreement and the related PA
Supplement, the Company shall pay to the Seller, on each Business Day on which
any Additional Loans are purchased from the Seller by the Company pursuant to
Section 2 of the related PA Supplement, the Additional Pool

                                       17


Purchase Price for such Additional Loans by paying such Additional Pool Purchase
Price to the Seller in cash.

           (c)    SCHEDULED PAYMENTS UNDER LOANS AND CUT-OFF DATE. The Company
shall be entitled to all Scheduled Payments, other Collections and all other
funds with respect to any Loan received on or after the related Cut-Off Date or
Addition Cut-Off Date, as applicable. The principal balance of each Loan as of
the related Cut-Off Date or Addition Cut-Off Date, as applicable, shall be
determined after deduction, in accordance with the terms of each such Loan, of
payments of principal received before such Cut-Off Date or Addition Cut-Off
Date.

SECTION 5.   CONDITIONS PRECEDENT TO SALE OF LOANS.

     No Purchase of Loans and related Transferred Assets shall be made hereunder
or under any PA Supplement on any date on which:

           (a)    the Company does not have sufficient funds available to pay
the related Pool Purchase Price or Additional Pool Purchase Price in cash; or

           (b)    an Insolvency Event has occurred and is continuing with
respect to the Seller or the Company.

SECTION 6.   REPRESENTATIONS AND WARRANTIES OF THE SELLER, FRI, FMB AND THE VB
             SUBSIDIARIES.

     (a)   GENERAL REPRESENTATIONS AND WARRANTIES OF THE SELLER, FRI, FMB AND
THE VB SUBSIDIARIES. The Seller, FRI, FMB and the VB Subsidiaries jointly and
severally represent and warrant as of each Closing Date and as of each Addition
Date, or as of such other date specified in such representation and warranty,
that:

           (i)    ORGANIZATION AND GOOD STANDING.

                  (A)   Each of the Seller, FRI, FMB and the VB Subsidiaries
           (other than the VB Partnerships) is a corporation duly organized,
           validly existing and in good standing under the laws of the state of
           its organization and has full corporate power, authority and legal
           right to own its properties and conduct its business as such
           properties are presently owned and such business is presently
           conducted, and to execute, deliver and perform its obligations under
           this Agreement, any related PA Supplement and each of the Facility
           Documents to which it is a party. Each of the Seller, FRI, FMB and
           the VB Subsidiaries (other than the VB Partnerships) is organized in
           the jurisdiction set forth in the preamble. Each of the Seller, FRI,
           FMB and the VB Subsidiaries (other than the VB Partnerships) is duly
           qualified to do business and is in good standing as a foreign
           corporation, and has obtained all necessary licenses and approvals in
           each jurisdiction in which failure to qualify or to obtain such
           licenses and approvals would render any Loan unenforceable by any of
           the Seller, FRI, FMB or the VB Subsidiaries (other than the VB
           Partnerships).

                                       18


                  (B)   Each of the VB Partnerships is a general partnership
           duly organized and validly existing under the laws of the State of
           Florida and has full power, authority and legal right to own its
           properties and conduct its business as such properties are presently
           owned and such business is presently conducted, and to execute,
           deliver and perform its obligations under this Agreement, any related
           PA Supplement and each of the Facility Documents to which it is a
           party. Each of the VB Partnerships is duly qualified to do business
           and is in good standing and has obtained all necessary licenses and
           approvals in each jurisdiction in which failure to qualify or to
           obtain such licenses and approvals would render any Loan
           unenforceable by any of the VB Partnerships.

                  (C)   The name of each of the Seller, FRI, FMB, and the VB
           Subsidiaries set forth in the preamble of this Agreement is the
           correct legal name of such entity, and such name has not been changed
           in the past six years (except that a predecessor corporation of the
           Seller, Fairfield Acceptance Corporation, was merged with and into
           the Seller on July 13, 1998 and FRI changed its name from Fairfield
           Communities, Inc. to Fairfield Resorts, Inc. on June 26, 200l). None
           of the Seller, FRI, FMB or the VB Subsidiaries utilizes any trade
           names, assumed names, fictitious names or "doing business names."

           (ii)   DUE AUTHORIZATION AND NO CONFLICT. The execution, delivery
     and performance by each of the Seller, FRI, FMB and the VB Subsidiaries of
     each of the Facility Documents to which it is a party, and the consummation
     by each such party of the transactions contemplated hereby and under each
     other Facility Document to which it is a party, has been duly authorized by
     the Seller, FRI, FMB and the VB Subsidiaries, respectively, by all
     necessary corporate or partnership action, does not contravene (i) the
     Seller's, FRI's, FMB's or the VB Subsidiaries' charter or by-laws or
     partnership agreement, (ii) any law, rule or regulation applicable to the
     Seller, FRI or FMB or the VB Subsidiaries, (iii) any contractual
     restriction contained in any material indenture, loan or credit agreement,
     lease, mortgage, deed of trust, security agreement, bond, note, or other
     material agreement or instrument binding on any of the Seller, FRI, FMB or
     the VB Subsidiaries or (iv) any order, writ, judgment, award, injunction or
     decree binding on or affecting the Seller, FRI, FMB, the VB Subsidiaries or
     their properties (except where such contravention would not have a Material
     Adverse Effect with respect to such Persons or properties), and do not
     result in (except as provided in the Facility Documents) or require the
     creation of any Lien upon or with respect to any of their properties; and
     no transaction contemplated hereby requires compliance with any bulk sales
     act or similar law. Each of the Facility Documents to which the Seller,
     FRI, FMB or the VB Subsidiaries is a party have been duly executed and
     delivered on behalf of the Seller, FRI, FMB or the VB Subsidiaries, as
     applicable. To the extent that this representation is being made with
     respect to Title I of ERISA or Section 4975 of the Code, it is made subject
     to the assumption that none of the assets being used to purchase the Loans
     and Transferred Assets constitute assets of any Benefit Plan or Plan with
     respect to which the Seller is a party in interest or disqualified person.

           (iii)  GOVERNMENTAL AND OTHER CONSENTS. All approvals,
     authorizations, consents or orders of any court or governmental agency or
     body required in connection

                                       19


     with the execution and delivery by the Seller, FRI, FMB or the VB
     Subsidiaries of this Agreement, any related PA Supplement or any of the
     other Facility Documents to which it is a party, the consummation by such
     party of the transactions contemplated hereby or thereby, the performance
     by such party of and the compliance by such party with the terms hereof or
     thereof, have been obtained, except where the failure so to do would not
     have a Material Adverse Effect with respect to such Party.

           (iv)   ENFORCEABILITY OF FACILITY DOCUMENTS. Each of the Facility
     Documents to which any of the Seller, FRI, FMB or the VB Subsidiaries is a
     party has been duly and validly executed and delivered by the Seller, FRI,
     FMB or the VB Subsidiaries, as applicable, and constitutes the legal, valid
     and binding obligation of the Seller, FRI, FMB or the VB Subsidiaries, as
     applicable, enforceable against it in accordance with its respective terms,
     except as enforceability may be subject to or limited by Debtor Relief Laws
     or by general principles of equity (whether considered in a suit at law or
     in equity).

           (v)    NO LITIGATION. Except as disclosed in Schedule 5 to this
     Agreement or to any Assignment, there are no proceedings or investigations
     pending, or to the knowledge of the Seller, FRI, FMB or the VB Subsidiaries
     threatened, against the Seller, FRI, FMB or the VB Subsidiaries before any
     court, regulatory body, administrative agency, or other tribunal or
     governmental instrumentality (A) asserting the invalidity of this Agreement
     or any of the other Facility Documents, (B) seeking to prevent the
     consummation of any of the transactions contemplated by this Agreement or
     any of the other Facility Documents, (C) seeking any determination or
     ruling that would adversely affect the performance by any of the Seller,
     FRI, FMB or the VB Subsidiaries of its obligations under this Agreement,
     any related PA Supplement or any of the other Facility Documents to which
     it is a party, (D) seeking any determination or ruling that would adversely
     affect the validity or enforceability of this Agreement or any of the other
     Facility Documents or (E) seeking any determination or ruling that would,
     if adversely determined, be reasonably likely to have a Material Adverse
     Effect with respect to such party.

           (vi)   GOVERNMENTAL REGULATIONS. Neither the Seller, FRI, FMB nor
     any of the VB Subsidiaries is (A) an "investment company" registered or
     required to be registered under the Investment Company Act of 1940, as
     amended, or (B) a "public utility company" or a "holding company," a
     "subsidiary company" or an "affiliate" of any public utility company within
     the meaning of Section 2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(ii) of the Public
     Utility Holding Company Act of 1935, as amended.

           (vii)  MARGIN REGULATIONS. Neither the Seller, FRI, FMB nor any of
     the VB Subsidiaries is engaged, principally or as one of its important
     activities, in the business of extending credit for the purpose of
     purchasing or carrying any margin stock (as each such term is defined or
     used in any of Regulations T, U or X of the Board of Governors of the
     Federal Reserve System). No part of the proceeds of any of the notes issued
     by the Issuer has been used by the Seller, FRI, FMB or any of the VB
     Subsidiaries for so purchasing or carrying margin stock or for any purpose
     that violates or would be inconsistent with the provisions of any of
     Regulations T, U or X of the Board of Governors of the Federal Reserve
     System.

                                       20


           (viii) LOCATION OF CHIEF EXECUTIVE OFFICE AND RECORDS. The principal
     place of business and chief executive office of FRI and FMB, and the office
     where FRI and FMB maintain all of their Records, is located at 8427 South
     Park Circle, Orlando, Florida 32819; the principal place of business and
     chief executive office of the Seller, and the office where the Seller
     maintains all of its Records, is 10750 West Charleston Blvd., Suite 130,
     Las Vegas, Nevada 89135; and the principal place of business and chief
     executive office of each of the VB Subsidiaries is located at 8427 South
     Park Circle, Orlando, Florida 32819. None of FRI, FMB, the VB Subsidiaries
     or the Seller has changed its principal place of business or chief
     executive office (or the office where such entity maintains all of its
     Records) during the previous six years (except that FRI and FMB changed
     their principal place of business and chief executive office from 8669
     Commodity Circle, Suite 200, Orlando, Florida 32819 to 8427 South Park
     Circle, Orlando, Florida 32819 on February 18, 2002; FAC changed its
     principal place of business and chief executive office from 11001 Executive
     Center Drive, Little Rock, Arkansas 72211 to 7730 West Sahara Avenue, Suite
     105, Las Vegas, Nevada 89117 in 1998, and from such address to the address
     set forth above in 2002; each of the VB Subsidiaries changed its principal
     place of business and chief executive office from 6400 North Andrews
     Avenue, Fort Lauderdale, Florida 33309 to the address set forth above in
     2001; Fairfield Acceptance Corporation, a predecessor corporation that was
     merged into the Seller, maintained its principal place of business and
     chief executive office (and all of its Records) in Pulaski County, Arkansas
     until July 13, 1998 and FRI changed its name from Fairfield Communities,
     Inc. to Fairfield Resorts, Inc. on June 26, 2001). At any time after the
     Initial Closing Date, upon 30 days' prior written notice to the Trustee as
     assignee of the Company and the Issuer, any of the Seller, FRI, FMB and the
     VB Subsidiaries may change its name or may change its type or its
     jurisdiction of organization to another jurisdiction within the United
     States and any of the VB Partnerships may change the location of its chief
     executive office, but only so long as all action necessary or reasonably
     requested by the Company to amend the existing financing statements and to
     file additional financing statements in all applicable jurisdictions to
     perfect the transfer of the Loans and the related Transferred Assets is
     taken.

           (ix)   LOCKBOX ACCOUNTS. Except in the case of any Lockbox Account
     pursuant to which only Collections in respect of Loans subject to a PAC or
     Credit Card Account are deposited, each of the Seller, FRI, FMB and the VB
     Subsidiaries, as applicable, has filed a standing delivery order with the
     United States Postal Service authorizing each Lockbox Bank to receive mail
     delivered to the related Post Office Box. The account numbers of all
     Lockbox Accounts, together with the names, addresses, ABA numbers and names
     of contact persons of all the Lockbox Banks maintaining such Lockbox
     Accounts and the related Post Office Boxes, are set forth in Schedule 4.
     From and after the Initial Closing Date, none of the Seller, FRI, FMB or
     the VB Subsidiaries shall have any right, title and/or interest in or to
     any of the Lockbox Accounts or the Post Office Boxes and will maintain no
     Lockbox accounts in their own names for the collection of payments in
     respect of the Loans. None of the Seller, FRI, FMB or the VB Subsidiaries
     has any lockbox or other accounts for the collection of payments in respect
     of the Loans other than the Lockbox Accounts.

                                       21


           (x)    FACILITY DOCUMENTS. This Agreement and any PA Supplement are
     the only agreements pursuant to which the Seller sells the Loans and other
     related Transferred Assets to the Company. Each of the Seller, FRI, FMB and
     the VB Subsidiaries has furnished to the Company true, correct and complete
     copies of each Facility Document to which any of the Seller, FRI, FMB and
     the VB Subsidiaries is a party, each of which is in full force and effect.
     None of the Seller, FRI, FMB, any of the VB Subsidiaries or any of its
     Affiliates (not including the Purchaser or the Issuer) is in default
     thereunder in any material respect.

           (xi)   TAXES. Each of the Seller, FRI, FMB and the VB Subsidiaries
     has timely filed or caused to be filed all federal, state and local tax
     returns required to be filed by it, and has paid or caused to be paid all
     taxes shown to be due and payable on such returns or on any assessments
     received by it, other than any taxes or assessments the validity of which
     are being contested in good faith by appropriate proceedings and with
     respect to which the Seller, FRI, FMB or any of the VB Subsidiaries, as
     applicable, has set aside adequate reserves on its books in accordance with
     GAAP, and which proceedings have not given rise to any Lien.

           (xii)  ACCOUNTING TREATMENT. Each of the Seller, FRI, FMB and the VB
     Subsidiaries has accounted for the transactions contemplated in the
     Facility Documents to which it is a party in accordance with GAAP.

           (xiii) ERISA. There has been no (A) occurrence or expected
     occurrence of any Reportable Event with respect to any Benefit Plan subject
     to Title IV of ERISA of FRI, FMB, the Seller or any ERISA Affiliate, or any
     withdrawal from, or the termination, Reorganization or Plan Insolvency of
     any Multiemployer Plan or (B) institution of proceedings or the taking of
     any other action by Pension Benefit Guaranty Corporation or by FRI, FMB,
     the Seller or any ERISA Affiliate or any such Multiemployer Plan with
     respect to the withdrawal from, or the termination, Reorganization or Plan
     Insolvency of, any such Plan.

           (xiv)  NO ADVERSE SELECTION. No selection procedures materially
     adverse to the Company, the Issuer, the Noteholders, the Trustee or the
     Collateral Agent have been employed by any of the Seller, FRI, FMB or the
     VB Subsidiaries in selecting the Loans for inclusion in the Loan Pool on
     such Closing Date or Addition Date, as applicable.

           (xv)   FAIRSHARE PLUS PROGRAM.

                  (A)   As of each Closing Date or any Addition Date, as
           applicable, for each Timeshare Property Regime for which the related
           Timeshare Properties are comprised primarily of UDIs, the RATIO of
           (1) the total number of Points actually allocated to such Timeshare
           Property Regime pursuant to the FairShare Plus Program for the
           succeeding twelve-month period TO (2) the total number of Points
           allocable to available space in such Timeshare Property Regime over
           such twelve-month period, does not exceed 1.0 to 1.0.

                                       22


                  (B)   On each Closing Date or any Addition Date, as
           applicable, for each owner of a UDI who is a member of the FairShare
           Plus Program, the RATIO, expressed as a percentage, of (1) the number
           of Points allocated to such owner in Timeshare Property Regime in
           return for assigning his Timeshare Property to the FairShare Plus
           Program trust TO (2) the total number of Points assigned to all UDI
           owners in such Timeshare Property Regime, does not exceed the
           percentage of such owner's undivided interest in such Timeshare
           Property Regime as described in such owner's Loan.

           (xvi)  [Reserved].

           (xvii) SEPARATE IDENTITY. Each of the Seller, FRI, the VB
     Subsidiaries and their respective Affiliates has observed the applicable
     legal requirements on its part for the recognition of the Company as a
     legal entity separate and apart from each of the Seller, FRI, the VB
     Subsidiaries and any of their respective Affiliates (other than the
     Company) and has taken all actions necessary on its part to be taken in
     order to ensure that the facts and assumptions relating to the Company set
     forth in the opinion of Orrick, Herrington & Sutcliffe LLP of even date
     herewith relating to substantive consolidation matters with respect to the
     Seller and the Company are true and correct; PROVIDED, HOWEVER, that none
     of the Seller, FRI, FMB or any of the VB Subsidiaries makes any
     representations or warranties in this Section 6(a)(xvii) with respect to
     the Company or the Issuer.

     (b)   REPRESENTATIONS AND WARRANTIES REGARDING THE LOANS. The Seller and
FRI jointly and severally represent and warrant to the Company as of the
applicable Cut-Off Date and Addition Cut-Off Date as to each Loan conveyed on
and as of each Closing Date or the related Addition Date, as applicable (except
as otherwise expressly stated) as follows:

           (i)    ELIGIBILITY. Such Loan is an Eligible Loan.

           (ii)   NO WAIVERS. The terms of such Loan have not been waived,
     altered, modified or extended in any respect other than (A) modifications
     entered into in accordance with Customary Practices and Credit Standards
     and Collections Policies that do not reduce the amount or extend the
     maturity of required Scheduled Payments and (B) modifications in the
     applicability of a PAC (which may result in a change in the related Loan
     Rate).

           (iii)  BINDING OBLIGATION. Such Loan is the legal, valid and binding
     obligation of the Obligor thereunder and is enforceable against the Obligor
     in accordance with its terms, except as such enforceability may be limited
     by Debtor Relief Laws or by general principles of equity (whether
     considered in a suit at law or in equity).

           (iv)   NO DEFENSES. Such Loan is not subject to any statutory right
     of rescission, setoff, counterclaim or defense, including without
     limitation the defense of usury.

           (v)    LAWFUL ASSIGNMENT. Such Loan was not originated in, and is
     not subject to the laws of, any jurisdiction the laws of which would make
     the transfer of the Loan under this Agreement or any PA Supplement
     unlawful.

                                       23


           (vi)   COMPLIANCE WITH LAW. The Originator and the Seller have
     complied with requirements of all material federal, state and local laws
     (including without limitation usury, truth in lending and equal credit
     opportunity laws) applicable to such Loan in all material respects. The
     related Timeshare Property Regime is in compliance with any and all
     applicable zoning and building laws and regulations and any other laws and
     regulations relating to the use and occupancy of such Timeshare Property
     Regime, except where such noncompliance would not have a Material Adverse
     Effect with respect to the applicable Originator and the Seller. None of
     the Seller, FRI, FMB or the VB Subsidiaries has received notice of any
     material violation of any legal requirements applicable to such Timeshare
     Property Regime, except where such violation would not have a Material
     Adverse Effect with respect to the applicable Originator and the Seller.
     The Timeshare Property Regime related to such Loan complies with all
     applicable state statutes, including without limitation condominium
     statutes, timeshare statutes, HUD filings relating to interstate land sales
     (if applicable) and the requirements of any governmental authority or local
     authority having jurisdiction with respect to such Timeshare Property
     Regime, and constitutes a valid and conforming condominium and timeshare
     regime under the laws of the State in which the related Resort is located,
     except where such noncompliance would not have a Material Adverse Effect
     with respect to the applicable Originator and the Seller.

           (vii)  LOAN IN FORCE; NO SUBORDINATION. Such Loan is in full force
     and effect and has not been subordinated, satisfied in whole or in part or
     rescinded.

           (viii) CAPACITY OF PARTIES. All parties to such Loan had legal
     capacity to execute the Loan.

           (ix)   ORIGINAL LOANS. All original executed copies of such Loans
     are in the custody of the Custodian, except to the extent otherwise
     permitted pursuant to Section 6(b)(xiv).

           (x)    LOAN FORM/GOVERNING LAW. Such Loan was executed in
     substantially the form of one of the forms of Loan in Exhibit D (as such
     Exhibit D may be amended from time to time with the consent of the Seller
     and the Company), except for changes required by applicable law and certain
     other modifications that do not, individually or in the aggregate, affect
     the enforceability or collectibility of such Loan. In addition, such Loan
     was originated in and is governed by the laws of the State in which the
     related Resort is located.

           (xi)   INTEREST IN REAL PROPERTY. The Timeshare Property underlying
     such Loan is an interest in real property consisting of either a Fixed Week
     or a UDI, and (except for a Timeshare Property that is a Green Timeshare
     Property) such Timeshare Property has been deeded to the Nominee pursuant
     to the terms of one of the Title Clearing Agreements or has been deeded to
     the related Obligor in accordance with the requirements of the related Loan
     and applicable law.

           (xii)  ENVIRONMENTAL COMPLIANCE. Each Timeshare Property Regime
     related to a Loan is now, and at all times during FRI's ownership thereof
     (or the ownership of any

                                       24


     Affiliate thereof other than the Company and the Issuer), has been free of
     contamination from any substance, material or waste identified as toxic or
     hazardous according to any federal, state or local law, rule, regulation or
     order governing, imposing standards of conduct with respect to, or
     regulating in any way the discharge, generation, removal, transportation,
     storage or handling of toxic or hazardous substances, materials or waste or
     air or water pollution (hereinafter referred to as "ENVIRONMENTAL LAWS"),
     including without limitation any PCB, radioactive substance, methane,
     asbestos, volatile hydrocarbons, petroleum products or wastes, industrial
     solvents or any other material or substance that now or hereafter may cause
     or constitute a health, safety or other environmental hazard to any person
     or property (any such substance together with any substance, material or
     waste identified as toxic or hazardous under any Environmental Law now in
     effect or hereinafter enacted shall be referred to herein as
     "CONTAMINANTS"), but excluding from the foregoing any levels of
     Contaminants at or below which such Environmental Laws do not apply ("DE
     MINIMUS LEVELS"). Neither FRI nor any Affiliate of FRI (other than the
     Company and the Issuer) has caused or suffered to occur any discharge,
     spill, uncontrolled loss or seepage of any petroleum or chemical product or
     any Contaminant (except for De Minimus Levels thereof) onto any property
     comprising or adjoining any Timeshare Property Regime, and neither FRI nor
     any Affiliate of FRI (other than the Company and the Issuer) nor any
     Obligor or occupant of all or part of any Timeshare Property Regime is now
     or has been involved in operations at the related Timeshare Property Regime
     that could lead to liability for FRI, the Company, any Affiliate of FRI or
     any other owner of such Timeshare Property Regime or the imposition of a
     Lien on such Timeshare Property Regime under any Environmental Law. No
     practice, procedure or policy employed by FRI (or any Affiliate thereof
     other than the Company and the Issuer) with respect to POAs for which FRI
     acts as the manager or, to the best knowledge of the Seller, by the manager
     of the POAs with respect to POAs managed by parties unaffiliated with FRI,
     violates any Environmental Law that, if enforced, would reasonably be
     expected to (A) have a Material Adverse Effect on such POA or the ability
     of such POA to do business, (B) have a Material Adverse Effect on the
     financial condition of the POA or (C) constitute grounds for the revocation
     of any license, charter, permit or registration that is material to the
     conduct of the business of the POA.

           Except as set forth in Schedule 3, (1) all property owned, managed,
     or controlled by FRI or any Affiliate of FRI (other than the Company and
     the Issuer) and located within a Resort is now, and at all times during
     FRI's ownership, management or control thereof (or the ownership,
     management or control of any Affiliate thereof (other than the Company and
     the Issuer)) has been free of contamination from any Contaminants, except
     for De Minimus Levels thereof, (2) neither FRI nor any Affiliate of FRI
     (other than the Company and the Issuer) has caused or suffered to occur any
     discharge, spill, uncontrolled loss or seepage of any Contaminants onto any
     property comprising or adjoining any of the Resorts, except for De Minimus
     Levels thereof, and (3) neither FRI nor any Affiliate of FRI (other than
     the Company and the Issuer) nor any Obligor or occupant of all or part of
     any of any Resort is now or previously has been involved in operations at
     any Resort that could lead to liability for FRI, the Company, any Affiliate
     of FRI or any other owner of any Resort or the imposition of a Lien on such
     Resort under any Environmental Law. None of the matters set forth in
     Schedule 3 will have a Material Adverse Effect with respect to the Company
     or its assignees or the interests of

                                       25


     the Company or its assignees in the Loans. Each Resort, and the present use
     thereof, does not violate any Environmental Law in any manner that would
     materially adversely affect the value or use of such Resort or the
     performance by the POAs of their respective obligations under their
     applicable declarations, articles or similar charter documents. There is no
     condition presently existing, and to the best knowledge of FRI and the
     Seller no event has occurred or failed to occur with respect to any Resort,
     relating to any Contaminants or compliance with any Environmental Laws that
     would reasonably be expected to have a Materially Adverse Effect with
     respect to such Resort, including in connection with the present use of
     such Resort.

           (xiii) TAX LIENS. All taxes applicable to such Loan and the related
     Timeshare Property have been paid, except where the failure to pay such tax
     would not have a Material Adverse Effect with respect to the Seller or its
     assignees or the Purchaser or the collectibility or enforceability of the
     Loan. There are no delinquent tax liens in respect of the Timeshare
     Property underlying such Loan.

           (xiv)  LOAN FILES. The related Loan File contains the following Loan
     Documents (which may include microfiche or other electronic copies of the
     Loan Documents to the extent provided in the Custodial Agreement):

                  (A)   for Loans other than Loans described in clause (B)
           below, at least one original of each Loan (or, if the Loan and
           promissory note are contained in separate documents, an original of
           the promissory note); PROVIDED, HOWEVER, that the original Loan may
           have been removed from the Loan File in accordance with the Custodial
           Agreement for the performance of collection services and other
           routine servicing requirements; and

                  (B)   for Loans relating to Timeshare Properties located in
           Resorts in North Carolina or South Carolina with respect to which two
           originals of such Loans have been executed, each original Loan is in
           the Loan File, and each contains the following legend (whether by
           stamp or otherwise) on its face:

                  "THIS COPY IS ONE OF TWO ORIGINALS, AND WAS EXECUTED SOLELY
           FOR RECORDATION. TO THE EXTENT THAT POSSESSION OF THIS CONTRACT IS
           REQUIRED TO TRANSFER OR PERFECT A TRANSFER OF ANY INTEREST IN OR TO
           THIS CONTRACT, POSSESSION OF THE OTHER ORIGINAL HEREOF IS REQUIRED";

           and

                  (C)   for Loans with respect to which the related Timeshare
           Property has been deeded out to the related Obligor:

                  (1)   a copy of the deed for such Timeshare Property; and

                  (2)   the original recorded Mortgage (or a copy thereof, if
           applicable, for Mortgages that have been submitted for recording as
           set forth herein) and Assignments of Mortgages in favor of the
           Collateral Agent (or a copy of such

                                       26


           recorded Mortgage or Assignment of Mortgage, as the case may be,
           certified to be a true and complete copy thereof, if the original of
           the recorded Mortgage or Assignment of Mortgage is lost or
           destroyed), PROVIDED that in the case of any Loan with respect to
           which the related Mortgage and/or deed has been removed from the Loan
           File for recording in the local real property recording office: (x)
           the original Mortgage shall not have been at such real property
           recording office more than (1) 180 days from the related loan closing
           date (in the case of Loans (other than Green Loans) relating to
           Timeshare Properties located in the State of Florida) or (2) 180 days
           from the date on which the related Timeshare Property is required to
           be deeded to an Obligor (in the case of Green Loans or Loans relating
           to Timeshare Properties located in any other State) and (y) in the
           case of any Loan (other than a Green Loan) relating to a Timeshare
           Property located in the State of Florida, the Loan File shall contain
           one or more certificates from FRI's applicable title agents in
           Florida to the effect that the related Mortgage has been delivered
           for purposes of recordation to the appropriate local real property
           recording office.

           (xv)   LOCKBOX ACCOUNTS. As of the applicable Cut-Off Date, the
     Obligor of such Loan either:

                  (A)   shall have been instructed to remit Payments thereunder
           to a Post Office Box for credit to a Lockbox Account or directly to a
           Lockbox Account, in each case maintained at a Lockbox Bank pursuant
           to the terms of a Lockbox Agreement; or

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

           (xvi)  OWNERSHIP INTEREST. As of the Closing Date or related
     Addition Date, as applicable, the Seller has good and marketable title to
     the Loan, free and clear of all Liens (other than Permitted Encumbrances).

           (xvii) INTEREST IN LOAN. Such Loan constitutes either a "general
     intangible," an "instrument," "chattel paper" or an "account" under the
     Uniform Commercial Code of the States of Delaware, Florida and New York.

           (xviii) RECORDATION OF ASSIGNMENTS. The collateral Assignment of
     Mortgage to the Collateral Agent relating to the Mortgage with respect to
     each Loan has been recorded or delivered for recordation simultaneously
     with the related Mortgage to the proper office in the jurisdiction in which
     the related Timeshare Property is located, except to the extent the related
     Timeshare Property is located in the State of Florida and the Seller shall
     have delivered an Opinion of Counsel to the effect that recordation of the
     Assignment of Mortgage is not necessary to perfect a security interest
     therein in favor of the Collateral Agent.

                                       27


           (xix)  MATERIAL DISPUTES. To the actual knowledge of the Seller, the
     Loan is not subject to any material dispute.

           (xx)   GOOD TITLE; NO LIENS. Upon the Purchase hereunder occurring
     on such Closing Date or Addition Date, as applicable, the Company will be
     the lawful owner of, and have good title to, each Loan and all of the other
     related Transferred Assets that are the subject of such Purchase, free and
     clear of any Liens (other than any Permitted Encumbrances on the related
     Timeshare Properties). All Loans and related Transferred Assets are
     purchased without recourse to any of the Seller, FRI, FMB or the VB
     Subsidiaries except as described in this Agreement and any PA Supplement.
     Such Purchase by the Company under this Agreement and under any PA
     Supplement constitutes a valid and true sale and transfer for consideration
     (and not merely the grant of a security interest to secure a loan),
     enforceable against creditors of each of the Seller, FRI, FMB and the VB
     Subsidiaries, and no Loan or other related Transferred Assets that are the
     subject of such Purchase will constitute property of the Seller after such
     Purchase.

           (xxi)  SOLVENCY. Each of the Seller, FRI, FMB and the VB
     Subsidiaries, both prior to and immediately after giving effect to the
     Purchase of Loans hereunder and under any PA Supplement occurring on such
     Closing Date or Addition Date, as applicable, (A) is not insolvent (as such
     term is defined in Section 101(32)(A) of the Bankruptcy Code), (B) is able
     to pay its debts as they become due and (C) does not have unreasonably
     small capital for the business in which it is engaged or for any business
     or transaction in which it is about to engage.

           (xxii) POA RESERVES. The capital reserves and maintenance fee levels
     of the POAs related to each Timeshare Property Regime underlying the Loans
     Purchased on such Closing Date or Addition Date, as applicable, are
     adequate in light of the operating requirements of such POAs.

     (c)   REPRESENTATIONS AND WARRANTIES REGARDING THE LOAN FILES. The
Seller and FRI jointly and severally represent and warrant to the Company as of
each Closing Date and related Addition Date as to each Loan and the related Loan
File conveyed by it hereunder on and as of such Closing Date or related Addition
Date, as applicable (except as otherwise expressly stated) as follows:

           (i)    POSSESSION. On or immediately prior to each Closing Date or
     related Addition Date, as applicable, the Custodian will have possession of
     each original Loan and the related Loan File, and will have acknowledged
     such receipt and its undertaking to hold such original Loan and the related
     Loan File for purposes of perfection of the Collateral Agent's interest in
     such original Loan and the related Loan File; PROVIDED, HOWEVER, that the
     fact that any document not required to be in its respective Loan File
     pursuant to Section 6(b)(xiv) of this Agreement is not in the possession of
     the Custodian in its respective Loan File does not constitute a breach of
     this representation.

           (ii)   MARKING RECORDS. On or before each Closing Date or Addition
     Date, as applicable, the Seller shall have caused the portions of its
     computer files relating to the Loans sold on such date to the Company to be
     clearly and unambiguously marked to indicate that each such Loan has been
     conveyed on such date to the Company.

                                       28


     (d)   SURVIVAL OF REPRESENTATIONS AND WARRANTIES. It is understood and
agreed that the representations and warranties contained in this Section 6 shall
remain operative and in full force and effect, shall survive the transfer and
conveyance of the Loans with respect to any Series by the Seller to the Company
under this Agreement and any PA Supplement, the conveyance of the Loans by the
Company to the Issuer pursuant to the Pool Purchase Agreement and any PPA
Supplement and the Grant of the Collateral by the Issuer to the Collateral Agent
and shall inure to the benefit of the Company, the Issuer, the Trustee, the
Collateral Agent and the Noteholders and their respective designees, successors
and assigns.

     (e)   INDEMNIFICATION OF THE COMPANY. FMB, each VB Subsidiary and FRI
shall jointly and severally indemnify, defend and hold harmless the Company
against any and all claims, losses and liabilities, including reasonable
attorneys' fees (the foregoing being collectively referred to as "INDEMNIFIED
AMOUNTS") that may at any time be imposed on, incurred by or asserted against
the Company as a result of a breach by any of FMB, any VB Subsidiary or FRI of
any of its respective representations, warranties or covenants hereunder. Except
as otherwise provided in Section 11(i), FRI shall pay to the Company, on demand,
any and all amounts necessary to indemnify the Company for (i) any and all
recording and filing fees in connection with the transfer of the Loans from the
Seller to the Company, and any and all liabilities with respect to, or resulting
from any delay in paying when due, any taxes (including sales, excise or
property taxes) payable in connection with the transfer of the Loans from the
Seller to the Company and (ii) costs, expenses and reasonable counsel fees in
defending against the same. The agreements in this Section 6(e) shall survive
the termination of this Agreement or any PA Supplement and the payment of all
amounts payable hereunder, under any PA Supplement and under the Loans. For
purposes of this Section 6(e), any reference to the Company shall include any
officer, director, employee or agent thereof, or any successor or assignee
thereof or of the Company.

SECTION 7.   REPURCHASES OR SUBSTITUTION OF LOANS FOR BREACH OF REPRESENTATIONS
             AND WARRANTIES.

     Provisions with respect to the repurchase or substitution of Loans of any
Series for breach of representations and warranties under this Agreement and any
PA Supplement shall be set forth in the related PA Supplement.

SECTION 8.   COVENANTS OF THE SELLER AND FRI.

           (a)    AFFIRMATIVE COVENANTS OF THE SELLER AND FRI. Each of the
Seller and FRI covenants and agrees that it will, at any time prior to the
Termination Date:

             (i)      COMPLIANCE WITH LAWS, ETC. Comply in all material respects
     with all applicable laws, rules, regulations and orders with respect to it,
     its business and properties, provisions of ERISA, the Internal Revenue Code
     and all applicable regulations and interpretations thereunder, and all
     Loans and Facility Documents to which it is a party.

             (ii)     PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain
     its corporate existence, rights, franchises and privileges in the
     jurisdiction of its incorporation, and qualify and remain qualified in good
     standing as a foreign corporation, and maintain all

                                       29


     necessary licenses and approvals in each jurisdiction in which it does
     business, except where the failure to preserve and maintain such existence,
     rights, franchises, privileges, qualifications, licenses and approvals
     would not have a Material Adverse Effect with respect to it.

             (iii)    AUDITS. Upon at least two Business Days notice during
     regular business hours, permit the Company and/or its agents,
     representatives or assigns access:

                      (A)   to the offices and properties of the Seller or FRI
             in order to examine and make copies of and abstracts from all
             books, correspondence and Records of the Seller or FRI as
             appropriate to verify the Seller's or FRI's compliance with this
             Agreement, any PA Supplement or any other Facility Documents to
             which the Seller or FRI is a party and any other agreement
             contemplated hereby or thereby, and the Company and/or its agents,
             representatives and assigns may examine and audit the same and make
             photocopies, computer tapes or other computer replicas thereof, as
             appropriate, and each of the Seller and FRI will provide to the
             Company and/or its agents, representatives and assigns, at the
             expense of the Seller and FRI, such clerical and other assistance
             as may be reasonably requested in connection therewith; and

                      (B)   to the officers or employees of the Seller or FRI
             designated by the Seller or FRI, as applicable, in order to discuss
             matters relating to the Loans and the performance of the Seller or
             FRI hereunder, under any PA Supplement or any other Facility
             Documents to which the Seller or FRI is a party and any other
             agreement contemplated hereby or thereby, and under the other
             Facility Documents to which it is a party with the officers or
             employees of the Seller and FRI having knowledge of such matters.

             Each such audit shall be at the sole expense of the Seller and FRI.
     The Company shall be entitled to conduct such audits as frequently as it
     deems reasonable in the exercise of the Company's reasonable commercial
     judgment; PROVIDED, HOWEVER, that such audits shall not be conducted more
     frequently than annually unless an Event of Default or an Amortization
     Event shall have occurred. The Company and its agents, representatives and
     assigns also shall have the right to discuss the Seller's and FRI's affairs
     with the officers, employees and independent accountants of the Seller and
     FRI and to verify under appropriate procedures the validity, amount,
     quality, quantity, value and condition of, or any other matter relating to,
     the Loans and other related Transferred Assets.

             (iv)     [Reserved].

             (v)      PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND LOANS. At
     its expense, timely and fully perform and comply in all material respects
     with the Credit Standards and Collection Policies and Customary Practices
     with respect to the Loans and with all provisions, covenants and other
     promises required to be observed by the Seller or FRI under the Loans.

                                       30


             (vi)     [Reserved].

             (vii)    OWNERSHIP INTEREST. Take such action with respect to each
     Loan as is necessary to ensure that the Company maintains a first priority
     ownership interest in such Loan and the other related Transferred Assets,
     in each case free and clear of any Liens arising through or under the
     Seller or FRI and, in the case of any Timeshare Properties, other than any
     Permitted Encumbrance thereon, and respond to any inquiries with respect to
     ownership of a Loan sold by it hereunder by stating that, from and after
     the Initial Closing Date or related Addition Date, as applicable, it is no
     longer the owner of such Loan and that ownership of such Loan has been
     transferred to the Company.

             (viii)   INSTRUMENTS. Not remove any portion of the Loans or
     related Transferred Assets with respect to any Series that consists of
     money or is evidenced by an instrument, certificate or other writing from
     the jurisdiction in which it was held under the related Custodial Agreement
     unless the Company shall have first received an Opinion of Counsel to the
     effect that the Company shall continue to have a first-priority perfected
     ownership or security interest with respect to such property after giving
     effect to such action or actions.

             (ix)     NO RELEASE. Not take any action, and use its best efforts
     not to permit any action to be taken by others, that would release any
     Person from such Person's covenants or obligations under any document,
     instrument or agreement relating to the Loans or the other Transferred
     Assets, or result in the hypothecation, subordination, termination or
     discharge of, or impair the validity or effectiveness of, any such
     document, instrument or agreement, except as expressly provided in this
     Agreement or any PA Supplement or such other instrument or document.

             (x)      INSURANCE AND CONDEMNATION.

                      (A)   FRI (1) shall with respect to each Resort which it
             develops or which is developed by its subsidiaries (other than the
             Purchaser or the Issuer), cause the governing document of each such
             POA at the time of creation to contain covenants requiring
             insurance as described in this paragraph and (2) so long as FRI or
             an Affiliate (other than the Purchaser or the Issuer) maintains
             primary or substantial responsibility for the management,
             administration or other services of a similar nature with respect
             to such Resort, FRI shall do or cause to be done all things which
             it may accomplish with a reasonable amount of cost or effort to
             cause each POA to maintain the insurance described in this
             paragraph. The insurance referred to clauses in (1) and (2) above
             is "all-risk" property and general liability insurance with
             financially sound and reputable insurers providing coverage in
             scope and amount that (x) satisfy the requirements of the
             declarations (or any similar charter document) governing the POA
             for the maintenance of such insurance policies and (y) are at least
             consistent with the scope and amount of such insurance coverage
             obtained by prudent POAs and/or management of other similar
             developments in the same jurisdiction. So long as FRI or an
             Affiliate other than the Purchaser or the Issuer maintains primary
             or substantial responsibility for the management, administration or
             other services of a similar

                                       31


             nature with respect to such Resort and possesses the right to
             direct the application of insurance proceeds, FRI shall use its
             best efforts to apply the proceeds of any such insurance policies
             in the manner specified in the related declarations (or any similar
             charter document) governing the POA and/or any similar charter
             documents of such POA (which exercise of best efforts shall include
             voting as a member of the POA or as a proxy or attorney-in-fact for
             a member). For the avoidance of doubt, the parties acknowledge that
             the ultimate discretion and control relating to the maintenance of
             any such insurance policies is vested in the POA in accordance with
             the respective declaration (or any similar charter document)
             relating to each Timeshare Property Regime.

                      (B)   Each of FAC and FRI shall remit to the Collection
             Account the portion of any proceeds received pursuant to a
             condemnation of property in any Resort relating to any Timeshare
             Property to the extent the Obligors are required to make such
             remittance under the terms of one or more Loans that have been sold
             to the Company hereunder and under the related PA Supplement.

             (xi)     SEPARATE IDENTITY. Take such action (and cause FMB and the
     VB Subsidiaries to take such action) as is necessary to ensure compliance
     with Section 6(a)(xvii), including taking all actions necessary on its part
     to be taken in order to ensure that the facts and assumptions relating to
     the Company set forth in the opinion of Orrick, Herrington & Sutcliffe LLP
     of even date herewith relating to substantive consolidation matters with
     respect to the Seller and the Company are true and correct.

             (xii)    COMPUTER FILES. Mark or cause to be marked each Loan in
     its computer files as described in Section 6(c)(ii) and deliver to the
     Company, the Issuer, the Trustee and the Collateral Agent a copy of the
     Loan Schedule for each Series as amended from time to time.

             (xiii)   TAXES. File or cause to be filed, and cause each of its
     Affiliates with whom it shares consolidated tax liability to file, all
     federal, state and local tax returns that are required to be filed by it,
     except where the failure to file such returns could not reasonably be
     expected to have a Material Adverse Effect with respect to the Purchaser,
     the Seller or FRI, or otherwise be reasonably expected to expose the
     Purchaser, the Seller or FRI to material liability. Each of the Seller and
     FRI will pay or cause to be paid all taxes shown to be due and payable on
     such returns or on any assessments received by it, other than any taxes or
     assessments the validity of which are being contested in good faith by
     appropriate proceedings and with respect to which the Seller, FRI or the
     applicable Affiliate has set aside adequate reserves on its books in
     accordance with GAAP, and which proceedings could not reasonably be
     expected to have a Material Adverse Effect with respect to the Purchaser,
     the Seller or FRI, or otherwise be reasonably expected to expose the
     Purchaser, the Seller or FRI to material liability.

             (xiv)    FACILITY DOCUMENTS. Comply in all material respects with
     the terms of, and employ the procedures outlined under, this Agreement, any
     PA Supplement and all other Facility Documents to which it is a party, and
     take all such action as may be from

                                       32


     time to time reasonably requested by the Company to maintain this
     Agreement, any PA Supplement and all such other Facility Documents in full
     force and effect.

             (xv)     LOAN SCHEDULE. With respect to any Series, promptly amend
     the applicable Loan Schedule to reflect terms or discrepancies that become
     known after each Closing Date or any Addition Date, and promptly notify the
     Company, the Issuer, the Trustee and the Collateral Agent of any such
     amendments.

             (xvi)    SEGREGATION OF COLLECTIONS. Prevent, to the extent within
     its control, the deposit into the Collection Account or any Reserve Account
     of any funds other than Collections in respect of the Loans with respect to
     any Series, and to the extent that, to its knowledge, any such funds are
     nevertheless deposited into the Collection Account or any Reserve Account,
     promptly identify any such funds to the Master Servicer for segregation and
     remittance to the owner thereof.

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

     (b)     NEGATIVE COVENANTS OF THE SELLER AND FRI. Each of the Seller and
FRI covenants and agrees that it will not, at any time prior to the final Series
Termination Date without the prior written consent of the Company:

             (i)      SALES, LIENS, ETC. AGAINST LOANS AND TRANSFERRED ASSETS.
     Except for the transfers hereunder, sell, assign (by operation of law or
     otherwise) or otherwise dispose of, or create or suffer to exist, any Lien
     arising through or under it (other than, in the case of any Timeshare
     Properties, any Permitted Encumbrances thereon) upon or with respect to any
     Loan or other Transferred Asset or any interest therein. Each of FRI and
     the Seller shall immediately notify the Company of the existence of any
     Lien arising through or under it on any Loan or other Transferred Asset.

             (ii)     EXTENSION OR AMENDMENT OF LOAN TERMS. Extend, amend, waive
     or otherwise modify the terms of any Loan (other than as a result of a
     Timeshare Upgrade or in accordance with Customary Practices) or permit the
     rescission or cancellation of any Loan, whether for any reason relating to
     a negative change in the related Obligor's creditworthiness or inability to
     make any payment under the Loan or otherwise.

             (iii)    CHANGE IN BUSINESS OR CREDIT STANDARDS OR COLLECTION
     POLICIES. (A) Make any change in the character of its business or (B) make
     any change in the Credit Standards and Collection Policies or (C) deviate
     from the exercise of Customary Practices, which change or deviation would,
     in any such case, materially impair the value or collectibility of any
     Loan.

                                       33


             (iv)     CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Add or
     terminate any bank as a bank holding any account for the collection of
     payments in respect of the Loans from those listed in Exhibit E or make any
     change in its instructions to Obligors regarding payments to be made to any
     Lockbox Account at a Lockbox Bank, unless the Company and the Trustee shall
     have received (A) 30 days' prior written notice of such addition,
     termination or change, (B) written confirmation from the Seller or FRI
     that, after the effectiveness of any such termination, there will be at
     least one Lockbox in existence and (C) prior to the date of such addition,
     termination or change, (1) executed copies of Lockbox Agreements executed
     by each new Lockbox Bank, the Seller, the Company, the Master Servicer and
     the Trustee and (2) copies of all agreements and documents signed by either
     the Company or the respective Lockbox Bank with respect to any new Lockbox
     Account.

             (v)      CHANGE IN CORPORATE NAME, ETC. Make any change to its name
     or its type or jurisdiction of organization (or, in the case of the VB
     Partnerships, change the location of its chief executive office) that
     existed on the Initial Closing Date without providing at least 30 days'
     prior written notice to the Company and the Trustee and taking all action
     necessary or reasonably requested by the Trustee to amend its existing
     financing statements and file additional financing statements in all
     applicable jurisdictions as are necessary to maintain the perfection of the
     security interest of the Company.

             (vi)     ERISA MATTERS. (A) Engage or permit any ERISA Affiliate to
     engage in any prohibited transaction for which an exemption is not
     available or has not previously been obtained from the U.S. Department of
     Labor; (B) permit to exist any accumulated funding deficiency (as defined
     in Section 302(a) of ERISA and Section 412(a) of the Internal Revenue Code)
     or funding deficiency with respect to any Benefit Plan other than a
     Multiemployer Plan; (C) fail to make any payments to any Multiemployer Plan
     that the Seller, FRI or any ERISA Affiliate may be required to make under
     the agreement relating to such Multiemployer Plan or any law pertaining
     thereto; (D) terminate any Benefit Plan so as to result in any liability;
     (E) permit to exist any occurrence of any Reportable Event that represents
     a material risk of a liability of the Seller, FRI or any ERISA Affiliate
     under ERISA or the Internal Revenue Code; PROVIDED, HOWEVER, that the ERISA
     Affiliates of the Seller and FRI may take or allow such prohibited
     transactions, accumulated funding deficiencies, payments, terminations and
     Reportable Events described in clauses (A) through (E) above so long as
     such events occurring within any fiscal year of the Seller or FRI, in the
     aggregate, involve a payment of money by or an incurrence of liability of
     any such ERISA Affiliate (collectively, "ERISA LIABILITIES") in an amount
     that does not exceed $2,000,000 or otherwise result in liability that would
     result in imposition of a lien.

             (vii)    TERMINATE OR REJECT LOANS. Without limiting the
     requirements of Section 8(b)(ii), terminate or reject any Loan prior to the
     end of the term of such Loan, whether such rejection or early termination
     is made pursuant to an equitable cause, statute, regulation, judicial
     proceeding or other applicable law unless, prior to such termination or
     rejection, such Loan and any related Transferred Assets have been
     repurchased by the Seller pursuant to Section 7 of the related PA
     Supplement.

                                       34


             (viii)   FACILITY DOCUMENTS. Except as otherwise permitted under
     Section 8(b)(ii), (A) terminate, amend or otherwise modify any Facility
     Document to which it is a party or grant any waiver or consent thereunder
     or (B) terminate, amend or otherwise modify the FairShare Plus Agreement;
     PROVIDED, HOWEVER, that (1) the Title Clearing Agreements may be amended
     for the purposes of (x) making additional properties subject thereto, (y)
     making an Affiliate of FRI a party thereto having the same rights and
     obligations thereunder as FRI or (z) identifying a separate pool of loans
     (which shall not include Loans sold to the Company hereunder) to be sold or
     pledged to secure debt under a pooling or financing arrangement similar to
     that evidenced by the Indenture and Servicing Agreement, and (2) the
     FairShare Plus Agreement may be amended from time to time (x) to substitute
     or add additional parties thereto, (y) to comply with state and federal
     laws or regulations or (z) for any other purpose, PROVIDED that with
     respect to this Section 8(b)(viii), FRI or the Seller furnishes to the
     Company, the Issuer and the Trustee an Opinion of Counsel to the effect
     that such amendment or modification will not adversely affect in any
     material respect the respective interests of the Company, the Issuer, the
     Trustee or the Collateral Agent (if applicable) in the Loans and other
     Transferred Assets.

             (ix)     INSOLVENCY PROCEEDINGS. Institute Insolvency Proceedings
     with respect to the Company or the Issuer or consent to the institution of
     Insolvency Proceedings against the Company or the Issuer, or take any
     corporate action in furtherance of any such action.

SECTION 9.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company represents and warrants as of each Closing Date and Addition
Date, or as of such other date specified in such representation and warranty,
that:

           (a)    The Company is a limited liability company duly formed,
validly existing and in good standing under the laws of the State of Delaware
and has full limited liability company power, authority, and legal right to own
its properties and conduct its business as such properties are presently owned
and as such business is presently conducted, and to execute, deliver and perform
its obligations under this Agreement and any PA Supplement. The Company is duly
qualified to do business and is in good standing as a foreign entity, and has
obtained all necessary licenses and approvals in each jurisdiction necessary to
carry on its business as presently conducted and to perform its obligations
under this Agreement and any PA Supplement. One hundred percent (100%) of the
outstanding membership interests of the Company is directly owned (both
beneficially and of record) by FAC. Such membership interests are validly
issued, fully paid and nonassessable and there are no options, warrants or other
rights to acquire membership interests from the Company.

           (b)    The execution, delivery and performance of this Agreement and
any PA Supplement by the Company and the consummation by the Company of the
transactions provided for in this Agreement and any PA Supplement have been duly
approved by all necessary limited liability company action on the part of the
Company.

           (c)    This Agreement and any PA Supplement constitutes the legal,
valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except as

                                       35


such enforceability may be subject to or limited by Debtor Relief Laws and
except as such enforceability may be limited by general principles of equity.

           (d)    The execution and delivery by the Company of this Agreement
and any PA Supplement, the performance by the Company of the transactions
contemplated hereby and the fulfillment by the Company of the terms hereof
applicable to the Company will not conflict with, violate, result in any breach
of the material terms and provisions of, or constitute (with or without notice
or lapse of time or both) a material default under any provision of any existing
law or regulation or any order or decree of any court applicable to the Company
or its certificate of formation or limited liability company agreement or any
material indenture, contract, agreement, mortgage, deed of trust, or other
material instrument to which the Company is a party or by which it or its
properties is bound.

           (e)    There are no proceedings or investigations pending, or to the
knowledge of the Company threatened, against the Company before any court,
regulatory body, administrative agency, or other tribunal or governmental
instrumentality (A) asserting the invalidity of this Agreement or any PA
Supplement, (B) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or any PA Supplement, (C) seeking any
determination or ruling that, in the reasonable judgment of the Company, would
adversely affect the performance by the Company of its obligations under this
Agreement or any PA Supplement or (D) seeking any determination or ruling that
would adversely affect the validity or enforceability of this Agreement or any
PA Supplement.

           (f)    All approvals, authorizations, consents, orders or other
actions of any person or entity or any governmental body or official required in
connection with the execution and delivery of this Agreement and any PA
Supplement by the Company, the performance by it of the transactions
contemplated hereby and the fulfillment by it of the terms hereof, have been
obtained and are in full force and effect.

           (g)    The Company is solvent and will not become insolvent
immediately after giving effect to the transactions contemplated by this
Agreement and any PA Supplement, the Company has not incurred debts beyond its
ability to pay and, immediately after giving effect to the transactions
contemplated by this Agreement and any PA Supplement, the Company shall have an
adequate amount of capital to conduct its business in the foreseeable future.

SECTION 10.  COVENANTS OF THE COMPANY.

             The Company hereby acknowledges that the parties to the Facility
Documents are entering into the transactions contemplated by the Facility
Documents in reliance upon the Company's identity as a legal entity separate
from the Seller, FRI, the VB Subsidiaries and their respective Affiliates. From
and after the date hereof until the final Series Termination Date under any
Indenture Supplement, the Company will take such actions as shall be required in
order that:

             (a)   The Company will conduct its business in office space
allocated to it and for which it pays an appropriate rent and overhead
allocation;

                                       36


             (b)   The Company will maintain corporate records and books of
account separate from those of the Seller, FRI, the VB Subsidiaries and their
respective Affiliates and telephone numbers and stationery that are separate and
distinct from those of the Seller, FRI, the VB Subsidiaries and their respective
Affiliates;

             (c)   The Company's assets will be maintained in a manner that
facilitates their identification and segregation from those of any of the
Seller, FRI, the VB Subsidiaries and their respective Affiliates;

             (d)   The Company will observe corporate formalities in its
dealings with the public and with the Seller, FRI, the VB Subsidiaries and their
respective Affiliates and, except as contemplated by the Facility Documents,
funds or other assets of the Company will not be commingled with those of any of
the Seller, FRI, the VB Subsidiaries and their respective Affiliates. The
Company will at all times, in its dealings with the public and with the Seller,
FRI, the VB Subsidiaries and their respective Affiliates, hold itself out and
conduct itself as a legal entity separate and distinct from the Seller, FRI, the
VB Subsidiaries and their respective Affiliates. The Company will not maintain
joint bank accounts or other depository accounts to which any of the Seller,
FRI, the VB Subsidiaries and their respective Affiliates (other than the Master
Servicer) has independent access;

             (e)   The duly elected board of directors of the Company and duly
appointed officers of the Company will at all times have sole authority to
control decisions and actions with respect to the daily business affairs of the
Company;

             (f)   Not less than one member of the Company's board of directors
will be an Independent Director. The Company will observe those provisions in
its limited liability company agreement that provide that the Company's board of
directors will not approve, or take any other action to cause the filing of, a
voluntary bankruptcy petition with respect to the Company unless the Independent
Director and all other members of the Company's board of directors unanimously
approve the taking of such action in writing prior to the taking of such action;

             (g)   The Company will compensate each of its employees,
consultants and agents from the Company's own funds for services provided to the
Company; and

             (h)   Except as contemplated by the Facility Documents, the Company
will not hold itself out to be responsible for the debts of any of the Seller,
FRI, the VB Subsidiaries and their respective Affiliates.

SECTION 11.  MISCELLANEOUS.

         (a)   AMENDMENT. This Agreement may be amended from time to time or the
provisions hereof may be waived or otherwise modified by the parties hereto by
written agreement signed by the parties hereto; PROVIDED, HOWEVER, that no such
amendment, waiver or modification shall be effective without the prior written
consent of the Trustee.

         (b)   ASSIGNMENT. The Company has the right to assign its interest
under this Agreement and any PA Supplement as may be required to effect the
purposes of the Pool

                                       37


Purchase Agreement without the consent of the Seller or FRI, and the assignee
shall succeed to the rights hereunder of the Company. The Seller agrees to
perform its obligations hereunder for the benefit of the Issuer, the Trustee,
the Collateral Agent and the Noteholders, agrees that such parties are intended
third party beneficiaries of this Agreement and agrees that the Trustee (or the
Collateral Agent) and (subject to the terms and conditions of the Indenture and
Servicing Agreement and any applicable Indenture Supplement) the Noteholders may
enforce the provisions of this Agreement and any PA Supplement, exercise the
rights of the Company and enforce the obligations of the Seller hereunder
without the consent of the Company.

         (c)   COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.

         (d)   TERMINATION. The obligations of each of the Seller and FRI under
this Agreement and any PA Supplement shall survive the sale of the Loans to the
Company and the Company's transfer of the Loans and other related Transferred
Assets to the Issuer.

         (e)   GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PRINCIPLES.

         (f)   NOTICES. All demands and notices hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by certified mail, postage prepaid and return receipt requested, or by express
delivery service, to (i) in the case of the Seller, Fairfield Acceptance
Corporation-Nevada, 10750 West Charleston Blvd., Suite 130, Las Vegas, Nevada
89135, Attention: President, or such other address as may hereafter be furnished
to the Company and FRI in writing by the Seller, (ii) in the case of FRI, FMB
and the VB Subsidiaries, c/o Fairfield Resorts, Inc., 8427 South Park Circle,
Orlando, Florida 32819, Attention: President, or such other address as may
hereafter be furnished to the Seller or the Company in writing by FRI, and (c)
in the case of the Company, Sierra Deposit Company, LLC, 10750 West Charleston
Blvd., Suite 130, Mailstop 2067, Las Vegas, Nevada 89135, Attention: President,
or such other address as may hereafter be furnished to the Seller or FRI in
writing by the Company.

         (g)   SEVERABILITY OF PROVISIONS. If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.

         (h)   SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon each
of the Seller, FRI, the VB Subsidiaries, the VB Partnerships and the Company and
their respective permitted successors and assigns, and shall inure to the
benefit of each of the Seller, FRI, the VB Subsidiaries, the VB Partnerships and
the Company and each of the Issuer, the Trustee and the Collateral Agent to the
extent explicitly contemplated hereby.

                                       38


         (i)   COSTS, EXPENSES AND TAXES.

             (i)      Each of the Seller and FRI jointly and severally agrees to
     pay on demand to the Company all reasonable costs and expenses, if any,
     incurred or reimbursed (or to be reimbursed) by the Company (including
     reasonable counsel fees and expenses) in connection with the enforcement or
     preservation of the rights and remedies under this Agreement and any PA
     Supplement.

             (ii)     Each of the Seller and FRI jointly and severally agrees to
     pay, indemnify and hold the Company harmless from and against any and all
     stamp, sales, excise and other taxes and fees payable or determined to be
     payable by or reimbursed (or to be reimbursed) by the Company in connection
     with the execution, delivery, filing and recording of this Agreement or any
     PA Supplement, and against any liabilities with respect to or resulting
     from any delay in paying or omission to pay such taxes and fees.

         (j)   NO BANKRUPTCY PETITION. Each of the Seller, each VB Subsidiary,
each VB Partnership and FRI covenants and agrees not to institute against the
Company or the Issuer, or join any other person in instituting against the
Company or the Issuer, any proceeding under any Debtor Relief Law.

         (k)   TREATMENT OF TIMESHARE UPGRADES. Notwithstanding anything in this
Agreement to the contrary (but subject to the other provisions of this
paragraph), the Seller (or the Master Servicer on the Seller's behalf) may
upgrade any Timeshare Property by entering into a new Loan with the related
Obligor, but only if the proceeds of such new Loan are used to prepay all
obligations in full of such Obligor under the existing Loan (the proceeds of
which shall be the property of the Company). Upon its creation, the new Loan
created by such Timeshare Upgrade shall not be property of the Company, but may
be sold by the Seller to the Company as an Additional Loan pursuant to the terms
and conditions of this Agreement and any PA Supplement. The parties hereto
intend that the Seller (or the Master Servicer on the Seller's behalf) will not
upgrade a Timeshare Property pursuant to this Section 11(k) in order to provide
direct or indirect assurance to the Seller, the Trustee or any Noteholder
against loss by reason of the bankruptcy or insolvency (or other credit
condition) of, or default by, the Obligor on, or the uncollectibility of, any
Loan.

         (l)   ADDITION OF KONA HAWAIIAN VACATION OWNERSHIP, LLC.
Notwithstanding anything to the contrary in this Agreement, the parties hereto
may amend this Agreement in writing without the consent of the Trustee to add
Kona Hawaiian Vacation Ownership, LLC ("KONA") as an originator of Loans
hereunder and under any PA Supplement and the other Facility Documents;
PROVIDED, that under any such amendment, Kona shall agree to representations,
warranties and covenants substantially similar to the representations,
warranties and covenants agreed to by FMB hereunder (with such variations as may
be necessary or appropriate given Kona's form and jurisdiction of organization,
the terms of the programs governing its related Timeshare Properties, or the
location of its related Resorts); and PROVIDED, FURTHER, that each of the
conditions precedent to the sale of Loans described in Section 5 hereof, and to
the sale of Additional Loans described in Section 2(d) of each PA Supplement
existing on the date of such amendment and each of the conditions precedent to
closing described in clauses (d), (e), (f), (g), (h) (with respect to the "true
sale" opinion only) and (k) (with respect to any applicable jurisdiction) of
Section 3.3 of the Note Purchase Agreement, dated as of August 29, 2002,

                                       39


among the Issuer, the Purchaser, as depositor, FAC, as master servicer, Cendant
Corporation, as performance guarantor, Fleet Securities, Inc, as deal agent, and
each of the conduits, alternate investors and class agents named therein, shall
have been satisfied with respect to Kona prior to the effectiveness of any such
amendment.

                                       40


     IN WITNESS WHEREOF, the parties have caused their names to be signed hereto
by their respective officers thereunto duly authorized, all as of the day and
year first above written.

                                          FAIRFIELD ACCEPTANCE CORPORATION -
                                          NEVADA


                                          By:      /s/ Ralph E. Turner
                                             -----------------------------------
                                             Name: Ralph E. Turner
                                             Title: President and Treasurer

                                          FAIRFIELD RESORTS, INC.


                                          By:      /s/ Ralph E. Turner
                                             -----------------------------------
                                             Name: Ralph E. Turner
                                             Title: Senior Vice President and
                                                    Assistant Treasurer

                                          FAIRFIELD MYRTLE BEACH, INC.


                                          By:      /s/ Ralph E. Turner
                                             -----------------------------------
                                             Name: Ralph E. Turner
                                             Title: Senior Vice President and
                                                    Assistant Treasurer

                                          SEA GARDENS BEACH AND
                                          TENNIS RESORT, INC.


                                          By:      /s/ Ralph E. Turner
                                             -----------------------------------
                                             Name: Ralph E. Turner
                                             Title: Senior Vice President and
                                                    Assistant Treasurer

                          [Signature page for FAC MLPA]



                                          VACATION BREAK RESORTS, INC.


                                          By:      /s/ Ralph E. Turner
                                             -----------------------------------
                                             Name: Ralph E. Turner
                                             Title: Assistant Treasurer

                                          VACATION BREAK RESORTS AT
                                          STAR ISLAND, INC.


                                          By:      /s/ Ralph E. Turner
                                             -----------------------------------
                                             Name: Ralph E. Turner
                                             Title: Senior Vice President and
                                                    Assistant Treasurer

                                          PALM VACATION GROUP,
                                          by its General Partners:

                                          Vacation Break Resorts at Palm Aire,
                                          Inc.


                                          By:      /s/ Ralph E. Turner
                                             -----------------------------------
                                             Name: Ralph E. Turner
                                             Title: Senior Vice President and
                                                    Assistant Treasurer

                                          Palm Resort Group, Inc.


                                          By:      /s/ Ralph E. Turner
                                             -----------------------------------
                                             Name: Ralph E. Turner
                                             Title: Senior Vice President and
                                                    Assistant Treasurer

                          [Signature page for FAC MLPA]



                                          OCEAN RANCH VACATION GROUP,
                                          by its General Partners:

                                          Vacation Break at Ocean Ranch, Inc.


                                          By:      /s/ Ralph E. Turner
                                             -----------------------------------
                                             Name: Ralph E. Turner
                                             Title: Senior Vice President and
                                                    Assistant Treasurer

                                          Ocean Ranch Development, Inc.


                                          By:      /s/ Ralph E. Turner
                                             -----------------------------------
                                             Name: Ralph E. Turner
                                             Title: Senior Vice President and
                                                    Assistant Treasurer

                                          SIERRA DEPOSIT COMPANY, LLC


                                          By:      /s/ Ralph E. Turner
                                             -----------------------------------
                                             Name: Ralph E. Turner
                                             Title: President and Treasurer

                          [Signature page for FAC MLPA]




                                                                   EXHIBIT 10.64

                                                                  EXECUTION COPY

                            SERIES 2002-1 SUPPLEMENT
                           Dated as of August 29, 2002

                                       to

                         MASTER LOAN PURCHASE AGREEMENT
                           Dated as of August 29, 2002

                     SIERRA RECEIVABLES FUNDING COMPANY, LLC
                                   LOAN-BACKED
                             VARIABLE FUNDING NOTES,
                                  SERIES 2002-1

                                 by and between

                    FAIRFIELD ACCEPTANCE CORPORATION-NEVADA,
                                    as Seller

                            FAIRFIELD RESORTS, INC.,
                                as Co-Originator

                          FAIRFIELD MYRTLE BEACH, INC.,
                                as Co-Originator

                   SEA GARDENS BEACH AND TENNIS RESORT, INC.,
                          VACATION BREAK RESORTS, INC.,
                  VACATION BREAK RESORTS AT STAR ISLAND, INC.,
                               PALM VACATION GROUP
                                       and
                           OCEAN RANCH VACATION GROUP,
                             each as a VB Subsidiary

                               PALM VACATION GROUP
                                       and
                           OCEAN RANCH VACATION GROUP,
                            each as a VB Partnership

                                       and

                           SIERRA DEPOSIT COMPANY, LLC
                                  as Purchaser



                                TABLE OF CONTENTS




                                                                                                     PAGE
                                                                                                    
Section 1.    Definitions...............................................................................1

Section 2.    Sale......................................................................................6

       (a)    Series 2002-1 Loans.......................................................................6

       (b) Filing of Financing Statements...............................................................6

       (c) Delivery of Series 2002-1 Loan Schedule......................................................6

       (d) Purchase of Additional Series 2002-1 Loans...................................................7

       (e) Treatment as Sale............................................................................8

       (f) Recharacterization...........................................................................8

       (g) Security Interest in Transferred Assets......................................................8

       (h) Quitclaim of All Right, Title and Interest by FMB, the VB Subsidiaries and FRI...............8

       (i) Transfer of Loans............................................................................9

Section 3.    Purchase Price............................................................................9

Section 4.    Payment of Purchase Price.................................................................9

Section 5.    Conditions Precedent to Sale of Series 2002-1 Loans......................................10

Section 6.    Representations and Warranties of the Seller, FRI, FMB and the VB Subsidiaries...........10

       (a)    Representations and Warranties of the Seller, FRI, FMB and the VB Subsidiaries...........10

       (b)    Representations and Warranties Regarding the Series 2002-1 Loans.........................10

Section 7.    Repurchases or Substitution of Series 2002-1 Loans.......................................11

       (a)    Repurchase or Substitution Obligation....................................................11

       (b)    Repurchases and Substitutions............................................................12

       (c)    Repurchases of Series 2002-1 Loans that Become Defaulted Loans...........................13

       (d)    Maximum Repurchases......................................................................13

Section 8.    Covenants of the Seller and FRI..........................................................13

Section 9.    Representations and Warranties of the Company............................................14

Section 10.   Covenants of the Company.................................................................14

Section 11.   Miscellaneous Provisions.................................................................14

       (l) Ratification of Agreement...................................................................14

       (m) Amendment...................................................................................14



                                       -i-


                                TABLE OF CONTENTS
                                   (continued)




                                                                                                     PAGE
                                                                                                    
       (n) Counterparts................................................................................14

       (o) GOVERNING LAW...............................................................................14

       (p) Successors and Assigns......................................................................14



                                      -ii-


     THIS PURCHASE AGREEMENT SUPPLEMENT (this "PA SUPPLEMENT"), dated as of
August 29, 2002, is by and between FAIRFIELD ACCEPTANCE CORPORATION-NEVADA, a
Delaware corporation, as seller (the "SELLER"), FAIRFIELD RESORTS, INC., a
Delaware corporation and the parent corporation of the Seller, as co-originator
("FRI"), FAIRFIELD MYRTLE BEACH, INC., a Delaware corporation and a wholly-owned
subsidiary of FRI, as co-originator ("FMB"), SEA GARDENS BEACH AND TENNIS
RESORT, INC., a Florida corporation ("SEA GARDENS"), VACATION BREAK RESORTS,
INC., a Florida corporation ("VBR"), VACATION BREAK RESORTS AT STAR ISLAND,
INC., a Florida corporation ("VBRS") (each of Sea Gardens, VBR and VBRS being
wholly-owned subsidiaries of Vacation Break, USA, Inc., a wholly-owned
subsidiary of FRI), PALM VACATION GROUP, a Florida general partnership ("PVG"),
OCEAN RANCH VACATION GROUP, a Florida general partnership ("ORVG") (each of Sea
Gardens, VBR, VBRS, PVG and ORVG are hereinafter collectively referred to as the
"VB SUBSIDIARIES" and PVG and ORVG are hereinafter collectively referred to as
the "VB PARTNERSHIPS") and SIERRA DEPOSIT COMPANY, LLC, a Delaware limited
liability company, as purchaser (hereinafter referred to as the "PURCHASER" or
the "COMPANY").

     Section 2 of the Agreement provides that the Seller may from time to time
sell and assign to the Company, and the Company may from time to time Purchase
from the Seller, all the Seller's right, title and interest in, to and under
Loans listed on the Loan Schedule of the related PA Supplement on the Closing
Date for the related Series. The principal terms of the Purchase and sale of
Loans for each Series shall be set forth in a PA Supplement to the Agreement.

     Pursuant to this PA Supplement and in accordance with Section 2 of the
Agreement, the Seller hereby sells to the Company, and the Company hereby
Purchases from the Seller, the Series 2002-1 Loans, and the Seller and the
Company hereby specify the principal terms of such sales and Purchases.

     SECTION 1.   DEFINITIONS.

     All capitalized terms used herein and not otherwise defined herein have the
meanings ascribed to them in the Agreement. Each capitalized term defined herein
shall relate only to the Series 2002-1 Loans and to no other Loans purchased by
the Company from the Seller.

     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 PA Supplement shall be controlling.

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

     "ADDITION DATE" shall mean the date from and after which Additional Loans
are sold pursuant to Section 2(d).



     "AGREEMENT" shall mean the Master Loan Purchase Agreement dated as of
August 29, 2002 by and between the Seller, FRI, FMB, the VB Subsidiaries, the VB
Partnerships and the Purchaser, as the same may be amended, supplemented or
otherwise modified from time to time thereafter in accordance with its terms.

     "ASSIGNMENT" shall have the meaning set forth in Section 2(d)(iii)(E).

     "CLOSING DATE" shall mean August 29, 2002.

     "COMPANY" shall have the meaning set forth in the preamble.

     "CUT-OFF DATE" shall mean August 27, 2002.

     "CUT-OFF DATE POOL PRINCIPAL BALANCE" shall have the meaning set forth in
Section 3.

     "ELIGIBLE LOAN" shall mean a Series 2002-1 Loan:

     (a)  with respect to which (i) the related Timeshare Property is not a Lot,
          (ii) the related Timeshare Property has been purchased by an Obligor,
          (iii) except in the case of a Green Loan, a certificate of occupancy
          for the related Timeshare Property has been issued, (iv) except in the
          case of a Green Loan, the unit for the related Timeshare Property is
          complete and ready for occupancy, is not in need of material
          maintenance or repair, except for ordinary, routine maintenance and
          repairs that are not substantial in nature or cost and contains no
          structural defects materially affecting its value, (v) the related
          Timeshare Property Regime is not in need of maintenance or repair,
          except for ordinary, routine maintenance and repairs that are not
          substantial in nature or cost and contains no structural defects
          materially affecting its value, (vi) there is no legal, judicial or
          administrative proceeding pending, or to the Seller's knowledge
          threatened, for the total condemnation of the related Timeshare
          Property or partial condemnation of any portion of the related
          Timeshare Property Regime that would have a material adverse effect on
          the value of the related Timeshare Property and (vii) the related
          Timeshare Property is not related to a Resort located outside of the
          United States, Canada, Mexico or the United States Virgin Islands;

     (b)  with respect to which the rights of the Obligor thereunder are subject
          to declarations, covenants and restrictions of record affecting the
          Resort; PROVIDED, HOWEVER, that a Series 2002-1 Loan shall not fail to
          be an Eligible Loan solely because the rights of the Obligor
          thereunder have been subjected to the FairShare Plus Program;

     (c)  in the case of a Series 2002-1 Loan that is an Installment Contract,
          with respect to which the Seller has a valid ownership or security
          interest in an underlying Timeshare Property, subject only to
          Permitted Encumbrances, unless the criteria in paragraph (d) are
          satisfied;

                                        2


     (d)  with respect to which (i) if the related Timeshare Property has been
          deeded to the Obligor of the related Series 2002-1 Loan, (A) the
          Originator has a valid and enforceable first lien Mortgage on such
          Timeshare Property, except as such enforceability may be limited by
          Debtor Relief Laws and as such enforceability may be limited by
          general principles of equity, regardless of whether such
          enforceability is considered in a proceeding in equity or at law,
          (B) such Mortgage and related mortgage note have been assigned to the
          Collateral Agent, (C) such Mortgage and the related note for such
          Mortgage have been transferred to the custody of the Custodian in
          accordance with the provisions of Section 6(c)(i) of the Agreement and
          (D) if any Mortgage relating to such Series 2002-1 Loan is a deed of
          trust, a trustee duly qualified under applicable law to serve as such
          has been properly designated in accordance with applicable law and
          currently so serves or (ii) if the related Timeshare Property has not
          been deeded to the Obligor of the related Series 2002-1 Loan, a
          Nominee has legal title to such Timeshare Property and the Seller has
          an equitable interest in such Timeshare Property underlying the
          related Series 2002-1 Loan;

     (e)  that was issued in a transaction that complied, and is in compliance,
          in all material respects with all material requirements of applicable
          federal, state and local law;

     (f)  that requires the Obligor to pay the unpaid principal balance over an
          original term of not greater than 120 months and (ii) the original
          term of which does not exceed 84 months unless (A) the Series 2002-1
          Loan relates to a Timeshare Upgrade or (B) the weighted average FICO
          score of all such Series 2002-1 Loans with original terms longer than
          84 months is at least 640 and the Series 2002-1 Loan has a FICO score
          not less than 600;

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

     (h)  that is not a Defective Loan or a Defaulted Loan;

     (i)  that (i) is not a Delinquent Loan as of the Cut-Off Date or related
          Addition Cut-Off Date, as applicable, and (ii) with respect to which
          no Scheduled Payment was (A) delinquent for more than 30 days past its
          Due Date more than once during the 18-month period preceding the
          Cut-Off Date or related Addition Cut-Off Date, as applicable, with
          respect to such Series 2002-1 Loan, or (B) delinquent for more than 60
          days at any time during such 18-month period (each such determination
          under this clause (ii) being made without giving effect to the grant
          of any extension of the Due Date of any such Scheduled Payment).

     (j)  that does not finance the purchase of credit life insurance;

     (k)  with respect to which no Due Date thereunder occurring after the
          Cut-Off Date or the related Addition Cut-Off Date, as applicable, has
          been deferred;

                                        3


     (l)  with respect to which the related Timeshare Property (A) consists of a
          Fixed Week or a UDI and (B) if it consists of a Fixed Week, it has
          been converted into a UDI or has become subject to the FairShare Plus
          Program, which conversion or other modification does not give rise to
          the extension of the maturity of any payments under such Series 2002-1
          Loan;

     (m)  that (i) either (A) has been transferred by FRI to FAC pursuant to the
          Operating Agreement, (B) in the case of any Series 2002-1 Loan
          originated by an Originator other than FRI or any Loan related to the
          Dolphin's Cove Resort, has been transferred by such Originator to FRI
          pursuant to the Operating Agreement and (C) in the case of any Loan
          related to the Dolphin's Cove Resort, was originated by Dolphin's Cove
          Resort, Ltd., a California limited partnership, and was transferred to
          FRI pursuant to a receivables purchase agreement dated December 29,
          2000 by and between Dolphin's Cove Resort, Ltd. and FRI and (ii) in
          the case of any Loans sold to the Purchaser on the Closing Date, such
          Loans were sold by Fairfield Receivables Corporation to FAC pursuant
          to an Assignment of Contracts and Mortgages, dated as of August 29,
          2002;

     (n)  that was originated by an Originator and has been consistently
          serviced by FAC, in each case in the ordinary course of its respective
          business and in accordance with Customary Practices and Credit
          Standards and Collection Policies;

     (o)  that has not been specifically reserved against by the Seller or
          classified by FAC or FRI as uncollectible or charged off;

     (p)  that arises from transactions in a jurisdiction in which FRI and each
          Subsidiary of FRI (other than the Purchaser and the Issuer) that
          conducts business in such jurisdiction is duly qualified to do
          business, except where the failure to so qualify will not adversely
          affect or impair the legality, validity, binding effect and
          enforceability of such Series 2002-1 Loan;

     (q)  that has not been cancelled or terminated by the related Obligor
          (regardless of whether such Obligor is legally entitled to do so) and
          constitutes a legal, valid, binding and enforceable obligation of the
          related Obligor, except as such enforceability may be limited by
          Debtor Relief Laws and as such enforceability may be limited by
          general principles of equity, regardless of whether such
          enforceability is considered in a proceeding in equity or at law;

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

     (s)  with respect to which (i) the downpayment has been made and (ii) no
          statutory rescission rights with respect to the related Obligor are
          continuing as of the Cut-Off Date or related Addition Cut-Off Date, as
          applicable;

                                        4


     (t)  that had an Equity Percentage of 10% or more at the time of the sale
          of the related Timeshare Property to the related Obligor (or, in the
          case of a Loan relating to a Timeshare Upgrade, an Equity Percentage
          of 10% or more of the value of all vacation credits owned by the
          related Obligor);

     (u)  with respect to which the related Obligor has not at any time made a
          written request for rescission of such Series 2002-1 Loan or otherwise
          stated in writing that it does not intend to consummate such Loan or
          to fully perform under such Series 2002-1 Loan;

     (v)  that is not a Series 2002-1 Loan originated under an Alliance Program;

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

     (x)  as of the Cut-Off Date or related Addition Cut-Off Date, as
          applicable, has an outstanding loan balance not greater than $100,000;
          and

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

     "EXCESS CONCENTRATION AMOUNT" shall have the meaning set forth in the
Series 2002-1 Supplement.

     "PA SUPPLEMENT" shall have the meaning set forth in the preamble.

     "POOL PURCHASE PRICE" shall have the meaning set forth in Section 3.

     "PURCHASE" shall have the meaning set forth in Section 2(e).

     "PURCHASER" shall have the meaning set forth in the preamble.

     "REPURCHASE DATE" shall have the meaning set forth in Section 7.

     "REPURCHASE PRICE" shall have the meaning set forth in Section 7.

     "SERIES TERMINATION DATE" shall mean the date on which all obligations with
respect to the Series 2002-1 Notes issued under the Series 2002-1 Supplement
have been paid in full and the Series 2002-1 Supplement is discharged.

                                        5


     "SERIES 2002-1 ADDITIONAL LOAN" shall mean each Additional Loan
constituting one of the Series 2002-1 Loans Purchased from the Seller on an
Addition Cut-Off Date and listed on Schedule 1 to the related Assignment.

     "SERIES 2002-1 LOAN" shall mean each Loan listed from time to time on the
Series 2002-1 Loan Schedule.

     "SERIES 2002-1 LOAN SCHEDULE" shall mean the Loan Schedule for the Series
2002-1 Loans.

     "SERIES 2002-1 NOTEHOLDER" shall mean any Noteholder under the Series
2002-1 Supplement.

     "SERIES 2002-1 PLEDGED LOAN" shall have the meaning set forth in the Series
2002-1 Supplement.

     "SERIES 2002-1 SUPPLEMENT" shall mean the supplement to the Master
Indenture and Servicing Agreement executed and delivered in connection with the
original issuance of the Series 2002-1 Notes and all amendments thereof and
supplements thereto.

     "SUBSTITUTION ADJUSTMENT AMOUNT" shall have the meaning set forth in
Section 7.

     SECTION 2.   SALE.

          (a)     SERIES 2002-1 LOANS. Subject to the terms and conditions and
in reliance on the representations, warranties, and covenants and agreements set
forth in the Agreement and this PA Supplement, the Seller hereby sells and
assigns to the Company, and the Company hereby Purchases from the Seller,
without recourse except as specifically set forth herein, all of the Seller's
right, title and interest in, to and under the Initial Loans listed on the
Series 2002-1 Loan Schedule delivered on the Closing Date, together with all
other Transferred Assets relating thereto. The Series 2002-1 Additional Loans
existing at the close of business on the related Addition Cut-Off Date and all
other Transferred Assets relating thereto shall be sold by the Seller and
purchased by the Company on the related Addition Date. Notwithstanding the
foregoing, and for avoidance of doubt, the Seller does not assign, and the
Purchaser does not agree to assume, any obligations specific to FRI or any
Originator as developer of any Timeshare Property underlying an Installment
Contract.

          (b)     FILING OF FINANCING STATEMENTS. In connection with the
foregoing sale, the Seller agrees to record and file a financing statement or
statements (and continuation statements or other amendments with respect to such
financing statements) with respect to the Series 2002-1 Loans and related
Transferred Assets described in Section 2(a) sold by the Seller hereunder
meeting the requirements of applicable state law in such manner and in such
jurisdictions as are necessary to perfect the interests of the Purchaser created
hereby under the applicable UCC and to deliver a file-stamped copy of such
financing statements and continuation statements (or other amendments) or other
evidence of such filings to the Purchaser.

          (c)     DELIVERY OF SERIES 2002-1 LOAN SCHEDULE. In connection with
the sale and conveyance hereunder, the Seller agrees on or prior to the Closing
Date and on or prior to the

                                        6


applicable Addition Date (in the case of Additional Series 2002-1 Loans) to
indicate or cause to be indicated clearly and unambiguously in its accounting,
computer and other records that the Series 2002-1 Loans and related Transferred
Assets have been sold to the Purchaser pursuant to this PA Supplement. In
addition, in connection with the sale and conveyance hereunder, the Seller
agrees on or prior to the Closing Date and on or prior to the applicable
Addition Date (in the case of Additional Series 2002-1 Loans) to deliver to the
Company a Series 2002-1 Loan Schedule for such Series 2002-1 Loans or Additional
Series 2002-1 Loans.

          (d)     PURCHASE OF ADDITIONAL SERIES 2002-1 LOANS.

                  (i)     [Reserved].

                  (ii)    The Seller may, with the consent of the Purchaser,
     designate Eligible Loans to be sold as Additional Series 2002-1 Loans.

                  (iii)   On the Addition Date with respect to any Additional
     Series 2002-1 Loans, such Additional Series 2002-1 Loans shall become
     Series 2002-1 Loans, and the Purchaser shall Purchase the Seller's right,
     title and interest in, to and under the Additional Series 2002-1 Loans and
     the other related Transferred Assets as provided in the Assignment, subject
     to the satisfaction of the following conditions on such Addition Date:

                  (A)     The Seller shall have delivered to the Purchaser
          copies of UCC financing statements covering such Additional Series
          2002-1 Loans, if necessary to perfect the Purchaser's first priority
          interest in such Series 2002-1 Additional Loans and the other related
          Transferred Assets;

                  (B)     On each of the Addition Cut-Off Date and the Addition
          Date, the sale of such Additional Series 2002-1 Loans and the other
          related Transferred Assets to the Purchaser shall not have caused the
          Seller's insolvency or have been made in contemplation of the Seller's
          insolvency;

                  (C)     No selection procedure shall have been utilized by the
          Seller that would result in a selection of such Additional Series
          2002-1 Loans (from the Eligible Loans available to the Seller) that
          would be materially adverse to the interests of the Purchaser as of
          the Addition Date;

                  (D)     The Seller shall have indicated in its accounting,
          computer and other records that the Additional Series 2002-1 Loans and
          the other related Transferred Assets have been sold to the Purchaser
          and shall have delivered to the Purchaser the required Series 2002-1
          Loan Schedule;

                  (E)     The Seller and the Purchaser shall have entered into a
          duly executed, written assignment substantially in the form of Exhibit
          B to the Agreement (an "ASSIGNMENT");

                                        7


                  (F)     The Seller shall have delivered to the Purchaser an
          Officer's Certificate of the Seller dated the Addition Date,
          confirming, to the extent applicable, the items set forth in Section
          2(d)(iii) (A) through (E); and

                  (G)     The Purchaser shall have paid the Additional Pool
          Purchase Price as provided in Section 3 of the Agreement.

                  (iv)    The Seller shall have no obligation to sell the
     Additional Series 2002-1 Loans if it has not been paid the Additional Pool
     Purchase Price therefor.

          (e)     TREATMENT AS SALE. It is the express and specific intent of
the parties that the sale of the Series 2002-1 Loans and related Transferred
Assets from the Seller to the Company as provided in this Section 2 (the
"PURCHASE") is and shall be construed for all purposes as a true and absolute
sale of such Series 2002-1 Loans and related Transferred Assets, shall be
absolute and irrevocable and provide the Company with the full benefits of
ownership of the Series 2002-1 Loans and related Transferred Assets and will be
treated as such for all federal income tax reporting and all other purposes.

          (f)     RECHARACTERIZATION. Without prejudice to the provisions of
Section 2(e) providing for the absolute transfer of the Seller's interest in the
Series 2002-1 Loans and related Transferred Assets to the Company, in order to
secure the prompt payment and performance of all of the obligations of the
Seller to the Company and the Company's assignees arising in connection with the
Agreement, this PA Supplement and the other Facility Documents, whether now or
hereafter existing, due or to become due, direct or indirect, or absolute or
contingent, the Seller hereby assigns and grants to the Company a first priority
security interest in all of the Seller's right, title and interest, whether now
owned or hereafter acquired, if any, in, to and under all of the Series 2002-1
Loans and related Transferred Assets and the proceeds thereof.

          (g)     SECURITY INTEREST IN TRANSFERRED ASSETS. FRI, FMB, the VB
Subsidiaries and the Seller acknowledge that the Series 2002-1 Loans and related
Transferred Assets are subject to the Lien of the Indenture and Servicing
Agreement for the benefit of the Trustee and the Series 2002-1 Noteholders (or
to the Collateral Agent on behalf of the Trustee and the Series 2002-1
Noteholders).

          (h)     QUITCLAIM OF ALL RIGHT, TITLE AND INTEREST BY FMB, THE VB
SUBSIDIARIES AND FRI.

                  (i)     The parties hereto recognize that each of (A) FMB and
                          the VB Subsidiaries has previously sold, transferred
                          and assigned to FRI all of its right, title and
                          interest in and to the Series 2002-1 Loans originated
                          by it and (B) FRI has previously sold, transferred and
                          assigned to the Seller all of its respective right,
                          title and interest in and to the Series 2002-1 Loans
                          originated by it or sold to it by FMB or the VB
                          Subsidiaries, together with, in each case, the other
                          related Transferred Assets. Each such sale, transfer
                          and assignment has been made pursuant to the terms of
                          the Operating Agreement and one or more blanket
                          assignments executed by such

                                        8


                          parties in favor of FRI or the Seller, as applicable.
                          For the avoidance of doubt and to further evidence the
                          intent of the parties hereto that all right, title and
                          interest in the Series 2002-1 Loans and related
                          Transferred Assets are being sold and transferred to
                          the Company pursuant to the Agreement and this PA
                          Supplement, each of FRI, FMB and the VB Subsidiaries
                          hereby irrevocably quitclaim all right, title and
                          interest that any of them may have or be deemed to
                          have in and to any of the Series 2002-1 Loans and
                          related Transferred Assets directly to the Company.

                  (ii)    To the extent that any quitclaim of the Series 2002-1
                          Loans and related Transferred Assets from FRI, FMB or
                          the VB Subsidiaries to the Company contemplated by
                          this Section 2(h) is not treated as a sale under
                          applicable law, this PA Supplement shall constitute a
                          security agreement under applicable law and, in order
                          to secure the prompt payment and performance of all of
                          the obligations of the Seller to the Company and the
                          Company's assignees arising in connection with the
                          Agreement, this PA Supplement and the other Facility
                          Documents, whether now or hereafter existing, due or
                          to become due, direct or indirect, or absolute or
                          contingent, each of FRI, FMB and the VB Subsidiaries,
                          as applicable, hereby assigns and grants to the
                          Company a first priority security interest in all of
                          the right, title and interest of FRI, FMB or such VB
                          Subsidiary, as applicable, whether now owned or
                          hereafter acquired, if any, in, to and under all of
                          the Series 2002-1 Loans and related Transferred Assets
                          and the proceeds thereof.

          (i)     TRANSFER OF LOANS. All Series 2002-1 Loans conveyed to the
Company hereunder shall be held by the Custodian pursuant to the terms of either
Custodial Agreement for the benefit of the Company, the Issuer, the Trustee and
the Collateral Agent. Upon each Purchase hereunder, the Custodian shall execute
and deliver to the Company a certificate acknowledging receipt of the applicable
Series 2002-1 Loans pursuant to either Custodial Agreement.

     Each of FRI, the other Originators and the Seller acknowledges that the
Company will convey the Series 2002-1 Loans and the other related Transferred
Assets to the Issuer and that the Issuer will grant a security interest in the
Series 2002-1 Loans and other related Transferred Assets to the Collateral Agent
pursuant to the Indenture and Servicing Agreement and the related Series 2002-1
Supplement. Each of FRI, the other Originators and the Seller agrees that, upon
such grant, the Issuer and the Collateral Agent may enforce all of the Seller's
and FRI's obligations hereunder and under the Agreement directly, including
without limitation the repurchase obligations of the Seller set forth in
Section 7.

     SECTION 3.   PURCHASE PRICE.

     The Initial Series 2002-1 Loans had an aggregate unpaid principal balance
of $280,127,904.13 at the Cut-Off Date (such aggregate unpaid principal balance
at the Cut-Off

                                        9


Date being referred to herein as the "CUT-OFF DATE POOL PRINCIPAL BALANCE"). The
purchase price (the "POOL PURCHASE PRICE") for the Loans sold on the Closing
Date shall be $280,127,904.13. The purchase price for Additional Loans sold on
an Addition Date shall be the Additional Pool Purchase Price.

     SECTION 4.   PAYMENT OF PURCHASE PRICE.

     Sections 4(a) through (c) are set forth in the Agreement.

     (d)  Payment for and delivery of the Series 2002-1 Loans being purchased by
the Company on the Closing Date shall take place at a closing at the offices of
Orrick, Herrington & Sutcliffe LLP, Washington Harbour, 3050 K Street, NW,
Washington, D.C. 20007, at 10:00 a.m. local time on the Closing Date, or such
other time and place as shall be mutually agreed upon among the parties hereto.

     SECTION 5.   CONDITIONS PRECEDENT TO SALE OF SERIES 2002-1 LOANS.

     The Purchaser's obligations hereunder to Purchase and pay for the Series
2002-1 Loans and related Transferred Assets on the Closing Date are subject to
the fulfillment of the following conditions on or before the Closing Date:

          (a)     (i) The Purchaser shall have received the Series 2002-1 Pool
                  Purchase Agreement relating to each Series 2002-1 Loan
                  executed by all the parties thereto and (ii) all conditions
                  precedent to the sale of the Series 2002-1 Pool Loans
                  thereunder shall have been fulfilled to the extent they are
                  capable of being fulfilled prior to the performance by the
                  Purchaser of its obligations under this PA Supplement.

          (b)     The representations and warranties of each of the Seller, FRI,
                  FMB and the VB Subsidiaries made in the Agreement and herein
                  shall be true and correct in all material respects on the
                  Closing Date.

     SECTION 6.   REPRESENTATIONS AND WARRANTIES OF THE SELLER, FRI, FMB AND THE
                  VB SUBSIDIARIES.

          (a)     REPRESENTATIONS AND WARRANTIES OF THE SELLER, FRI, FMB AND THE
VB SUBSIDIARIES. The Seller, FRI, FMB and the VB Subsidiaries jointly and
severally represent and warrant as of the Closing Date and as of each Addition
Date, or as of such other date specified in such representation and warranty,
that:

                  (xviii) ACCURACY OF INFORMATION. All information with respect
     to the Seller, FRI, FMB or the VB Subsidiaries contained in the
     Confidential Information Memorandum dated June 2002 with respect to the
     Series 2002-1 Notes and Series 2002-1 Loans (including, without limitation,
     the Credit Standards and Collection Policies) was true and accurate in
     every respect material to the transactions contemplated hereby on the date
     as of which it was delivered, and did not omit to state any fact necessary
     to make the statements contained therein not materially misleading or, if
     any such information contained therein has been discovered to have been
     inaccurate on such date, such

                                       10


     information has been corrected by subsequent information provided in
     writing to the Issuer.

                  (xix)   NO MATERIAL ADVERSE CHANGE. As of the Closing Date,
     there has been no material adverse change with respect to the business
     operations or financial condition of any of the Seller, FRI, FMB or the VB
     Subsidiaries since December 31, 2001.

     Sections 6(a)(i) through (xvii) are set forth in the Agreement.

          (b)     REPRESENTATIONS AND WARRANTIES REGARDING THE SERIES 2002-1
LOANS. The Seller and FRI jointly and severally represent and warrant to the
Company as of the Cut-Off Date and Addition Cut-Off Date as to each Series
2002-1 Loan conveyed on and as of the Closing Date or the related Addition Date,
as applicable (except as otherwise expressly stated) as follows:

                  (xxiii) LOAN SCHEDULE.  The information set forth in the
     Series 2002-1 Loan Schedule is true and correct with respect to such Series
     2002-1 Loan.

                  (xxiv)  GOOD TITLE TO SERIES 2002-1 LOANS. The Seller has good
     and marketable title to such Series 2002-1 Loan free and clear of any Lien
     other than Permitted Encumbrances. The Seller has not sold, assigned or
     pledged such Series 2002-1 Loan or any interest therein to any Person other
     than the Company. With respect to the related Timeshare Property, either
     (A) a generally accepted form of title insurance policy insuring the fee
     estate ownership of the real property subject to the Timeshare Property
     Regime by the Persons owning the respective interests therein and their
     successors and assigns (1) was effective either at the time the Originator
     (or a Subsidiary thereof) acquired the Timeshare Property or at the time of
     registration of the Timeshare Property Regime, (2) is valid and remains in
     full force and effect and (3) was issued by a title insurer qualified to do
     business in the applicable jurisdiction; or (B) either at the time the
     Originator (or a Subsidiary thereof) acquired the Timeshare Property or at
     the time of registration of the Timeshare Property Regime, such fee estate
     ownership had been verified by an attorney's opinion of title, the form and
     substance of which is of a type acceptable for purposes of registration of
     sales of Timeshare Properties and which may be relied upon by Persons
     subsequently owning the respective interests therein and their successors
     and assigns.

                  (xxv)   NO DEFAULTS. As of the Cut-Off Date or related
     Addition Cut-Off Date, as applicable, such Series 2002-1 Loan is not a
     Defaulted Loan and no event has occurred which, with the taking of any
     action or the expiration of any grace or cure period or both, would cause
     such Series 2002-1 Loan to be a Defaulted Loan. None of the Seller, FRI,
     FMB or the VB Subsidiaries has waived any such default, breach, violation
     or event permitting acceleration with respect to such Series 2002-1 Loan.

                  (xxvi)  EQUAL INSTALLMENTS.  Such Series 2002-1 Loan has a
     fixed Loan Rate and provides for substantially equal monthly payments that
     fully amortize the Series 2002-1 Loan over its term.

                                       11


                  (xxvii) EXCESS CONCENTRATION AMOUNT. The Purchase of such
     Series 2002-1 Loan occurring on such Closing Date or Addition Date, as
     applicable, and the inclusion of such Series 2002-1 Loan as a Series 2002-1
     Pledged Loan pursuant to the Series 2002-1 Supplement to the Indenture and
     Servicing Agreement, does not cause an increase in the Excess Concentration
     Amount.

     Sections 6(b)(i) through (xxii) are set forth in the Agreement.

     SECTION 7.   REPURCHASES OR SUBSTITUTION OF SERIES 2002-1 LOANS.

            (a)   REPURCHASE OR SUBSTITUTION OBLIGATION. Subject to Section
7(b), upon discovery by the Seller or upon written notice from the Company, the
Issuer or the Trustee that any Series 2002-1 Loan is a Defective Loan, the
Seller shall, within 90 days after the earlier of its discovery or receipt of
notice thereof, cure such Defective Loan in all material respects or either (i)
repurchase such Defective Loan from the Company or its assignee at the
Repurchase Price or (ii) substitute one or more Qualified Substitute Loans for
such Defective Loan. For purposes of this Agreement, the term "REPURCHASE PRICE"
shall mean an amount equal to the outstanding Principal Balance of such
Defective Loan as of the close of business on the Due Date immediately preceding
the Payment Date on which the repurchase is to be made, plus accrued but unpaid
interest thereon to the date of the repurchase. The Company hereby directs the
Seller, for so long as the Indenture and Servicing Agreement is in effect, to
make such payment on its behalf to the Collection Account pursuant to Section
7(b). The following defects with respect to documents in any Loan File, solely
to the extent they do not impair the validity or enforceability of the subject
document under applicable law, shall not be deemed to constitute a breach of the
representations and warranties contained in Section 6(b): misspellings of or
omissions of initials in names; name changes from divorce or marriage;
discrepancies as to payment dates in a Series 2002-1 Loan of no more than 30
days; discrepancies as to Scheduled Payments of no more than $5.00;
discrepancies as to origination dates of not more than 30 days; inclusion of
additional parties other than the primary Obligor not listed in the Master
Servicer's records or in the Series 2002-1 Loan Schedule and non-substantive
typographical errors and other non-substantive minor errors of a clerical or
administrative nature.

            (b)   REPURCHASES AND SUBSTITUTIONS. The Seller shall provide
written notice to the Company of any repurchase pursuant to Section 7(a) not
less than two Business Days prior to the date on which such repurchase is to be
effected, specifying the Defective Loan and the Repurchase Price therefor. Upon
the repurchase of a Defective Loan pursuant to Section 7(a), the Seller shall
deposit the Repurchase Price in the Collection Account on behalf of the Company
no later than 12:00 noon, New York time, on the Payment Date on which such
repurchase is made (the "REPURCHASE DATE").

            If the Seller elects to substitute a Qualified Substitute Loan or
Loans for a Defective Loan pursuant to this Section 7(b), the Seller shall
deliver such Qualified Substitute Loan in the same manner as the other Series
2002-1 Loans sold hereunder, including delivery of the applicable Loan Documents
as required pursuant to either Custodial Agreement and satisfaction of the same
conditions with respect to such Qualified Substitute Loan as to the Purchase of
Additional Loans set forth in Section 2(d)(iii). Payments due with respect to
Qualified Substitute Loans prior to the last day of the Due Period next
preceding the date of

                                       12


substitution shall not be property of the Company, but will be retained by the
Master Servicer and remitted by the Master Servicer to the Seller on the next
succeeding Payment Date. Scheduled Payments due on a Defective Loan prior to the
last day of the Due Period next preceding the date of substitution shall be
property of the Company, and after such last day of the Due Period next
preceding the date of substitution the Seller shall be entitled to retain all
Scheduled Payments due thereafter and other amounts received in respect of such
Defective Loan. The Seller shall cause the Master Servicer to deliver a schedule
of any Defective Loans so removed and Qualified Substitute Loans so substituted
to the Company, and such schedule shall be an amendment to the Series 2002-1
Loan Schedule. Upon such substitution, the Qualified Substitute Loan or Loans
shall be subject to the terms of this PA Supplement in all respects, the Seller
shall be deemed to have made the representations and warranties with respect to
each Qualified Substitute Loan set forth in Section 6(b) of the Agreement and
this PA Supplement and Section 6(c) of the Agreement, in each case as of the
date of substitution, and the Seller shall be deemed to have made a
representation and warranty that each Loan so substituted is an Qualified
Substitute Loan as of the date of substitution. The Seller shall be obligated to
repurchase or substitute for any Eligible Substitute Loan as to which the Seller
has breached the Seller's representations and warranties in Section 6(b) to the
same extent as for any other Series 2002-1 Loan, as provided herein. In
connection with the substitution of one or more Qualified Substitute Loans for
one or more Defective Loans, the Master Servicer shall determine the amount
(such amount, a "SUBSTITUTION ADJUSTMENT AMOUNT"), if any, by which the
aggregate principal balance of all such Qualified Substitute Loans as of the
date of substitution is less than the aggregate principal balance of all such
Defective Loans (after application of the principal portion of the Scheduled
Payments due in the month of substitution that are to be distributed to the
Company in the month of substitution). The Seller shall deposit the amount of
such shortfall into the Collection Account in immediately available funds on the
date of substitution, without any reimbursement therefor.

     Upon each repurchase or substitution, the Company shall automatically and
without further action sell, transfer, assign, set over and otherwise convey to
the Seller, without recourse, representation or warranty, all of the Company's
right, title and interest in and to the related Defective Loan, the related
Timeshare Property, the Loan File relating thereto and any other related
Transferred Assets, all monies due or to become due with respect thereto and all
Collections with respect thereto (including payments received from Obligors from
and including the last day of the Due Period next preceding the date of
transfer, subject to the payment of any Substitution Adjustment Amount). The
Company shall execute such documents, releases and instruments of transfer or
assignment and take such other actions as shall reasonably be requested by the
Seller to effect the conveyance of such Defective Loan, the related Timeshare
Property and related Loan File pursuant to this Section 7(b).

     Promptly after the occurrence of a Repurchase Date and after the repurchase
of Defective Loans in respect of which the Repurchase Price has been paid on
such date, the Seller shall direct the Master Servicer to delete such Defective
Loans from the Series 2002-1 Loan Schedule.

     The obligation of the Seller to repurchase or substitute for any Defective
Loan shall constitute the sole remedy against the Seller, FRI or their
Affiliates with respect to any breach of the representations and warranties set
forth in Section 6(b) available hereunder to the Company or its successors or
assigns.

                                       13


            (c)   REPURCHASES OF SERIES 2002-1 LOANS THAT BECOME DEFAULTED
LOANS. If any Series 2002-1 Loan becomes a Defaulted Loan during any Due Period,
the Seller may repurchase such Defaulted Loan from the Company or its assignees
at the Repurchase Price therefor and in accordance with the additional
provisions applicable to repurchases of Defective Loans under Section 7(b).

            (d)   MAXIMUM REPURCHASES. Notwithstanding anything to the contrary
in the Agreement or this PA Supplement, no Defaulted Loans shall be repurchased
by the Seller to the extent that the aggregate principal balance of all
Defaulted Loans so repurchased is greater than the Defaulted Loan Repurchase
Cap.

     SECTION 8.   COVENANTS OF THE SELLER AND FRI.

     Section 8 is set forth in the Agreement.

     SECTION 9.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     Section 9 is set forth in the Agreement.

     SECTION 10.  COVENANTS OF THE COMPANY.

     Section 10 is set forth in the Agreement.

     SECTION 11.  MISCELLANEOUS PROVISIONS.

     Sections 11(a) through (k) are set forth in the Agreement.

          (l)     RATIFICATION OF AGREEMENT. As supplemented by this PA
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this PA Supplement shall be read, taken and
construed as one and the same instrument.

          (m)     AMENDMENT. This PA Supplement may be amended from time to time
or the provisions hereof may be waived or otherwise modified by the parties
hereto by written agreement signed by the parties hereto.

          (n)     COUNTERPARTS. This PA 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.

          (o)     GOVERNING LAW. THIS PA SUPPLEMENT IS GOVERNED BY AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES.

          (p)     SUCCESSORS AND ASSIGNS. This PA Supplement shall be binding
upon each of the Seller, FRI, the VB Subsidiaries, the VB Partnerships and the
Company and their respective permitted successors and assigns, and shall inure
to the benefit of, and be enforceable

                                       14


by, each of the Seller, FRI, the VB Subsidiaries, the VB Partnerships and the
Company and each of the Issuer, the Trustee, the Collateral Agent and the
Noteholders.

                                       15


     IN WITNESS WHEREOF, the parties have caused their names to be signed hereto
by their respective officers thereunto duly authorized, all as of the day and
year first above written.

                                         FAIRFIELD ACCEPTANCE CORPORATION-
                                         NEVADA

                                         By:    /s/ Ralph E. Turner
                                             --------------------------------
                                             Name:  Ralph E. Turner
                                             Title: President and Treasurer

                                         FAIRFIELD RESORTS, INC.

                                         By:    /s/ Ralph E. Turner
                                             --------------------------------
                                             Name:  Ralph E. Turner
                                             Title: Senior Vice President and
                                                    Assistant Treasurer

                                         FAIRFIELD MYRTLE BEACH, INC.

                                         By:    /s/ Ralph E. Turner
                                             --------------------------------
                                             Name:  Ralph E. Turner
                                             Title: Senior Vice President and
                                                    Assistant Treasurer

                                         SEA GARDENS BEACH AND
                                         TENNIS RESORT, INC.

                                         By:    /s/ Ralph E. Turner
                                             --------------------------------
                                             Name:  Ralph E. Turner
                                             Title: Senior Vice President and
                                                    Assistant Treasurer

                                         VACATION BREAK RESORTS, INC.

                                         By:    /s/ Ralph E. Turner
                                             --------------------------------
                                             Name:  Ralph E. Turner
                                             Title: Assistant Treasurer

                                         VACATION BREAK RESORTS AT
                                         STAR ISLAND, INC.

                                         By:    /s/ Ralph E. Turner
                                             --------------------------------
                                             Name:  Ralph E. Turner
                                             Title: Senior Vice President and
                                                    Assistant Treasurer

                     [Signature page for FAC PA Supplement]



                                         PALM VACATION GROUP,
                                         by its General Partners:

                                         Vacation Break Resorts at Palm Aire,
                                         Inc.

                                         By:    /s/ Ralph E. Turner
                                             --------------------------------
                                             Name:  Ralph E. Turner
                                             Title: Senior Vice President and
                                                    Assistant Treasurer

                                         Palm Resort Group, Inc.

                                         By:    /s/ Ralph E. Turner
                                             --------------------------------
                                             Name:  Ralph E. Turner
                                             Title: Senior Vice President and
                                                    Assistant Treasurer

                                         OCEAN RANCH VACATION GROUP,
                                         by its General Partners:

                                         Vacation Break at Ocean Ranch,
                                         Inc.

                                         By:    /s/ Ralph E. Turner
                                             --------------------------------
                                             Name:  Ralph E. Turner
                                             Title: Senior Vice President and
                                                    Assistant Treasurer

                                         Ocean Ranch Development, Inc.

                                         By:    /s/ Ralph E. Turner
                                             --------------------------------
                                             Name:  Ralph E. Turner
                                             Title: Senior Vice President and
                                                    Assistant Treasurer

                                         SIERRA DEPOSIT COMPANY, LLC

                                         By:    /s/ Ralph E. Turner
                                             --------------------------------
                                             Name:  Ralph E. Turner
                                             Title: President and Treasurer

                     [Signature page for FAC PA Supplement]




                                                                   EXHIBIT 10.65

                                                                  EXECUTION COPY


- --------------------------------------------------------------------------------

                         MASTER LOAN PURCHASE AGREEMENT
                           Dated as of August 29, 2002

                                 by and between

                            TRENDWEST RESORTS, INC.,
                                    as Seller

                                       and

                           SIERRA DEPOSIT COMPANY, LLC
                                  as Purchaser

- --------------------------------------------------------------------------------



                                TABLE OF CONTENTS




                                                                                                         PAGE
                                                                                                         ----
                                                                                                       
Section 1.    Definitions..................................................................................1

Section 2.    Purchase and Sale of Loans..................................................................14

Section 3.    Pool Purchase Price.........................................................................14

Section 4.    Payment of Purchase Price...................................................................14

       (a)    Closing Dates...............................................................................14

       (b)    Manner of Payment of Additional Pool Purchase Price.........................................15

       (c)    Scheduled Payments Under Loans and Cut-Off Date.............................................15

Section 5.    Conditions Precedent to Sale of Loans.......................................................15

Section 6.    Representations and Warranties of the Seller................................................15

       (a)    General Representations and Warranties of the Seller........................................15

       (b)    Representations and Warranties Regarding the Loans..........................................19

       (c)    Representations and Warranties Regarding the Loan Files.....................................23

       (d)    Survival of Representations and Warranties..................................................24

       (e)    Indemnification of the Company..............................................................24

Section 7.    Repurchases or Substitution of Loans for Breach of Representations and Warranties...........24

Section 8.    Covenants of the Seller.....................................................................24

       (a)    Affirmative Covenants of the Seller.........................................................24

       (b)    Negative Covenants of the Seller............................................................28

Section 9.    Representations and Warranties of the Company...............................................30

Section 10.   Affirmative Covenants of the Company........................................................31

Section 10A   Negative Covenant of the Company............................................................32

Section 11.   Miscellaneous...............................................................................32

       (a)    Amendment...................................................................................32

       (b)    Assignment..................................................................................32

       (c)    Counterparts................................................................................32

       (d)    Termination.................................................................................32

       (e)    GOVERNING LAW...............................................................................32

       (f)    Notices.....................................................................................33

       (g)    Severability of Provisions..................................................................33

       (h)    Successors and Assigns......................................................................33

       (i)    Costs, Expenses and Taxes...................................................................33

       (j)    No Bankruptcy Petition......................................................................33



                                       -i-


                                    SCHEDULES

Schedule 1 - Loan Schedule

Schedule 2 - Resorts

Schedule 3 - Environmental Issues

Schedule 4 - Lockbox Accounts

Schedule 5 - Litigation

                                    EXHIBITS

Exhibit A   Form of Custodial Agreement

Exhibit B   Form of Assignment of Additional Loans

Exhibit C   Credit Standards and Collection Policies of Trendwest Resorts, Inc.

Exhibit D   Forms of Loans

Exhibit E   Form of Lockbox Agreement

                                      -ii-


An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.



                         MASTER LOAN PURCHASE AGREEMENT

     THIS MASTER LOAN PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
August 29, 2002, is made by and between TRENDWEST RESORTS, INC., an Oregon
corporation, as seller (the "SELLER"), and SIERRA DEPOSIT COMPANY, LLC, a
Delaware limited liability company, as purchaser (hereinafter referred to as the
"PURCHASER" or the "COMPANY").

                                    RECITALS

     WHEREAS, Trendwest has originated certain Loans in connection with the sale
to Obligors of Timeshare Properties at various Resorts;

     WHEREAS, each of the Seller and the Company wishes to enter into this
Agreement and the related Master Loan Purchase Agreement Supplement for each
Series of Notes (each, a "PA SUPPLEMENT") in order to, among other things,
effect the sale to the Company on the related Closing Date of Initial Loans and
related Transferred Assets that the Seller owns as of the close of business on
the related Cut-Off Date, and the sale to the Company of Additional Loans
(including Additional Upgrade Balances) and related Transferred Assets that the
Seller will own from time to time thereafter as of the close of business on the
related Addition Cut-Off Dates; and

     WHEREAS, the Company intends to transfer and assign the Loans and related
Transferred Assets to the Issuer, which will then grant security interests in
the Loans and related Transferred Assets to Wachovia Bank, National Association,
as Collateral Agent on behalf of the Trustee and the holders of Notes issued
from time to time pursuant to a Master Indenture and Servicing Agreement of even
date herewith (the "INDENTURE AND SERVICING AGREEMENT"), together with any
Indenture Supplements thereto, each by and between Sierra Receivables Funding
Company, LLC as Issuer, FAC as Master Servicer, the Trustee and the Collateral
Agent.

     NOW, THEREFORE, in consideration of the purchase price set forth herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:

Section 1.   DEFINITIONS.

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

     "ADDITION CUT-OFF DATE" shall mean, for Additional Loans of any Series, the
date set forth in the related Assignment.

     "ADDITION DATE" shall mean, with respect to any Series, the Addition Date
as defined in the related PA Supplement.

     "ADDITIONAL LOAN" shall mean, with respect to any Series, each Installment
Contract or other contract for deed or contract or note secured by a mortgage,
deed of trust, vendor's lien or retention of title, in each case relating to the
sale of one or more Timeshare Properties or Green



Timeshare Properties to an Obligor and each Additional Upgrade Balance, in each
case constituting one of the Loans of such Series purchased from the Seller on
an Addition Cut-Off Date and listed on Schedule 1 to the related Assignment.

     "ADDITIONAL POOL PURCHASE PRICE" shall have the meaning set forth in
Section 3.

     "ADDITIONAL UPGRADE BALANCE" shall mean, with respect to any Loan, any
future borrowing made by the related Obligor pursuant to a modification of the
Loan relating to a Timeshare Upgrade after the Cut-Off Date or the Addition
Cut-Off Date, as applicable, with respect to such Loan, together with all money
due or to become due in respect of such borrowing.

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

     "AGREEMENT" shall mean this Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.

     "AMORTIZATION EVENT" shall mean, with respect to any Series, one or more of
the events constituting an Amortization Event as defined in the related
Indenture Supplement.

     "ASSESSMENTS" shall mean any assessments made with respect to a Timeshare
Property, including but not limited to real estate taxes, recreation fees,
community club or property owners' association dues, water and sewer improvement
district assessments or other similar assessments, the nonpayment of which could
result in the imposition of a Lien or other encumbrance upon such Timeshare
Property.

     "ASSIGNMENT" shall mean, with respect to any Series, an Assignment as
defined in the related PA Supplement.

     "ASSIGNMENT OF MORTGAGE" shall mean any assignment (including any
collateral assignment) of any Mortgage.

     "BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, Title 11 of
the United States Code, as amended.

     "BENEFIT PLAN" shall mean any employee benefit plan as defined in
Section 3(3) of ERISA in respect of which the Company or any ERISA Affiliate of
the Company is, or at any time during the immediately preceding six years was,
an "employer" as defined in Section 3(5) of ERISA.

     "BUSINESS DAY" shall mean any day other than (i) a Saturday or Sunday or
(ii) a day on which banking institutions in New York, New York, Las Vegas,
Nevada, or the city in which the Corporate Trust Office of the Trustee is
located, or any other city specified in the PA Supplement for a Series, are
authorized or obligated by law or executive order to be closed.

                                        2


     "CENDANT" shall mean Cendant Corporation or any successor thereof.

     "CLOSING DATE" shall mean, with respect to any Series, the Closing Date as
defined in the related PA Supplement.

     "COLLATERAL" shall have the meaning set forth in the Indenture and
Servicing Agreement.

     "COLLATERAL AGENCY AGREEMENT" shall mean the Collateral Agency Agreement
dated as of January 15, 1998 by and between Fleet National Bank as predecessor
Collateral Agent, Fleet Securities, Inc. as deal agent and the secured parties
named therein, as amended by the First Amendment to Collateral Agency Agreement
dated as of July 31, 1998, as further amended by the Second Amendment to
Collateral Agreement dated as of July 25, 2000, as further amended by the Third
Amendment to Collateral Agency Agreement dated as of July 1, 2001, and as
further amended by the Fourth Amendment to Collateral Agency Agreement dated as
of August 29, 2002 by and among the Collateral Agent, the Trustee and other
secured parties, as such Collateral Agency Agreement may be amended,
supplemented or otherwise modified from time to time in accordance therewith.

     "COLLATERAL AGENT" shall mean Wachovia Bank, National Association, as
Collateral Agent, its successors and assigns and any entity which is substituted
as Collateral Agent under the terms of the Collateral Agency Agreement.

     "COLLECTION ACCOUNT" shall mean the account or accounts established
pursuant to Section 7.1(a) of the Indenture and Servicing Agreement.

     "COLLECTIONS" shall mean, with respect to any Loan, all funds, cash
collections and other cash proceeds of such Loan, including without limitation
(i) all Scheduled Payments or recoveries made in the form of money, checks and
like items to, or a wire transfer or an automated clearinghouse transfer
received in, any of the Lockbox Accounts or received by the Issuer or the Master
Servicer (or any Subservicer) in respect of such Loan, (ii) all amounts received
by the Issuer, the Master Servicer (or any Subservicer) or the Trustee in
respect of any Insurance Proceeds relating to such Loan or the related Timeshare
Property and (iii) all amounts received by the Issuer, the Master Servicer (or
any Subservicer) or the Trustee in respect of any proceeds in respect of a
condemnation of property in any Resort, which proceeds relate to such Loan or
the related Timeshare Property.

     "COMPANY" shall have the meaning set forth in the preamble.

     "CONTAMINANTS" shall have the meaning set forth in Section 6(b)(xii).

     "CORPORATE TRUST OFFICE" shall have the meaning set forth in the Indenture
and Servicing Agreement.

     "CREDIT CARD ACCOUNT" shall mean an arrangement whereby an Obligor makes
Scheduled Payments under a Loan via pre-authorized debit to a Major Credit Card.

     "CREDIT STANDARDS AND COLLECTION POLICIES" shall mean the Credit Standards
and Collection Policies of Trendwest, a copy of which is attached to this
Agreement as Exhibit C, as

                                        3


the same may be amended from time to time in accordance with the provisions of
Section 8(b)(iii).

     "CUSTODIAL AGREEMENT" shall mean the custodial agreement dated as of
August 29, 2002 by and between the Issuer, FAC, EFI, Trendwest, Wachovia Bank,
National Association as Custodian, the Trustee and the Collateral Agent, a copy
of which is attached to this Agreement as Exhibit A, as the same may be amended,
supplemented or otherwise modified from time to time thereafter in accordance
with the terms hereof.

     "CUSTODIAN" shall mean, at any time, the custodian under the Custodial
Agreement at such time.

     "CUSTOMARY PRACTICES" shall mean the Master Servicer's practices with
respect to the servicing and administration of Loans as in effect from time to
time, which practices shall be consistent with the practices employed by prudent
lending institutions that originate and service instruments similar to the Loans
or other timeshare loans in the jurisdictions in which the Resorts are located.

     "CUT-OFF DATE" shall mean, with respect to any Series, the Cut-Off Date as
defined in the related PA Supplement.

     "DE MINIMUS LEVELS" shall have the meaning set forth in Section 6(b)(xii).

     "DEBTOR RELIEF LAWS" shall mean the Bankruptcy Code and all other
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments or similar
debtor relief laws from time to time in effect affecting the rights of creditors
generally.

     "DEFAULTED LOAN" shall mean any 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 has been the
subject of a proceeding under a Debtor Relief Law or (d) for which cancellation
or foreclosure actions have been commenced.

     "DEFAULTED LOAN REPURCHASE CAP" shall mean, as of any date of
determination, an amount equal to the PRODUCT of (a) 16.0% MULTIPLIED BY (b) the
aggregate Loan principal balance of all Loans (calculated as of the Cut-Off Date
or related Addition Cut-Off Date, as applicable, for each Loan) sold by the
Seller to the Depositor pursuant to this Agreement on or prior to such date of
determination.

     "DEFECTIVE LOAN" shall mean, with respect to any Series, any Loan with any
uncured material breach of a representation or warranty of the Seller set forth
in Section 6(b) hereof and in the related PA Supplement.

     "DELINQUENT LOAN" shall mean, with respect to any Series, a Loan with any
portion of a Scheduled Payment delinquent more than 30 days, other than any Loan
that is a Defaulted Loan.

                                        4


     "DEPOSITOR ADMINISTRATIVE SERVICES AGREEMENT" shall mean the administrative
services agreement dated as of August 29, 2002 by and between FAC, as
administrator, and the Company.

     "DUE DATE" shall mean, with respect to any Loan, the date on which an
Obligor is required to make a Scheduled Payment thereon.

     "DUE PERIOD" shall mean, with respect to any Payment Date, the immediately
preceding calendar month.

     "EFI" shall mean EFI Development Funding, Inc., a Delaware corporation and
a wholly-owned indirect Subsidiary of Cendant.

     "ELIGIBLE LOAN" shall mean, with respect to any Series, an Eligible Loan as
defined in the related PA Supplement.

     "ENVIRONMENTAL LAWS" shall have the meaning set forth in Section 6(b)(xii).

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

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

     "ERISA AFFILIATE" shall mean, with respect to any Person, (i) any
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Internal Revenue Code) as such
Person; (ii) a trade or business (whether or not incorporated) under common
control (within the meaning of Section 414(c) of the Internal Revenue Code) with
such Person; or (iii) a member of the same affiliated service group (within the
meaning of Section 414(m) of the Internal Revenue Code) as such Person, any
corporation described in clause (i) or any trade or business described in clause
(ii).

     "ERISA LIABILITIES" shall have the meaning set forth in Section 8(b)(vi).

     "EVENT OF DEFAULT" shall mean, with respect to any Series, one or more of
the events constituting an Event of Default under the related Indenture
Supplement.

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

                                        5


     "FACILITY DOCUMENTS" shall mean, collectively, this Agreement, each PA
Supplement, the Indenture and Servicing Agreement, each Indenture Supplement,
the Pool Purchase Agreement, each PPA Supplement, the Custodial Agreement, the
Lockbox Agreements, the Collateral Agency Agreement, the Loan Conveyance
Documents, the Depositor Administrative Services Agreement, the Issuer
Administrative Services Agreement, the Financing Statements and all other
agreements, documents and instruments delivered pursuant thereto or in
connection therewith.

     "FRI" shall mean Fairfield Resorts, Inc., a Delaware corporation and the
parent corporation of FAC.

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

     "GRANT" shall have the meaning set forth in the Indenture and Servicing
Agreement.

     "GREEN LOAN" shall mean a Loan the proceeds of which are used to finance
the purchase of a Green Timeshare Property.

     "GREEN TIMESHARE PROPERTY" shall mean a Timeshare Property for which
construction on the related Resort has not yet begun or is subject to
completion.

     "INDEMNIFIED AMOUNTS" shall have the meaning set forth in Section 6(e).

     "INDENTURE AND SERVICING AGREEMENT" shall have the meaning set forth in the
recitals.

     "INDENTURE SUPPLEMENT" shall mean, with respect to any Series, an indenture
supplement to the Indenture and Servicing Agreement, executed and delivered in
connection with the issuance of the Notes of such Series pursuant to
Section 2.10 of the Indenture and Servicing Agreement, and all amendments
thereof and supplements thereto.

     "INDEPENDENT DIRECTOR" shall mean an individual who is an Independent
Director as defined in the Limited Liability Company Agreement of the Company as
in effect on the date of this Agreement.

     "INITIAL CLOSING DATE" shall mean August 29, 2002.

     "INITIAL LOAN" shall mean, with respect to any Series, each Loan listed on
the related Loan Schedule on the Closing Date for such Series.

     "INSOLVENCY EVENT" shall mean, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Debtor Relief Law now or hereafter in
effect, or the filing of a petition against such Person in an involuntary case
under any applicable Debtor Relief Law now or hereafter in effect, which case
remains unstayed and undismissed within 30 days of such filing, or the
appointing of a receiver, conservator, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its property, or the ordering of the winding-up or

                                        6


liquidation of such Person's business; or (b) the commencement by such Person of
a voluntary case under any applicable Debtor Relief Law now or hereafter in
effect, or the consent by such Person to the entry of an order for relief in an
involuntary case under any such Debtor Relief Law, or the consent by such Person
to the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due or the admission by such Person of its
inability to pay its debts generally as they become due.

     "INSOLVENCY PROCEEDING" shall mean any proceeding relating to an Insolvency
Event.

     "INSTALLMENT CONTRACT" shall mean, with respect to any Series, an
installment sale contract for deed and retained title in a related Timeshare
Property by and between the Seller and an Obligor.

     "INSURANCE PROCEEDS" shall mean proceeds of any insurance policy relating
to any Loan or the related Timeshare Property, including any refund of unearned
premium, but only to the extent such proceeds are not to be applied to the
restoration of any improvements on the related Timeshare Property or released to
the Obligor in accordance with Customary Practices.

     "INTERCREDITOR AGREEMENT" shall mean the intercreditor and clearing account
agreement, dated as of January 3, 2001, among the Seller, LaSalle Bank National
Association, Wells Fargo Bank Minnesota, National Association, the Issuers named
therein, Bank One, NA, Jupiter Securitzation Corporation, TW Holdings III,
KeyBank National Association, and the other parties thereto by accession.

     "INTERNAL REVENUE CODE" shall mean the United States Internal Revenue Code
of 1986, as amended from time to time.

     "ISSUER" shall mean Sierra Receivables Funding Company, LLC, a Delaware
limited liability company.

     "ISSUER ADMINISTRATIVE SERVICES AGREEMENT" shall mean the administrative
services agreement dated as of August 29, 2002 by and between FAC as
administrator and the Issuer.

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

     "LOAN" shall mean, with respect to any Series, each Installment Contract or
other contract for deed or contract or note secured by a mortgage, deed of
trust, vendor's lien or retention of title, in each case relating to the sale of
one or more Timeshare Properties or Green Timeshare

                                        7


Properties to an Obligor, that is listed on the Loan Schedule for such Series on
the related Closing Date and any Additional Loans that are listed from time to
time on such Loan Schedule in accordance with the related PA Supplement.

     "LOAN CONVEYANCE DOCUMENTS" shall mean, with respect to any Loan, (a) the
Assignment of Additional Loans in the form of Exhibit B, if applicable, and (b)
any such other releases, documents, instruments or agreements as may be required
by the Company, the Issuer or the Trustee in order to more fully effect the sale
(including any prior assignments) of such Loan and any related Transferred
Assets.

     "LOAN DOCUMENTS" shall mean, with respect to any Loan, all papers and
documents related to such Loan, including the original of all applicable
promissory notes, stamped as required by the Custodial Agreement, the original
of any related recorded or (to the extent permitted under this Agreement)
unrecorded Mortgage (or a copy of such recorded Mortgage if the original of the
recorded Mortgage is not available, certified to be a true and complete copy of
the original) and a copy of any recorded or (to the extent permitted under this
Agreement) unrecorded warranty deed transferring legal title to the related
Timeshare Property to the Obligor; PROVIDED, HOWEVER, that the Loan Documents
may be provided in microfiche or other electronic form to the extent permitted
under the Custodial Agreement.

     "LOAN FILE" shall mean, with respect to any Loan, the Loan Documents
pertaining to such Loan and any additional amendments, supplements, extensions,
modifications or waiver agreements required to be added to the Loan File
pursuant to this Agreement, the Credit Standards and Collection Policies and/or
Customary Practices.

     "LOAN POOL" shall mean, with respect to any Series, all Loans identified in
the Loan Schedule for such Series.

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

     "LOAN SCHEDULE" shall mean, with respect to any Series, the list of Loans
attached to the related PA Supplement as Schedule 1, as amended from time to
time on each Addition Date and Repurchase Date as provided in the related PA
Supplement, which list shall set forth the following information with respect to
each Loan therein as of the applicable date:

     (a)     the Loan number;

     (b)     the Obligor's name and the home address and telephone number for
             such Obligor set forth in the Loan;

     (c)     the Resort in which the related Timeshare Property is located, if
             applicable;

     (d)     as to Timeshare Properties other than UDIs, the number of Vacation
             Credits related thereto for which occupancy rights in a Timeshare
             Property may be redeemed and which are represented thereby;

                                        8


     (e)     the Loan Rate;

     (f)     whether the Obligor has elected a PAC with respect to the Loan;

     (g)     the original term of the Loan;

     (h)     the original Loan principal balance and outstanding Loan principal
             balance as of the Cut-Off Date or related Addition Cut-Off Date, as
             applicable;

     (i)     the date of execution of the Loan;

     (j)     the amount of the Scheduled Payment on the Loan;

     (k)     the original Timeshare Price and Equity Percentage; and

     (l)     with respect to UDI's whether the related Timeshare Property has
             been deeded to the Obligor.

     The Loan Schedule also shall set forth the aggregate amounts described
under clause (h) above for all outstanding Loans. The Loan Schedule may be in
the form of more than one list, collectively setting forth all of the
information required.

     "LOCKBOX ACCOUNT" shall mean any of the accounts established pursuant to a
Lockbox Agreement.

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

     "LOCKBOX BANK" shall mean any of the commercial banks holding one or more
Lockbox Accounts for the purpose of receiving Collections.

     "LOT" shall mean a fully or partially developed parcel of real estate.

     "MAJOR CREDIT CARD" shall mean a credit card issued by any Visa USA, Inc.,
MasterCard International Incorporated, American Express Company, Discover Bank
or Diners Club International Ltd. credit card entity.

     "MASTER SERVICER" shall mean the master servicer under the Indenture and
Servicing Agreement.

     "MATERIAL ADVERSE EFFECT" shall mean, with respect to any Person and any
event or circumstance, a material adverse effect on:

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

                                        9


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

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

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

             (e)     the value, validity, enforceability or collectibility of
     the Loans pledged as collateral for any Series of Notes or any of the other
     Transferred Assets pledged as collateral for any Series of Notes.

     "MORTGAGE" shall mean any mortgage, deed of trust, purchase money deed of
trust or deed to secure debt encumbering the related Timeshare Property, granted
by the related Obligor to the Seller to secure payments or other obligations
under a Loan.

     "MULTIEMPLOYER PLAN" shall have the meaning set forth in Section 3(37) of
ERISA.

     "NOTE" shall mean any Loan-backed note issued, executed and authenticated
in accordance with the Indenture and Servicing Agreement and any related
Indenture Supplement.

     "NOTEHOLDER" shall have the meaning set forth in the Indenture and
Servicing Agreement.

     "OBLIGOR" shall mean, with respect to any Loan, the Person or Persons
obligated to make Scheduled Payments thereon.

     "OPINION OF COUNSEL" shall mean a written opinion of counsel in form and
substance reasonably satisfactory to the recipient thereof.

     "PAC" shall mean an arrangement whereby an Obligor makes Scheduled Payments
under a Loan via pre-authorized bank account debit.

     "PA SUPPLEMENT" shall have the meaning set forth in the recitals.

     "PAYMENT DATE" shall mean, with respect to any Series, the payment date set
forth in the related Indenture Supplement.

     "PERMITTED ENCUMBRANCE" shall mean, with respect to a Loan, any of the
following Liens against the related Timeshare Property: (i) the interest therein
of the Obligor, (ii) the Lien of due and unpaid Assessments, (iii) covenants,
conditions and restrictions, rights of way, easements and other matters of
public record, such exceptions appearing of record being consistent with the
normal business practices of the Seller or specifically disclosed in the
applicable land sales registrations filed with the applicable regulatory
agencies and (iv) other matters to which properties of the same type as those
underlying such Loan are commonly subject that do not materially interfere with
the benefits of the security intended to be provided by such Timeshare Property.

                                       10


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

     "PLAN" shall mean an employee benefit plan or other retirement arrangement
subject to ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended from time to time.

     "PLAN INSOLVENCY" shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.

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

     "POOL PURCHASE AGREEMENT" shall mean the master purchase agreement relating
to the Loans, dated the date hereof, by and between the Company and the Issuer,
and all amendments thereof and supplements thereto including, with respect to
any Series, the related PPA Supplement.

     "POOL PURCHASE PRICE" shall mean, with respect to any Series, the Pool
Purchase Price as defined in the related PA Supplement.

     "POST OFFICE BOX" shall mean each post office box to which Obligors are
directed to mail payments in respect of the Loans of any Series.

     "PPA SUPPLEMENT" shall mean any supplement to the Pool Purchase Agreement
relating to a particular Series of Notes.

     "PURCHASE" shall mean, with respect to any Series, a Purchase as defined in
the related PA Supplement.

     "PURCHASER" shall have the meaning set forth in the preamble.

     "QUALIFIED SUBSTITUTE LOAN" shall mean, with respect to any Series, a
substitute Loan that (i) is an Eligible Loan on the applicable date of
substitution for such substitute Loan, (ii) on such date of substitution has a
Loan Rate not less than the Loan Rate of the substituted Loan and (iii) is not
selected in a manner adverse to the Purchaser and its assignees.

     "RECORDS" shall mean all copies of Loans (not including originals) and
other documents, books, records and other information (including without
limitation computer programs, tapes, discs, punch cards, data processing
software and related property and rights) maintained by the Seller or any of its
respective Affiliates (not including the Purchaser or the Issuer) with respect
to Loans, the related Transferred Assets and the related Obligors.

     "REORGANIZATION" shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning of Section 4241
of ERISA.

                                       11


     "REPORTABLE EVENT" shall mean any of the events described in Section 4043
of ERISA.

     "REPURCHASE DATE" shall mean, with respect to any Series, the Repurchase
Date as defined in the related PA Supplement.

     "REPURCHASE PRICE" shall mean, with respect to any Series, the Repurchase
Price as defined in the related PA Supplement.

     "RESERVATION SYSTEM" shall mean the system with respect to Timeshare
Properties pursuant to which a reservation for a particular location, time,
length of stay and unit type is received, accepted, modified or canceled.

     "RESERVE ACCOUNT" shall, with respect to any Series, mean any reserve
account established pursuant to the related Indenture Supplement.

     "RESORT" shall mean each resort or development listed on Schedule 2 (as
such Schedule 2 may be amended from time to time with the consent of the Company
and the Seller in connection with proposed sales of Additional Loans relating to
resorts or developments with respect to which Loans have not previously been
sold under this Agreement).

     "SCHEDULED PAYMENT" shall mean each scheduled monthly payment of principal
and interest on a Loan.

     "SELLER" shall have the meaning set forth in the preamble.

     "SERIES" shall mean any Series of Notes issued and established pursuant to
an Indenture Supplement.

     "SERIES TERMINATION DATE" shall mean, with respect to any Series, the
Series Termination Date as defined in the related PA Supplement.

     "STATE" shall mean any of the 50 United States or the District of Columbia.

     "SUBSERVICER" shall have the meaning set forth in the Indenture and
Servicing Agreement.

     "SUBSERVICING AGREEMENT" shall have the meaning set forth in the Indenture
and Servicing Agreement.

     "SUBSIDIARY" shall mean, with respect to any Person, any corporation or
other entity of which more than 50% of the outstanding capital stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors of such corporation (notwithstanding that at the time capital
stock of any other class or classes of such corporation shall or might have
voting power upon the occurrence of any contingency) or other persons performing
similar functions is at the time directly or indirectly owned by such Person.

     "SUBSTITUTION ADJUSTMENT AMOUNT" shall, with respect to any Series, have
the meaning set forth in the related PA Supplement.

                                       12


     "TIMESHARE PRICE" shall mean the original price of the Timeshare Property
paid by an Obligor, plus any accrued and unpaid interest and other amounts owed
by the Obligor.

     "TIMESHARE PROPERTY" shall mean the underlying ownership interest that is
the subject of a Loan, which ownership interest may be either a UDI or Vacation
Credits.

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

     "TIMESHARE UPGRADE" shall mean the upgrade by an Obligor of the Obligor's
existing Timeshare Property to an upgraded Timeshare Property.

     "TRANSFERRED ASSETS" shall mean, with respect to any Series, any and all
right, title and interest of the Seller in, to and under:

             (a)     the Loans from time to time, including without limitation
     the Initial Loans as of the close of business on the Cut-Off Date and the
     Additional Loans as of the close of business on the related Addition
     Cut-Off Dates and all Scheduled Payments, other Collections and other funds
     received in respect of such Initial Loans and Additional Loans on or after
     the Cut-Off Date or Addition Cut-Off Date, as applicable, and any other
     monies due or to become due on or after the Cut-Off Date or Addition
     Cut-Off Date, as applicable, in respect of any such Loans, and any security
     therefor;

             (b)     the Timeshare Properties relating to the Loans;

             (c)     any Mortgages relating to the Loans;

             (d)     any Insurance Policies relating to the Loans;

             (e)     the Loan Files and other Records relating to the Loans;

             (f)     the Loan Conveyance Documents relating to the Loans;

             (g)     all interest, dividends, cash, instruments, financial
     assets and other investment property and other property from time to time
     received, receivable or otherwise distributed in respect of, or in exchange
     for, or on account of, the sale or other disposition of the Transferred
     Assets, and including all payments under Insurance Policies (whether or not
     any of the Seller, the Purchaser, the Master Servicer, the Issuer 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
     Transferred Assets, and any security granted or purported to be granted in
     respect of any Transferred Assets; and

                                       13


             (h)     all proceeds of any of the foregoing property described in
     clauses (a) through (g).

     "TRENDWEST" shall mean Trendwest Resorts, Inc., a wholly-owned indirect
Subsidiary of Cendant.

     "TRUSTEE" shall mean Wachovia Bank, National Association, as Trustee under
the Indenture and Servicing Agreement, and its successors and assigns.

     "UCC" shall mean the Uniform Commercial Code, as amended from time to time,
as in effect in any specified jurisdiction.

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

     "VACATION CREDITS" shall mean ownership interests in WorldMark that entitle
the owner thereof to use Resorts.

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

Section 2.   PURCHASE AND SALE OF LOANS.

     The Seller may from time to time sell and assign to the Company, and the
Company may from time to time Purchase from the Seller, all the Seller's right,
title and interest in, to and under the Loans listed on the Loan Schedule with
respect to the related PA Supplement. The principal terms of the Purchase and
sale of Loans for each Series shall be set forth in the related PA Supplement.

Section 3.   POOL PURCHASE PRICE.

     Provisions with respect to the Purchase and sale of the Loans for each
Series shall be set forth in the related PA Supplement.

     The purchase price for any Additional Loans and other related Transferred
Assets (the "ADDITIONAL POOL PURCHASE PRICE") conveyed to the Company under this
Agreement and the related PA Supplement on each Addition Date shall be a dollar
amount equal to the aggregate outstanding principal balance of such Additional
Loans sold on such date, subject to adjustment to reflect such factors as the
Company and the Seller mutually agree will result in an Additional Pool Purchase
Price equal to the fair market value of such Additional Loans and other related
Transferred Assets.

Section 4.   PAYMENT OF PURCHASE PRICE.

             (a)     CLOSING DATES. On the terms and subject to the conditions
of this Agreement and the related PA Supplement payment of the Pool Purchase
Price for each Series shall be made by the Company on the related Closing Date
in immediately available funds to the

                                       14


Seller to such accounts at such banks as the Seller shall designate to the
Company not less than one Business Day prior to the such Closing Date.

             (b)     MANNER OF PAYMENT OF ADDITIONAL POOL PURCHASE PRICE. On the
terms and subject to the conditions in this Agreement and the related PA
Supplement, the Company shall pay to the Seller, on each Business Day on which
any Additional Loans are purchased from the Seller by the Company pursuant to
Section 2 of the related PA Supplement, the Additional Pool Purchase Price for
such Additional Loans by paying such Additional Pool Purchase Price to the
Seller in cash.

             (c)     SCHEDULED PAYMENTS UNDER LOANS AND CUT-OFF DATE. The
Company shall be entitled to all Scheduled Payments, other Collections and all
other funds with respect to any Loan received on or after the related Cut-Off
Date or Addition Cut-Off Date, as applicable. The principal balance of each Loan
as of the related Cut-Off Date or Addition Cut-Off Date, as applicable, shall be
determined after deduction, in accordance with the terms of each such Loan, of
payments of principal received before such Cut-Off Date or Addition Cut-Off
Date.

Section 5.   CONDITIONS PRECEDENT TO SALE OF LOANS.

             No Purchase of Loans and related Transferred Assets shall be made
hereunder or under any PA Supplement on any date on which:

                     (a)  the Company does not have sufficient funds available
             to pay the related Pool Purchase Price or Additional Pool Purchase
             Price in cash; or

                     (b)  an Insolvency Event has occurred and is continuing
             with respect to the Seller or the Company.

Section 6.   REPRESENTATIONS AND WARRANTIES OF THE SELLER.

             (a)     GENERAL REPRESENTATIONS AND WARRANTIES OF THE SELLER. The
Seller represents and warrants as of each Closing Date and as of each Addition
Date, or as of such other date specified in such representation and warranty,
that:

                     (i)  ORGANIZATION AND GOOD STANDING.

                          (A)   The Seller is a corporation duly organized,
                     validly existing and in good standing under the laws of the
                     state of its organization and has full corporate power,
                     authority and legal right to own its properties and conduct
                     its business as such properties are presently owned and
                     such business is presently conducted, and to execute,
                     deliver and perform its obligations under this Agreement,
                     any related PA Supplement and each of the Facility
                     Documents to which it is a party. The Seller is organized
                     in the jurisdiction set forth in the preamble. The Seller
                     is duly qualified to do business and is in good standing as
                     a foreign corporation, and has obtained all necessary
                     licenses and approvals in each jurisdiction in which
                     failure to qualify or to obtain such licenses and approvals
                     would render any Loan unenforceable by the Seller.

                                       15


                          (B)   The name of the Seller set forth in the preamble
                     of this Agreement is its correct legal name and such name
                     has not been changed in the past six years. The Seller does
                     not utilize any trade names, assumed names, fictitious
                     names or "doing business names."

             (ii)    DUE AUTHORIZATION AND NO CONFLICT. The execution, delivery
     and performance by the Seller of each of the Facility Documents to which it
     is a party, and the consummation by the Seller of the transactions
     contemplated hereby and under each other Facility Document to which it is a
     party, has been duly authorized by the Seller by all necessary corporate
     action, does not contravene (i) the Seller's charter or by-laws, (ii) any
     law, rule or regulation applicable to the Seller, (iii) any contractual
     restriction contained in any material indenture, loan or credit agreement,
     lease, mortgage, deed of trust, security agreement, bond, note, or other
     material agreement or instrument binding on the Seller or (iv) any order,
     writ, judgment, award, injunction or decree binding on or affecting the
     Seller or its properties (except where such contravention would not have a
     Material Adverse Effect with respect to the Seller or its properties), and
     does not result in (except as provided in the Facility Documents) or
     require the creation of any Lien upon or with respect to any of its
     properties; and no transaction contemplated hereby requires compliance with
     any bulk sales act or similar law. Each of the Facility Documents to which
     the Seller is a party have been duly executed and delivered on behalf of
     the Seller. To the extent that this representation is being made with
     respect to Title I of ERISA or Section 4975 of the Code, it is made subject
     to the assumption that none of the assets being used to purchase the Loans
     and Transferred Assets constitute assets of any Benefit Plan or Plan with
     respect to which the Seller is a party in interest or disqualified person.

             (iii)   GOVERNMENTAL AND OTHER CONSENTS. All approvals,
     authorizations, consents or orders of any court or governmental agency or
     body required in connection with the execution and delivery by the Seller
     of this Agreement, any related PA Supplement or any of the other Facility
     Documents to which it is a party, the consummation by such party of the
     transactions contemplated hereby or thereby, the performance by such party
     of and the compliance by such party with the terms hereof or thereof, have
     been obtained, except where the failure so to do would not have a Material
     Adverse Effect with respect to such Party.

             (iv)    ENFORCEABILITY OF FACILITY DOCUMENTS. Each of the Facility
     Documents to which the Seller is a party has been duly and validly executed
     and delivered by the Seller and constitutes the legal, valid and binding
     obligation of the Seller, enforceable against it in accordance with its
     respective terms, except as enforceability may be subject to or limited by
     Debtor Relief Laws or by general principles of equity (whether considered
     in a suit at law or in equity).

             (v)     NO LITIGATION. Except as disclosed in Schedule 5 to this
     Agreement or to any Assignment, there are no proceedings or investigations
     pending, or to the knowledge of the Seller threatened, against the Seller
     before any court, regulatory body, administrative agency, or other tribunal
     or governmental instrumentality (A) asserting the invalidity of this
     Agreement or any of the other Facility Documents, (B) seeking to prevent
     the consummation of any of the transactions contemplated by this Agreement
     or

                                       16


     any of the other Facility Documents, (C) seeking any determination or
     ruling that would adversely affect the performance by the Seller of its
     obligations under this Agreement, any related PA Supplement or any of the
     other Facility Documents to which it is a party, (D) seeking any
     determination or ruling that would adversely affect the validity or
     enforceability of this Agreement or any of the other Facility Documents or
     (E) seeking any determination or ruling that would, if adversely
     determined, be reasonably likely to have a Material Adverse Effect with
     respect to such party.

             (vi)    GOVERNMENTAL REGULATIONS. The Seller is not (A) an
     "investment company" registered or required to be registered under the
     Investment Company Act of 1940, as amended, or (B) a "public utility
     company" or a "holding company," a "subsidiary company" or an "affiliate"
     of any public utility company within the meaning of Section 2(a)(5),
     2(a)(7), 2(a)(8) or 2(a)(ii) of the Public Utility Holding Company Act of
     1935, as amended.

             (vii)   MARGIN REGULATIONS. The Seller is not engaged, principally
     or as one of its important activities, in the business of extending credit
     for the purpose of purchasing or carrying any margin stock (as each such
     term is defined or used in any of Regulations T, U or X of the Board of
     Governors of the Federal Reserve System). No part of the proceeds of any of
     the notes issued by the Issuer has been used by the Seller for so
     purchasing or carrying margin stock or for any purpose that violates or
     would be inconsistent with the provisions of any of Regulations T, U or X
     of the Board of Governors of the Federal Reserve System.

             (viii)  LOCATION OF CHIEF EXECUTIVE OFFICE AND RECORDS. The
     principal place of business and chief executive office of the Seller, and
     the office where the Seller maintains all of its Records, is 9805 Willows
     Road, Redmond, Washington 98052. The Seller has not changed its principal
     place of business or chief executive office (or the office where such
     entity maintains all of its Records) during the previous six years (except
     that the Seller changed its principal place of business and chief executive
     office from 12301 NE 10th Place, Bellevue, Washington 98005 on February 18,
     1999). At any time after the Initial Closing Date, upon 30 days' prior
     written notice to the Trustee as assignee of the Company and the Issuer,
     the Seller may change its name or may change its type or its jurisdiction
     of organization to another jurisdiction within the United States, but only
     so long as all action necessary or reasonably requested by the Company to
     amend the existing financing statements and to file additional financing
     statements in all applicable jurisdictions to perfect the transfer of the
     Loans and the related Transferred Assets is taken.

             (ix)    LOCKBOX ACCOUNTS. Except in the case of any Lockbox Account
     pursuant to which only Collections in respect of Loans subject to a PAC or
     Credit Card Account are deposited, the Seller has filed a standing delivery
     order with the United States Postal Service authorizing each Lockbox Bank
     to receive mail delivered to the related Post Office Box. The account
     numbers of all Lockbox Accounts, together with the names, addresses, ABA
     numbers and names of contact persons of all the Lockbox Banks maintaining
     such Lockbox Accounts and the related Post Office Boxes, are set forth in
     Schedule 4. Except as described in the Intercreditor Agreement, from and
     after the Initial

                                       17


     Closing Date, the Seller shall not have any right, title and/or interest in
     or to any of the Lockbox Accounts or the Post Office Boxes and will
     maintain no Lockbox accounts in its own name for the collection of payments
     in respect of the Loans. The Seller has no lockbox or other accounts for
     the collection of payments in respect of the Loans other than the Lockbox
     Accounts.

             (x)     FACILITY DOCUMENTS. This Agreement and any PA Supplement
     are the only agreements pursuant to which the Seller sells the Loans and
     other related Transferred Assets to the Company. The Seller has furnished
     to the Company true, correct and complete copies of each Facility Document
     to which the Seller is a party, each of which is in full force and effect.
     Neither the Seller nor any of its Affiliates (not including the Purchaser
     or the Issuer) is in default thereunder in any material respect.

             (xi)    TAXES. The Seller has timely filed or caused to be filed
     all federal, state and local tax returns required to be filed by it, and
     has paid or caused to be paid all taxes shown to be due and payable on such
     returns or on any assessments received by it, other than any taxes or
     assessments the validity of which are being contested in good faith by
     appropriate proceedings and with respect to which the Seller has set aside
     adequate reserves on its books in accordance with GAAP, and which
     proceedings have not given rise to any Lien.

             (xii)   ACCOUNTING TREATMENT. The Seller has accounted for the
     transactions contemplated in the Facility Documents to which it is a party
     in accordance with GAAP.

             (xiii)  ERISA. There has been no (A) occurrence or expected
     occurrence of any Reportable Event with respect to any Benefit Plan subject
     to Title IV of ERISA of the Seller or any ERISA Affiliate, or any
     withdrawal from, or the termination, Reorganization or Plan Insolvency of
     any Multiemployer Plan or (B) institution of proceedings or the taking of
     any other action by Pension Benefit Guaranty Corporation or by the Seller
     or any ERISA Affiliate or any such Multiemployer Plan with respect to the
     withdrawal from, or the termination, Reorganization or Plan Insolvency of,
     any such Plan.

             (xiv)   NO ADVERSE SELECTION. No selection procedures materially
     adverse to the Company, the Issuer, the Noteholders, the Trustee or the
     Collateral Agent have been employed by the Seller in selecting the Loans
     for inclusion in the Loan Pool on such Closing Date or Addition Date, as
     applicable.

             (xv)    VACATION CREDIT PROGRAM. As of each Closing Date or any
     Addition Date, as applicable, for each Timeshare Property Regime for which
     the related Timeshare Properties are comprised primarily of Vacation
     Credits, the RATIO of (1) the total number of Vacation Credits actually
     allocated to such Timeshare Property Regime for the succeeding twelve-month
     period TO (2) the total number of Vacation Credits allocable to available
     space in such Timeshare Property Regime over such twelve-month period, does
     not exceed 1.0 to 1.0.

                                       18


             (xvi)   SEPARATE IDENTITY. The Seller and its Affiliates have
     observed the applicable legal requirements on their part for the
     recognition of the Company as a legal entity separate and apart from the
     Seller and any of its Affiliates (other than the Company) and have taken
     all actions necessary on their part to be taken in order to ensure that the
     facts and assumptions relating to the Company set forth in the opinion of
     Orrick, Herrington & Sutcliffe LLP of even date herewith relating to
     substantive consolidation matters with respect to the Seller and the
     Company are true and correct; PROVIDED, HOWEVER, that the Seller makes no
     representations or warranties in this Section 6(a)(xvi) with respect to the
     Company or the Issuer.

             (b)     REPRESENTATIONS AND WARRANTIES REGARDING THE LOANS. The
Seller represents and warrants to the Company as of the applicable Cut-Off Date
and Addition Cut-Off Date as to each Loan conveyed on and as of each Closing
Date or the related Addition Date, as applicable (except as otherwise expressly
stated) as follows:

             (i)     ELIGIBILITY. Such Loan is an Eligible Loan.

             (ii)    NO WAIVERS. The terms of such Loan have not been waived,
     altered, modified or extended in any respect other than (A) modifications
     entered into in accordance with Customary Practices and Credit Standards
     and Collections Policies that do not reduce the amount or extend the
     maturity of required Scheduled Payments and (B) modifications in the
     applicability of a PAC (which may result in a change in the related Loan
     Rate).

             (iii)   BINDING OBLIGATION. Such Loan is the legal, valid and
     binding obligation of the Obligor thereunder and is enforceable against the
     Obligor in accordance with its terms, except as such enforceability may be
     limited by Debtor Relief Laws or by general principles of equity (whether
     considered in a suit at law or in equity).

             (iv)    NO DEFENSES. Such Loan is not subject to any statutory
     right of rescission, setoff, counterclaim or defense, including without
     limitation the defense of usury.

             (v)     LAWFUL ASSIGNMENT. Such Loan was not originated in, and is
     not subject to the laws of, any jurisdiction the laws of which would make
     the transfer of the Loan under this Agreement or any PA Supplement
     unlawful.

             (vi)    COMPLIANCE WITH LAW. The Seller has complied with
     requirements of all material federal, state and local laws (including
     without limitation usury, truth in lending and equal credit opportunity
     laws) applicable to such Loan in all material respects. The related
     Timeshare Property Regime is in compliance with any and all applicable
     zoning and building laws and regulations and any other laws and regulations
     relating to the use and occupancy of such Timeshare Property Regime, except
     where such noncompliance would not have a Material Adverse Effect with
     respect to the Seller. The Seller has not received notice of any material
     violation of any legal requirements applicable to such Timeshare Property
     Regime, except where such violation would not have a Material Adverse
     Effect with respect to the Seller. The Timeshare Property Regime related to
     such Loan complies with all applicable state statutes, including without
     limitation

                                       19


     condominium statutes, timeshare statutes, HUD filings relating to
     interstate land sales (if applicable) and the requirements of any
     governmental authority or local authority having jurisdiction with respect
     to such Timeshare Property Regime, and constitutes a valid and conforming
     condominium and timeshare regime under the laws of the State in which the
     related Resort is located, except where such noncompliance would not have a
     Material Adverse Effect with respect to the Seller.

             (vii)   LOAN IN FORCE; NO SUBORDINATION. Such Loan is in full force
     and effect and has not been subordinated, satisfied in whole or in part or
     rescinded.

             (viii)  CAPACITY OF PARTIES. All parties to such Loan had legal
     capacity to execute the Loan.

             (ix)    ORIGINAL LOANS. All original executed copies of such Loans
     are in the custody of the Custodian, except to the extent otherwise
     permitted pursuant to Section 6(b)(xiv).

             (x)     LOAN FORM/GOVERNING LAW. Such Loan was executed in
     substantially the form of one of the forms of Loan in Exhibit D (as such
     Exhibit D may be amended from time to time with the consent of the Seller
     and the Company), except for changes required by applicable law and certain
     other modifications that do not, individually or in the aggregate, affect
     the enforceability or collectibility of such Loan. In addition, such Loan
     was originated in and is governed by the laws of the State in which the
     Loan was executed.

             (xi)    INTEREST IN REAL PROPERTY. Each Timeshare Property that is
     a UDI constitutes a fee simple interest in real property and improvements
     on the real property.

             (xii)   ENVIRONMENTAL COMPLIANCE. Each Timeshare Property Regime
     related to a Loan is now, and at all times during the Seller's ownership
     thereof (or the ownership of any Affiliate thereof other than the Company
     and the Issuer), has been free of contamination from any substance,
     material or waste identified as toxic or hazardous according to any
     federal, state or local law, rule, regulation or order governing, imposing
     standards of conduct with respect to, or regulating in any way the
     discharge, generation, removal, transportation, storage or handling of
     toxic or hazardous substances, materials or waste or air or water pollution
     (hereinafter referred to as "ENVIRONMENTAL LAWS"), including without
     limitation any PCB, radioactive substance, methane, asbestos, volatile
     hydrocarbons, petroleum products or wastes, industrial solvents or any
     other material or substance that now or hereafter may cause or constitute a
     health, safety or other environmental hazard to any person or property (any
     such substance together with any substance, material or waste identified as
     toxic or hazardous under any Environmental Law now in effect or hereinafter
     enacted shall be referred to herein as "CONTAMINANTS"), but excluding from
     the foregoing any levels of Contaminants at or below which such
     Environmental Laws do not apply ("DE MINIMUS LEVELS"). Neither the Seller
     nor any Affiliate of the Seller (other than the Company and the Issuer) has
     caused or suffered to occur any discharge, spill, uncontrolled loss or
     seepage of any petroleum or chemical product or any Contaminant (except for
     De Minimus Levels thereof) onto any property

                                       20


     comprising or adjoining any Timeshare Property Regime, and neither the
     Seller nor any Affiliate of the Seller (other than the Company and the
     Issuer) nor any Obligor or occupant of all or part of any Timeshare
     Property Regime is now or has been involved in operations at the related
     Timeshare Property Regime that could lead to liability for the Seller, the
     Company, any Affiliate of the Seller or any other owner of such Timeshare
     Property Regime or the imposition of a Lien on such Timeshare Property
     Regime under any Environmental Law. No practice, procedure or policy
     employed by the Seller (or any Affiliate thereof other than the Company and
     the Issuer) with respect to POAs for which the Seller acts as the manager
     or, to the best knowledge of the Seller, by the manager of the POAs with
     respect to POAs managed by parties unaffiliated with the Seller, violates
     any Environmental Law that, if enforced, would reasonably be expected to
     (A) have a Material Adverse Effect on such POA or the ability of such POA
     to do business, (B) have a Material Adverse Effect on the financial
     condition of the POA or (C) constitute grounds for the revocation of any
     license, charter, permit or registration that is material to the conduct of
     the business of the POA.

             Except as set forth in Schedule 3, (1) all property owned, managed,
     or controlled by the Seller or any Affiliate of the Seller (other than the
     Company and the Issuer) and located within a Resort is now, and at all
     times during the Seller's ownership, management or control thereof (or the
     ownership, management or control of any Affiliate thereof (other than the
     Company and the Issuer)) has been free of contamination from any
     Contaminants, except for De Minimus Levels thereof, (2) neither the Seller
     nor any Affiliate of the Seller (other than the Company and the Issuer) has
     caused or suffered to occur any discharge, spill, uncontrolled loss or
     seepage of any Contaminants onto any property comprising or adjoining any
     of the Resorts, except for De Minimus Levels thereof, and (3) neither the
     Seller nor any Affiliate of the Seller (other than the Company and the
     Issuer) nor any Obligor or occupant of all or part of any of any Resort is
     now or previously has been involved in operations at any Resort that could
     lead to liability for the Seller, the Company, any Affiliate of the Seller
     or any other owner of any Resort or the imposition of a Lien on such Resort
     under any Environmental Law. None of the matters set forth in Schedule 3
     will have a Material Adverse Effect with respect to the Company or its
     assignees or the interests of the Company or its assignees in the Loans.
     Each Resort, and the present use thereof, does not violate any
     Environmental Law in any manner that would materially adversely affect the
     value or use of such Resort or the performance by the POAs of their
     respective obligations under their applicable declarations, articles or
     similar charter documents. There is no condition presently existing, and to
     the best knowledge of the Seller no event has occurred or failed to occur
     with respect to any Resort, relating to any Contaminants or compliance with
     any Environmental Laws that would reasonably be expected to have a
     Materially Adverse Effect with respect to such Resort, including in
     connection with the present use of such Resort.

             (xiii)  TAX LIENS. All taxes applicable to such Loan and the
     related Timeshare Property have been paid, except where the failure to pay
     such tax would not have a Material Adverse Effect with respect to the
     Seller or its assignees or the Purchaser or the collectibility or
     enforceability of the Loan. There are no delinquent tax liens in respect of
     the Timeshare Property underlying such Loan.

                                       21


             (xiv)   LOAN FILES. The related Loan File contains the following
     Loan Documents (which may include microfiche or other electronic copies of
     the Loan Documents to the extent provided in the Custodial Agreement):

                     (A)  at least one original of each Loan (or, if the Loan
             and promissory note are contained in separate documents, an
             original of the promissory note); PROVIDED, HOWEVER, that the
             original Loan may have been removed from the Loan File in
             accordance with the Custodial Agreement for the performance of
             collection services and other routine servicing requirements; and

                     (B)  for Loans with respect to which the related Timeshare
             Property has been deeded out to the related Obligor:

                     (1)  a copy of the deed for such Timeshare Property; and

                     (2)  the original recorded Mortgage (or a copy thereof, if
             applicable, for Mortgages that have been submitted for recording as
             set forth herein) and Assignments of Mortgages in favor of the
             Collateral Agent (or a copy of such recorded Mortgage or Assignment
             of Mortgage, as the case may be, certified to be a true and
             complete copy thereof, if the original of the recorded Mortgage or
             Assignment of Mortgage is lost or destroyed), PROVIDED that in the
             case of any Loan with respect to which the related Mortgage and/or
             deed has been removed from the Loan File for recording in the local
             real property recording office, the original Mortgage shall not
             have been at such real property recording office more than 180 days
             from the date on which the related Timeshare Property is required
             to be deeded to an Obligor.

             (xv)    LOCKBOX ACCOUNTS. As of the applicable Cut-Off Date, the
     Obligor of such Loan either:

                     (A)  shall have been instructed to remit Payments
             thereunder to a Post Office Box for credit to a Lockbox Account or
             directly to a Lockbox Account, in each case maintained at a Lockbox
             Bank pursuant to the terms of a Lockbox Agreement; or

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

             (xvi)   OWNERSHIP INTEREST. As of the Closing Date or related
     Addition Date, as applicable, the Seller has good and marketable title to
     the Loan, free and clear of all Liens (other than Permitted Encumbrances).

             (xvii)  INTEREST IN LOAN. Such Loan constitutes either a "general
     intangible," an "instrument," "chattel paper" or an "account" under the
     Uniform Commercial Code of the States of Delaware, Oregon and New York.

                                       22


             (xviii) RECORDATION OF ASSIGNMENTS. The collateral Assignment of
     Mortgage to the Collateral Agent relating to the Mortgage with respect to
     each Loan has been recorded or delivered for recordation simultaneously
     with the related Mortgage to the proper office in the jurisdiction in which
     the related Timeshare Property is located.

             (xix)   MATERIAL DISPUTES. To the actual knowledge of the Seller,
     the Loan is not subject to any material dispute.

             (xx)    GOOD TITLE; NO LIENS. Upon the Purchase hereunder occurring
     on such Closing Date or Addition Date, as applicable, the Company will be
     the lawful owner of, and have good title to, each Loan and all of the other
     related Transferred Assets that are the subject of such Purchase, free and
     clear of any Liens (other than any Permitted Encumbrances on the related
     Timeshare Properties). All Loans and related Transferred Assets are
     purchased without recourse to the Seller except as described in this
     Agreement and any PA Supplement. Such Purchase by the Company under this
     Agreement and under any PA Supplement constitutes a valid and true sale and
     transfer for consideration (and not merely the grant of a security interest
     to secure a loan), enforceable against creditors of the Seller, and no Loan
     or other related Transferred Assets that are the subject of such Purchase
     will constitute property of the Seller after such Purchase.

             (xxi)   SOLVENCY. The Seller, both prior to and immediately after
     giving effect to the Purchase of Loans hereunder and under any PA
     Supplement occurring on such Closing Date or Addition Date, as applicable,
     (A) is not insolvent (as such term is defined in Section 101(32)(A) of the
     Bankruptcy Code), (B) is able to pay its debts as they become due and (C)
     does not have unreasonably small capital for the business in which it is
     engaged or for any business or transaction in which it is about to engage.

             (xxii)  POA RESERVES. The capital reserves and maintenance fee
     levels of the POAs related to each Timeshare Property Regime underlying the
     Loans Purchased on such Closing Date or Addition Date, as applicable, are
     adequate in light of the operating requirements of such POAs.

             (c)     REPRESENTATIONS AND WARRANTIES REGARDING THE LOAN FILES.
The Seller represents and warrants to the Company as of each Closing Date and
related Addition Date as to each Loan and the related Loan File conveyed by it
hereunder on and as of such Closing Date or related Addition Date, as applicable
(except as otherwise expressly stated) as follows:

                     (i)  POSSESSION. On or immediately prior to each Closing
             Date or related Addition Date, as applicable, the Custodian will
             have possession of each original Loan and the related Loan File and
             will have acknowledged such receipt, and its undertaking to hold
             such original Loan and the related Loan File for purposes of
             perfection of the Collateral Agent's interest in such original Loan
             and the related Loan File; PROVIDED, HOWEVER, that the fact that
             any document not required to be in its respective Loan File
             pursuant to Section 6(b)(xiv) of this Agreement is not in the
             possession of the Custodian in its respective Loan File does not
             constitute a breach of this representation.

                                       23


                     (ii) MARKING RECORDS. On or before each Closing Date or
             Addition Date, as applicable, the Seller shall have caused the
             portions of its computer files relating to the Loans sold on such
             date to the Company to be clearly and unambiguously marked to
             indicate that each such Loan has been conveyed on such date to the
             Company.

             (d)     SURVIVAL OF REPRESENTATIONS AND WARRANTIES. It is
understood and agreed that the representations and warranties contained in this
Section 6 shall remain operative and in full force and effect, shall survive the
transfer and conveyance of the Loans with respect to any Series by the Seller to
the Company under this Agreement and any PA Supplement, the conveyance of the
Loans by the Company to the Issuer pursuant to the Pool Purchase Agreement and
any PPA Supplement and the Grant of the Collateral by the Issuer to the
Collateral Agent and shall inure to the benefit of the Company, the Issuer, the
Trustee, the Collateral Agent and the Noteholders and their respective
designees, successors and assigns.

             (e)     INDEMNIFICATION OF THE COMPANY. The Seller shall indemnify,
defend and hold harmless the Company against any and all claims, losses and
liabilities, including reasonable attorneys' fees (the foregoing being
collectively referred to as "INDEMNIFIED AMOUNTS") that may at any time be
imposed on, incurred by or asserted against the Company as a result of a breach
by the Seller of any of its respective representations, warranties or covenants
hereunder. Except as otherwise provided in Section 11(i), the Seller shall pay
to the Company, on demand, any and all amounts necessary to indemnify the
Company for (i) any and all recording and filing fees in connection with the
transfer of the Loans from the Seller to the Company, and any and all
liabilities with respect to, or resulting from any delay in paying when due, any
taxes (including sales, excise or property taxes) payable in connection with the
transfer of the Loans from the Seller to the Company and (ii) costs, expenses
and reasonable counsel fees in defending against the same. The agreements in
this Section 6(e) shall survive the termination of this Agreement or any PA
Supplement and the payment of all amounts payable hereunder, under any PA
Supplement and under the Loans. For purposes of this Section 6(e), any reference
to the Company shall include any officer, director, employee or agent thereof,
or any successor or assignee thereof or of the Company.

Section 7.   REPURCHASES OR SUBSTITUTION OF LOANS FOR BREACH OF REPRESENTATIONS
AND WARRANTIES.

     Provisions with respect to the repurchase or substitution of Loans of any
Series for breach of representations and warranties under this Agreement and any
PA Supplement shall be set forth in the related PA Supplement.

Section 8.   COVENANTS OF THE SELLER.

             (a)     AFFIRMATIVE COVENANTS OF THE SELLER. The Seller covenants
and agrees that it will, at any time prior to the Termination Date:

             (i)     COMPLIANCE WITH LAWS, ETC. Comply in all material respects
     with all applicable laws, rules, regulations and orders with respect to it,
     its business and properties, provisions of ERISA, the Internal Revenue Code
     and all applicable regulations

                                       24


     and interpretations thereunder, and all Loans and Facility Documents to
     which it is a party.

             (ii)    PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain
     its corporate existence, rights, franchises and privileges in the
     jurisdiction of its incorporation, and qualify and remain qualified in good
     standing as a foreign corporation, and maintain all necessary licenses and
     approvals in each jurisdiction in which it does business, except where the
     failure to preserve and maintain such existence, rights, franchises,
     privileges, qualifications, licenses and approvals would not have a
     Material Adverse Effect with respect to it.

             (iii)   AUDITS. Upon at least two Business Days notice during
     regular business hours, permit the Company and/or its agents,
     representatives or assigns access:

                     (A)  to the offices and properties of the Seller in order
             to examine and make copies of and abstracts from all books,
             correspondence and Records of the Seller as appropriate to verify
             the Seller's compliance with this Agreement, any PA Supplement or
             any other Facility Documents to which the Seller is a party and any
             other agreement contemplated hereby or thereby, and the Company
             and/or its agents, representatives and assigns may examine and
             audit the same and make photocopies, computer tapes or other
             computer replicas thereof, as appropriate, and the Seller will
             provide to the Company and/or its agents, representatives and
             assigns, at the expense of the Seller, such clerical and other
             assistance as may be reasonably requested in connection therewith;
             and

                     (B)  to the officers or employees of the Seller designated
             by the Seller in order to discuss matters relating to the Loans and
             the performance of the Seller hereunder, under any PA Supplement or
             any other Facility Documents to which the Seller is a party and any
             other agreement contemplated hereby or thereby, and under the other
             Facility Documents to which it is a party with the officers or
             employees of the Seller having knowledge of such matters.

             Each such audit shall be at the sole expense of the Seller. The
     Company shall be entitled to conduct such audits as frequently as it deems
     reasonable in the exercise of the Company's reasonable commercial judgment;
     PROVIDED, HOWEVER, that such audits shall not be conducted more frequently
     than annually unless an Event of Default or an Amortization Event shall
     have occurred. The Company and its agents, representatives and assigns also
     shall have the right to discuss the Seller's affairs with the officers,
     employees and independent accountants of the Seller and to verify under
     appropriate procedures the validity, amount, quality, quantity, value and
     condition of, or any other matter relating to, the Loans and other related
     Transferred Assets.

             (iv)    [Reserved.]

             (v)     PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND LOANS. At
     its expense, timely and fully perform and comply in all material respects
     with the Credit Standards and Collection Policies and Customary Practices
     with respect to the Loans and with all

                                       25


     provisions, covenants and other promises required to be observed by the
     Seller under the Loans.

             (vi)    [Reserved.]

             (vii)   OWNERSHIP INTEREST. Take such action with respect to each
     Loan as is necessary to ensure that the Company maintains a first priority
     ownership interest in such Loan and the other related Transferred Assets,
     in each case free and clear of any Liens arising through or under the
     Seller and, in the case of any Timeshare Properties, other than any
     Permitted Encumbrance thereon, and respond to any inquiries with respect to
     ownership of a Loan sold by it hereunder by stating that, from and after
     the Initial Closing Date or related Addition Date, as applicable, it is no
     longer the owner of such Loan and that ownership of such Loan has been
     transferred to the Company.

             (viii)  INSTRUMENTS. Not remove any portion of the Loans or related
     Transferred Assets with respect to any Series that consists of money or is
     evidenced by an instrument, certificate or other writing from the
     jurisdiction in which it was held under the related Custodial Agreement
     unless the Company shall have first received an Opinion of Counsel to the
     effect that the Company shall continue to have a first-priority perfected
     ownership or security interest with respect to such property after giving
     effect to such action or actions.

             (ix)    NO RELEASE. Not take any action, and use its best efforts
     not to permit any action to be taken by others, that would release any
     Person from such Person's covenants or obligations under any document,
     instrument or agreement relating to the Loans or the other Transferred
     Assets, or result in the hypothecation, subordination, termination or
     discharge of, or impair the validity or effectiveness of, any such
     document, instrument or agreement, except as expressly provided in this
     Agreement or any PA Supplement or such other instrument or document.

             (x)     INSURANCE AND CONDEMNATION.

                     (A)  The Seller shall do or cause to be done all things
             that it may accomplish with a reasonable amount of cost or effort
             to cause each of the POAs for each Resort, in each case (1) to
             maintain one or more policies of "all-risk" property and general
             liability insurance with financially sound and reputable insurers
             providing coverage in scope and amount that (x) satisfy the
             requirements of the declarations (or any similar charter document)
             governing the POA for the maintenance of such insurance policies
             and (y) are at least consistent with the scope and amount of such
             insurance coverage obtained by prudent POAs and/or management of
             other similar developments in the same jurisdiction and (2) to the
             extent the Seller is the property manager of the Resort and
             possesses the right to direct the application of insurance
             proceeds, to use its best efforts to apply the proceeds of any such
             insurance policies in the manner specified in the related
             declarations (or any similar charter document) governing the POA
             and/or any similar charter documents of such POA (which exercise of
             best efforts shall include voting as a member of the POA or as a
             proxy or attorney-in-fact for a

                                       26


             member). For the avoidance of doubt, the parties acknowledge that
             the ultimate discretion and control relating to the maintenance of
             any such insurance policies is vested in the POA in accordance with
             the respective declaration (or any similar charter document)
             relating to each Timeshare Property Regime.

                     (B)  The Seller shall remit to the Collection Account the
             portion of any proceeds received pursuant to a condemnation of
             property in any Resort relating to any Timeshare Property to the
             extent the Obligors are required to make such remittance under the
             terms of one or more Loans that have been sold to the Company
             hereunder and under the related PA Supplement.

             (xi)    SEPARATE IDENTITY. Take such action as is necessary to
     ensure compliance with Section 6(a)(xvi), including taking all actions
     necessary on its part to be taken in order to ensure that the facts and
     assumptions relating to the Company set forth in the opinion of Orrick,
     Herrington & Sutcliffe LLP of even date herewith relating to substantive
     consolidation matters with respect to the Seller and the Company are true
     and correct.

             (xii)   COMPUTER FILES. Mark or cause to be marked each Loan in its
     computer files as described in Section 6(c)(ii) and deliver to the Company,
     the Issuer, the Trustee and the Collateral Agent a copy of the Loan
     Schedule for each Series as amended from time to time.

             (xiii)  TAXES. File or cause to be filed, and cause each of its
     Affiliates with whom it shares consolidated tax liability to file, all
     federal, state and local tax returns that are required to be filed by it,
     except where the failure to file such returns could not reasonably be
     expected to have a Material Adverse Effect with respect to the Purchaser or
     the Seller, or otherwise be reasonably expected to expose the Purchaser or
     the Seller to material liability. The Seller will pay or cause to be paid
     all taxes shown to be due and payable on such returns or on any assessments
     received by it, other than any taxes or assessments the validity of which
     are being contested in good faith by appropriate proceedings and with
     respect to which the Seller or the applicable Affiliate has set aside
     adequate reserves on its books in accordance with GAAP, and which
     proceedings could not reasonably be expected to have a Material Adverse
     Effect with respect to the Purchaser or the Seller or otherwise be
     reasonably expected to expose the Purchaser or the Seller to material
     liability.

             (xiv)   FACILITY DOCUMENTS. Comply in all material respects with
     the terms of, and employ the procedures outlined under, this Agreement, any
     PA Supplement and all other Facility Documents to which it is a party, and
     take all such action as may be from time to time reasonably requested by
     the Company to maintain this Agreement, any PA Supplement and all such
     other Facility Documents in full force and effect.

             (xv)    LOAN SCHEDULE. With respect to any Series, promptly amend
     the applicable Loan Schedule to reflect terms or discrepancies that become
     known after each Closing Date or any Addition Date, and promptly notify the
     Company, the Issuer, the Trustee and the Collateral Agent of any such
     amendments.

                                       27


             (xvi)   SEGREGATION OF COLLECTIONS. Prevent, to the extent within
     its control, the deposit into the Collection Account or any Reserve Account
     of any funds other than Collections in respect of the Loans with respect to
     any Series, and to the extent that, to its knowledge, any such funds are
     nevertheless deposited into the Collection Account or any Reserve Account,
     promptly identify any such funds to the Master Servicer for segregation and
     remittance to the owner thereof.

             (xvii)  MANAGEMENT OF RESORTS. The Seller hereby covenants and
     agrees (to the extent that the Seller is responsible for maintaining or
     managing such Resort) to do or cause to be done all things that it may
     accomplish with a reasonable amount of cost or effort in order to maintain
     such Resort (including without limitation all grounds, waters and
     improvements thereon and all other facilities related thereto) in at least
     as good condition, repair and working order as would be customary for
     prudent managers of similar timeshare properties.

             (b)     NEGATIVE COVENANTS OF THE SELLER. The Seller covenants and
agrees that it will not, at any time prior to the final Series Termination Date
without the prior written consent of the Company:

             (i)     SALES, LIENS, ETC. AGAINST LOANS AND TRANSFERRED ASSETS.
     Except for the transfers hereunder, sell, assign (by operation of law or
     otherwise) or otherwise dispose of, or create or suffer to exist, any Lien
     arising through or under it (other than, in the case of any Timeshare
     Properties, any Permitted Encumbrances thereon) upon or with respect to any
     Loan or other Transferred Asset or any interest therein. The Seller shall
     immediately notify the Company of the existence of any Lien arising through
     or under it on any Loan or other Transferred Asset.

             (ii)    EXTENSION OR AMENDMENT OF LOAN TERMS. Extend, amend, waive
     or otherwise modify the terms of any Loan (other than as a result of a
     Timeshare Upgrade or in accordance with Customary Practices) or permit the
     rescission or cancellation of any Loan, whether for any reason relating to
     a negative change in the related Obligor's creditworthiness or inability to
     make any payment under the Loan or otherwise.

             (iii)   CHANGE IN BUSINESS OR CREDIT STANDARDS OR COLLECTION
     POLICIES. (A) Make any change in the character of its business or (B) make
     any change in the Credit Standards and Collection Policies or (C) deviate
     from the exercise of Customary Practices, which change or deviation would,
     in any such case, materially impair the value or collectibility of any
     Loan.

             (iv)    CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Add or
     terminate any bank as a bank holding any account for the collection of
     payments in respect of the Loans from those listed in Exhibit E or make any
     change in its instructions to Obligors regarding payments to be made to any
     Lockbox Account at a Lockbox Bank, unless the Company and the Trustee shall
     have received (A) 30 days' prior written notice of such addition,
     termination or change, (B) written confirmation from the Seller that, after
     the effectiveness of any such termination, there will be at least one
     Lockbox in existence and (C) prior to the date of such addition,
     termination or change, (1) executed copies of

                                       28


     Lockbox Agreements executed by each new Lockbox Bank, the Seller, the
     Company, the Master Servicer and the Trustee and (2) copies of all
     agreements and documents signed by either the Company or the respective
     Lockbox Bank with respect to any new Lockbox Account.

             (v)     CHANGE IN CORPORATE NAME, ETC. Make any change to its name
     or its type or jurisdiction of organization that existed on the Initial
     Closing Date without providing at least 30 days' prior written notice to
     the Company and the Trustee and taking all action necessary or reasonably
     requested by the Trustee to amend its existing financing statements and
     file additional financing statements in all applicable jurisdictions as are
     necessary to maintain the perfection of the security interest of the
     Company.

             (vi)    ERISA MATTERS. (A) Engage or permit any ERISA Affiliate to
     engage in any prohibited transaction for which an exemption is not
     available or has not previously been obtained from the U.S. Department of
     Labor; (B) permit to exist any accumulated funding deficiency (as defined
     in Section 302(a) of ERISA and Section 412(a) of the Internal Revenue Code)
     or funding deficiency with respect to any Benefit Plan other than a
     Multiemployer Plan; (C) fail to make any payments to any Multiemployer Plan
     that the Seller or any ERISA Affiliate may be required to make under the
     agreement relating to such Multiemployer Plan or any law pertaining
     thereto; (D) terminate any Benefit Plan so as to result in any liability;
     (E) permit to exist any occurrence of any Reportable Event that represents
     a material risk of a liability of the Seller or any ERISA Affiliate under
     ERISA or the Internal Revenue Code; provided, however, that the ERISA
     Affiliates of the Seller may take or allow such prohibited transactions,
     accumulated funding deficiencies, payments, terminations and Reportable
     Events described in clauses (A) through (E) above so long as such events
     occurring within any fiscal year of the Seller, in the aggregate, involve a
     payment of money by or an incurrence of liability of any such ERISA
     Affiliate (collectively, "ERISA LIABILITIES") in an amount that does not
     exceed $2,000,000 or otherwise result in liability that would result in
     imposition of a lien.

             (vii)   TERMINATE OR REJECT LOANS. Without limiting the
     requirements of Section 8(b)(ii), terminate or reject any Loan prior to the
     end of the term of such Loan, whether such rejection or early termination
     is made pursuant to an equitable cause, statute, regulation, judicial
     proceeding or other applicable law unless, prior to such termination or
     rejection, such Loan and any related Transferred Assets have been
     repurchased by the Seller pursuant to Section 7 of the related PA
     Supplement.

             (viii)  FACILITY DOCUMENTS. Except as otherwise permitted under
     Section 8(b)(ii), terminate, amend or otherwise modify any Facility
     Document to which it is a party or grant any waiver or consent thereunder.

             (ix)    INSOLVENCY PROCEEDINGS. Institute Insolvency Proceedings
     with respect to WorldMark, the Company or the Issuer or consent to the
     institution of Insolvency Proceedings against WorldMark, the Company or the
     Issuer, or take any corporate action in furtherance of any such action.

                                       29


Section 9.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company represents and warrants as of each Closing Date and Addition
Date, or as of such other date specified in such representation and warranty,
that:

             (a)     The Company is a limited liability company duly formed,
validly existing and in good standing under the laws of the State of Delaware
and has full limited liability company power, authority, and legal right to own
its properties and conduct its business as such properties are presently owned
and as such business is presently conducted, and to execute, deliver and perform
its obligations under this Agreement and any PA Supplement. The Company is duly
qualified to do business and is in good standing as a foreign entity, and has
obtained all necessary licenses and approvals in each jurisdiction necessary to
carry on its business as presently conducted and to perform its obligations
under this Agreement and any PA Supplement. One hundred percent (100%) of the
outstanding membership interests of the Company is directly owned (both
beneficially and of record) by FAC. Such membership interests are validly
issued, fully paid and nonassessable and there are no options, warrants or other
rights to acquire membership interests from the Company.

             (b)     The execution, delivery and performance of this Agreement
and any PA Supplement by the Company and the consummation by the Company of the
transactions provided for in this Agreement and any PA Supplement have been duly
approved by all necessary limited liability company action on the part of the
Company.

             (c)     This Agreement and any PA Supplement constitutes the legal,
valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except as such enforceability may be subject to or
limited by Debtor Relief Laws and except as such enforceability may be limited
by general principles of equity.

             (d)     The execution and delivery by the Company of this Agreement
and any PA Supplement, the performance by the Company of the transactions
contemplated hereby and the fulfillment by the Company of the terms hereof
applicable to the Company will not conflict with, violate, result in any breach
of the material terms and provisions of, or constitute (with or without notice
or lapse of time or both) a material default under any provision of any existing
law or regulation or any order or decree of any court applicable to the Company
or its certificate of formation or limited liability company agreement or any
material indenture, contract, agreement, mortgage, deed of trust, or other
material instrument to which the Company is a party or by which it or its
properties is bound.

             (e)     There are no proceedings or investigations pending, or to
the knowledge of the Company threatened, against the Company before any court,
regulatory body, administrative agency, or other tribunal or governmental
instrumentality (A) asserting the invalidity of this Agreement or any PA
Supplement, (B) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or any PA Supplement, (C) seeking any
determination or ruling that, in the reasonable judgment of the Company, would
adversely affect the performance by the Company of its obligations under this
Agreement or any PA Supplement or (D) seeking any determination or ruling that
would adversely affect the validity or enforceability of this Agreement or any
PA Supplement.

                                       30


             (f)     All approvals, authorizations, consents, orders or other
actions of any person or entity or any governmental body or official required in
connection with the execution and delivery of this Agreement and any PA
Supplement by the Company, the performance by it of the transactions
contemplated hereby and the fulfillment by it of the terms hereof, have been
obtained and are in full force and effect.

             (g)     The Company is solvent and will not become insolvent
immediately after giving effect to the transactions contemplated by this
Agreement and any PA Supplement, the Company has not incurred debts beyond its
ability to pay and, immediately after giving effect to the transactions
contemplated by this Agreement and any PA Supplement, the Company shall have an
adequate amount of capital to conduct its business in the foreseeable future.

Section 10.  AFFIRMATIVE COVENANTS OF THE COMPANY.

             The Company hereby acknowledges that the parties to the Facility
Documents are entering into the transactions contemplated by the Facility
Documents in reliance upon the Company's identity as a legal entity separate
from the Seller and its Affiliates. From and after the date hereof until the
final Series Termination Date under any Indenture Supplement, the Company will
take such actions as shall be required in order that:

             (a)     The Company will conduct its business in office space
allocated to it and for which it pays an appropriate rent and overhead
allocation;

             (b)     The Company will maintain corporate records and books of
account separate from those of the Seller and its Affiliates and telephone
numbers and stationery that are separate and distinct from those of the Seller
and its Affiliates;

             (c)     The Company's assets will be maintained in a manner that
facilitates their identification and segregation from those of any of the Seller
and its Affiliates;

             (d)     The Company will observe corporate formalities in its
dealings with the public and with the Seller and its Affiliates and, except as
contemplated by the Facility Documents, funds or other assets of the Company
will not be commingled with those of any of the Seller and its Affiliates. The
Company will at all times, in its dealings with the public and with the Seller
and its Affiliates, hold itself out and conduct itself as a legal entity
separate and distinct from the Seller and its Affiliates. The Company will not
maintain joint bank accounts or other depository accounts to which the Seller
and its Affiliates (other than the Master Servicer) has independent access;

             (e)     The duly elected board of directors of the Company and duly
appointed officers of the Company will at all times have sole authority to
control decisions and actions with respect to the daily business affairs of the
Company;

             (f)     Not less than one member of the Company's board of
directors will be an Independent Director. The Company will observe those
provisions in its limited liability company agreement that provide that the
Company's board of directors will not approve, or take any other action to cause
the filing of, a voluntary bankruptcy petition with respect to the Company
unless the Independent Director and all other members of the Company's board of

                                       31


directors unanimously approve the taking of such action in writing prior to the
taking of such action;

             (g)     The Company will compensate each of its employees,
consultants and agents from the Company's own funds for services provided to
the Company; and

             (h)     Except as contemplated by the Facility Documents, the
Company will not hold itself out to be responsible for the debts of the Seller
and its Affiliates.

Section 10A  NEGATIVE COVENANT OF THE COMPANY.

     The Company covenants and agrees that it will not, at any time prior to the
final Series Termination Date institute Insolvency Proceedings with respect to
WorldMark or consent to the institution of Insolvency Proceedings against
WorldMark, or take any corporate action in furtherance of any such action.

Section 11.  MISCELLANEOUS.

             (a)     AMENDMENT. This Agreement may be amended from time to time
or the provisions hereof may be waived or otherwise modified by the parties
hereto by written agreement signed by the parties hereto; provided, however,
that no such amendment, waiver or modification shall be effective without the
prior written consent of the Trustee.

             (b)     ASSIGNMENT. The Company has the right to assign its
interest under this Agreement and any PA Supplement as may be required to effect
the purposes of the Pool Purchase Agreement without the consent of the Seller,
and the assignee shall succeed to the rights hereunder of the Company. The
Seller agrees to perform its obligations hereunder for the benefit of the
Issuer, the Trustee, the Collateral Agent and the Noteholders agrees that such
parties are intended third party beneficiaries of this Agreement and agrees that
the Trustee or the Collateral Agent and (subject to the terms and conditions of
the Indenture and Servicing Agreement and any applicable Indenture Supplement)
the Noteholders may enforce the provisions of this Agreement and any PA
Supplement, exercise the rights of the Company and enforce the obligations of
the Seller hereunder without the consent of the Company.

             (c)     COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which counterparts shall be deemed to be an original,
and such counterparts shall constitute but one and the same instrument.

             (d)     TERMINATION. The obligations of the Seller under this
Agreement and any PA Supplement shall survive the sale of the Loans to the
Company and the Company's transfer of the Loans and other related Transferred
Assets to the Issuer.

             (e)     GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PRINCIPLES.

                                       32


             (f)     NOTICES. All demands and notices hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by certified mail, postage prepaid and return receipt requested, or by
express delivery service, to (i) in the case of the Seller, Trendwest Resorts,
Inc., 9805 Willows Road, Redmond, Washington 98052, Attention: President, or
such other address as may hereafter be furnished to the Company in writing by
the Seller and (ii) in the case of the Company, Sierra Deposit Company, LLC,
10750 West Charleston Blvd., Suite 130, Mailstop 2067, Las Vegas, Nevada 89135,
Attention: President, or such other address as may hereafter be furnished to the
Seller in writing by the Company.

             (g)     SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.

             (h)     SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon each of the Seller and the Company and their respective permitted
successors and assigns, and shall inure to the benefit of each of the Seller and
the Company and each of the Issuer, the Trustee and the Collateral Agent to the
extent explicitly contemplated hereby.

             (i)     COSTS, EXPENSES AND TAXES.

                     (a)  The Seller agrees to pay on demand to the Company all
             reasonable costs and expenses, if any, incurred or reimbursed (or
             to be reimbursed) by the Company (including reasonable counsel fees
             and expenses) in connection with the enforcement or preservation of
             the rights and remedies under this Agreement and any PA Supplement.

                     (b)  The Seller agrees to pay, indemnify and hold the
             Company harmless from and against any and all stamp, sales, excise
             and other taxes and fees payable or determined to be payable by or
             reimbursed (or to be reimbursed) by the Company in connection with
             the execution, delivery, filing and recording of this Agreement or
             any PA Supplement, and against any liabilities with respect to or
             resulting from any delay in paying or omission to pay such taxes
             and fees.

             (j)     NO BANKRUPTCY PETITION. The Seller covenants and agrees not
to institute against the Company or the Issuer, or join any other person in
instituting against the Company or the Issuer, any proceeding under any Debtor
Relief Law.

                                       33


     IN WITNESS WHEREOF, the parties have caused their names to be signed hereto
by their respective officers thereunto duly authorized, all as of the day and
year first above written.

                                      TRENDWEST RESORTS, INC.


                                      By:        /s/ Timothy P. O'Neil
                                            ----------------------------------
                                            Name: Timothy P. O'Neil
                                            Title: Chief Financial Officer


                                      SIERRA DEPOSIT COMPANY, LLC


                                      By:        /s/ Ralph E. Turner
                                            ----------------------------------
                                            Name: Ralph E. Turner
                                            Title: President and Treasurer


                       [Signature page for Trendwest MLPA]




                                                                   EXHIBIT 10.66

                                                                  EXECUTION COPY

                            SERIES 2002-1 SUPPLEMENT
                           Dated as of August 29, 2002

                                       to

                         MASTER LOAN PURCHASE AGREEMENT
                           Dated as of August 29, 2002

- --------------------------------------------------------------------------------
                     SIERRA RECEIVABLES FUNDING COMPANY, LLC
                                   LOAN-BACKED
                             VARIABLE FUNDING NOTES,
                                  SERIES 2002-1
- --------------------------------------------------------------------------------

                                 by and between

                            TRENDWEST RESORTS, INC.,
                                    as Seller

                                       and

                          SIERRA DEPOSIT COMPANY, LLC,
                                  as Purchaser



                                TABLE OF CONTENTS



                                                                                               PAGE
                                                                                               ----
                                                                                            
Section 1.      Definitions.....................................................................1

Section 2.      Sale............................................................................5

       (a)      Series 2002-1 Loans.............................................................5

       (b)      Filing of Financing Statements..................................................5

       (c)      Delivery of Series 2002-1 Loan Schedule.........................................6

       (d)      Purchase of Additional Series 2002-1 Loans......................................6

       (e)      Treatment as Sale...............................................................7

       (f)      Recharacterization..............................................................7

       (g)      Security Interest in Transferred Assets.........................................7

       (h)      Transfer of Loans...............................................................7

Section 3.      Purchase Price..................................................................8

Section 4.      Payment of Purchase Price.......................................................8

Section 5.      Conditions Precedent to Sale of Series 2002-1 Loans and Additional Loans........8

       (a)      Conditions Precedent to Sale of Series 2002-1 Loans.............................8

       (b)      Conditions Precedent to Sale of Additional Loans................................8

Section 6.      Representations and Warranties of the Seller....................................9

       (a)      Representations and Warranties of the Seller....................................9

       (b)      Representations and Warranties Regarding the Series 2002-1 Loans...............10

Section 7.      Repurchases or Substitution of Series 2002-1 Loans.............................10

       (a)      Repurchase or Substitution Obligation..........................................10

       (b)      Repurchases and Substitutions..................................................11

       (c)      Repurchases of Series 2002-1 Loans that Become Defaulted Loans.................12

       (d)      Maximum Repurchases............................................................12

Section 8.      Covenants of the Seller........................................................12

Section 9.      Representations and Warranties of the Company..................................13

Section 10.     Covenants of the Company.......................................................13

Section 11.     Miscellaneous Provisions.......................................................13

       (k)      Ratification of Agreement......................................................13

       (l)      Amendment......................................................................13



                                       -i-



                                                                                            
       (m)      Counterparts...................................................................13

       (n)      GOVERNING LAW..................................................................13

       (o)      Successors and Assigns.........................................................13



                                      -ii-


     THIS PURCHASE AGREEMENT SUPPLEMENT (this "PA SUPPLEMENT"), dated as of
August 29, 2002, is by and between TRENDWEST RESORTS, INC., an Oregon
corporation, as seller (the "SELLER") and SIERRA DEPOSIT COMPANY, LLC, a
Delaware limited liability company, as purchaser (hereinafter referred to as the
"PURCHASER" or the "COMPANY").

     Section 2 of the Agreement provides that the Seller may from time to time
sell and assign to the Company, and the Company may from time to time Purchase
from the Seller, all the Seller's right, title and interest in, to and under
Loans listed on the Loan Schedule of the related PA Supplement on the Closing
Date for the related Series. The principal terms of the Purchase and sale of
Loans for each Series shall be set forth in a PA Supplement to the Agreement.

     Pursuant to this PA Supplement and in accordance with Section 2 of the
Agreement, the Seller hereby sells to the Company, and the Company hereby
Purchases from the Seller, the Series 2002-1 Loans and the Seller and the
Company hereby specify the principal terms of such sales and Purchases.

     SECTION 1. DEFINITIONS.

     All capitalized terms used herein and not otherwise defined herein have the
meanings ascribed to them in the Agreement. Each capitalized term defined herein
shall relate only to the Series 2002-1 Loans and to no other Loans purchased by
the Company from the Seller.

     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 PA Supplement shall be controlling.

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

     "ADDITION DATE" shall mean the date from and after which Additional Loans
are sold pursuant to Section 2(d).

     "AGREEMENT" shall mean the Master Loan Purchase Agreement dated as of
August 29, 2002 by and between the Seller and the Purchaser, as the same may be
amended, supplemented or otherwise modified from time to time thereafter in
accordance with its terms.

     "ASSIGNMENT" shall have the meaning set forth in Section 2(d)(iii)(E).

     "CLOSING DATE" shall mean August 29, 2002.

     "COMPANY" shall have the meaning set forth in the preamble.

     "CUT-OFF DATE" shall mean August 27, 2002.

     "ELIGIBLE LOAN" shall mean a Series 2002-1 Loan:



     (a)  with respect to which (i) the related Timeshare Property is not a Lot,
          (ii) the related Timeshare Property has been purchased by an Obligor,
          (iii) except in the case of a Green Loan, a certificate of occupancy
          for the related Timeshare Property has been issued, (iv) except in the
          case of a Green Loan, the unit for the related Timeshare Property is
          complete and ready for occupancy, is not in need of material
          maintenance or repair, except for ordinary, routine maintenance and
          repairs that are not substantial in nature or cost and contains no
          structural defects materially affecting its value, (v) the related
          Timeshare Property Regime is not in need of maintenance or repair,
          except for ordinary, routine maintenance and repairs that are not
          substantial in nature or cost and contains no structural defects
          materially affecting its value, (vi) there is no legal, judicial or
          administrative proceeding pending, or to the Seller's knowledge
          threatened, for the total condemnation of the related Timeshare
          Property or partial condemnation of any portion of the related
          Timeshare Property Regime that would have a material adverse effect on
          the value of the related Timeshare Property and (vii) the related
          Timeshare Property, if not Vacation Credits, is not related to a
          Resort located outside of the United States, Canada, Mexico or the
          United States Virgin Islands;

     (b)  with respect to which the rights of the Obligor thereunder are subject
          to declarations, covenants and restrictions of record affecting the
          Resort;

     (c)  in the case of a Series 2002-1 Loan that is an Installment
          Contract, with respect to which the Seller has a valid ownership or
          security interest in an underlying Timeshare Property, subject only to
          Permitted Encumbrances, unless the criteria in paragraph (d) are
          satisfied;

     (d)  with respect to which (i) if the related Timeshare Property has been
          deeded to the Obligor of the related Series 2002-1 Loan, (A) the
          Seller has a valid and enforceable first lien Mortgage on such
          Timeshare Property, except as such enforceability may be limited by
          Debtor Relief Laws and as such enforceability may be limited by
          general principles of equity, regardless of whether such
          enforceability is considered in a proceeding in equity or at law, (B)
          such Mortgage and related mortgage note have been assigned to the
          Collateral Agent, (C) such Mortgage and the related note for such
          Mortgage have been transferred to the custody of the Custodian in
          accordance with the provisions of Section 6(c)(i) of the Agreement and
          (D) if any Mortgage relating to such Series 2002-1 Loan is a deed of
          trust, a trustee duly qualified under applicable law to serve as such
          has been properly designated in accordance with applicable law and
          currently so serves or (ii) if the related Timeshare Property has not
          been deeded to the Obligor of the related Series 2002-1 Loan, the
          Seller has legal title to and an equitable interest in such Timeshare
          Property underlying the related Series 2002-1 Loan;

     (e)  that was issued in a transaction that complied, and is in compliance,
          in all material respects with all material requirements of applicable
          federal, state and local law;

                                        2


     (f)  that requires the Obligor to pay the unpaid principal balance over an
          original term of not greater than 120 months and (ii) the original
          term of which does not exceed 84 months unless (A) the Series 2002-1
          Loan relates to a Timeshare Upgrade or (B) the weighted average FICO
          score of all such Series 2002-1 Loans with original terms longer than
          84 months is at least 640 and the Series 2002-1 Loan has a FICO score
          not less than 600;

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

     (h)  that is not a Defective Loan or a Defaulted Loan;

     (i)  that is not a Delinquent Loan and has never been a Defaulted Loan, as
          of the Cut-Off Date or related Addition Cut-Off Date, as applicable;

     (j)  that does not (i) finance the purchase of credit life   insurance and
          (ii) finance, and was not originated in connection with, the
          "Explorer" program, unless such Loan has been converted to be in
          connection with the WorldMark program;

     (k)  with respect to which no Due Date thereunder occurring after
          the Cut-Off Date or the related Addition Cut-Off Date, as
          applicable, has been deferred;

     (l)  with respect to which the related Timeshare Property consists of
          Vacation Credits or a UDI;

     (m)  that was originated by the Seller and has been consistently serviced
          by the Seller, in each case in the ordinary course of its business and
          in accordance with the Seller's Customary Practices and Credit
          Standards and Collection Policies;

     (n)  that has not been specifically reserved against by the Seller or
          classified by the Seller as uncollectible or charged off;

     (o)  that arises from transactions in a jurisdiction in which the Seller is
          duly qualified to do business, except where the failure to so qualify
          will not adversely affect or impair the legality, validity, binding
          effect and enforceability of such Series 2002-1 Loan;

     (p)  that has not been cancelled or terminated by the related Obligor
          (regardless of whether such Obligor is legally entitled to do so) and
          constitutes a legal, valid, binding and enforceable obligation of the
          related Obligor, except as such enforceability may be limited by
          Debtor Relief Laws and as such enforceability may be limited by
          general principles of equity, regardless of whether such
          enforceability is considered in a proceeding in equity or at law;

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

                                        3


     (r)  with respect to which (i) the downpayment has been made and (ii) no
          statutory rescission rights with respect to the related Obligor are
          continuing as of the Cut-Off Date or related Addition Cut-Off Date, as
          applicable;

     (s)  that had an Equity Percentage of 10% or more at the time of the sale
          of the related Timeshare Property to the related Obligor (or, in the
          case of a Loan relating to a Timeshare Upgrade, an Equity Percentage
          of 10% or more of the value of all vacation credits owned by the
          related Obligor);

     (t)  with respect to which the related Obligor has not at any time made a
          written request for rescission of such Series 2002-1 Loan or otherwise
          stated in writing that it does not intend to consummate such Loan or
          to fully perform under such Series 2002-1 Loan;

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

     (v)  as of the Cut-Off Date or related Addition Cut-Off Date, as
          applicable, has an outstanding loan balance not greater than $100,000;
          and

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

     "EXCESS CONCENTRATION AMOUNT" shall have the meaning set forth in the
Series 2002-1 Supplement.

     "PA SUPPLEMENT" shall have the meaning set forth in the preamble.

     "POOL PURCHASE PRICE" shall have the meaning set forth in Section 3.

     "PURCHASE" shall have the meaning set forth in Section 2(e).

     "PURCHASER" shall have the meaning set forth in the preamble.

     "REPURCHASE DATE" shall have the meaning set forth in Section 7.

     "REPURCHASE PRICE" shall have the meaning set forth in Section 7.

                                        4


     "SERIES TERMINATION DATE" shall mean the date on which all obligations with
respect to the Series 2002-1 Notes issued under the Series 2002-1 Supplement
have been paid in full and the Series 2002-1 Supplement is discharged.

     "SERIES 2002-1 ADDITIONAL LOAN" shall mean each Additional Loan
constituting one of the Series 2002-1 Loans Purchased from the Seller on an
Addition Cut-Off Date and listed on Schedule 1 to the related Assignment.

     "SERIES 2002-1 LOAN" shall mean each Loan listed from time to time on the
Series 2002-1 Loan Schedule.

     "SERIES 2002-1 LOAN SCHEDULE" shall mean the Loan Schedule for the Series
2002-1 Loans.

     "SERIES 2002-1 NOTEHOLDER" shall mean any Noteholder under the Series
2002-1 Supplement.

     "SERIES 2002-1 PLEDGED LOAN" shall have the meaning set forth in the Series
2002-1 Supplement.

     "SERIES 2002-1 SUPPLEMENT" shall mean the supplement to the Master
Indenture and Servicing Agreement executed and delivered in connection with the
original issuance of the Series 2002-1 Notes and all amendments thereof and
supplements thereto.

     "SUBSTITUTION ADJUSTMENT AMOUNT" shall have the meaning set forth in
Section 7.

     SECTION 2. SALE.

            (a) SERIES 2002-1 LOANS. Subject to the terms and conditions and in
reliance on the representations, warranties, and covenants and agreements set
forth in the Agreement and this PA Supplement, the Seller hereby sells and
assigns to the Company, and the Company hereby Purchases from the Seller,
without recourse except as specifically set forth herein, all of the Seller's
right, title and interest in, to and under the Initial Loans, if any, listed on
the Series 2002-1 Loan Schedule delivered on the Closing Date, together with all
Transferred Assets relating thereto. The Series 2002-1 Additional Loans existing
at the close of business on the related Addition Cut-Off Date and all other
Transferred Assets relating thereto shall be sold by the Seller and purchased by
the Company on the related Addition Date. Notwithstanding the foregoing, and for
avoidance of doubt, the Seller does not assign, and the Purchaser does not agree
to assume, any obligations specific to the Seller as developer of any Timeshare
Property underlying an Installment Contract.

            (b) FILING OF FINANCING STATEMENTS. In connection with the foregoing
sale, the Seller agrees to record and file a financing statement or statements
(and continuation statements or other amendments with respect to such financing
statements) with respect to the Series 2002-1 Loans and related Transferred
Assets described in Section 2(a) sold by the Seller hereunder meeting the
requirements of applicable state law in such manner and in such jurisdictions as
are necessary to perfect the interests of the Purchaser created hereby under the
applicable UCC and

                                        5


to deliver a file-stamped copy of such financing statements and continuation
statements (or other amendments) or other evidence of such filings to the
Purchaser.

            (c) DELIVERY OF SERIES 2002-1 LOAN SCHEDULE. In connection with the
sale and conveyance hereunder, the Seller agrees on or prior to the Closing Date
and on or prior to the applicable Addition Date (in the case of Additional
Series 2002-1 Loans) to indicate or cause to be indicated clearly and
unambiguously in its accounting, computer and other records that the Series
2002-1 Loans and related Transferred Assets have been sold to the Purchaser
pursuant to this PA Supplement. In addition, in connection with the sale and
conveyance hereunder, the Seller agrees on or prior to the Closing Date and on
or prior to the applicable Addition Date (in the case of Additional Series
2002-1 Loans) to deliver to the Company a Series 2002-1 Loan Schedule for such
Series 2002-1 Loans or Additional Series 2002-1 Loans.

            (d) PURCHASE OF ADDITIONAL SERIES 2002-1 LOANS.

                    (i)   [Reserved].

                    (ii)  The Seller may, with the consent of the Purchaser,
     designate Eligible Loans to be sold as Additional Series 2002-1 Loans.

                    (iii) On the Addition Date with respect to any Additional
     Series 2002-1 Loans, such Additional Series 2002-1 Loans shall become
     Series 2002-1 Loans, and the Purchaser shall Purchase the Seller's right,
     title and interest in, to and under the Additional Series 2002-1 Loans and
     the other related Transferred Assets as provided in the Assignment, subject
     to the satisfaction of the following conditions on such Addition Date:

                    (A)   The Seller shall have delivered to the Purchaser
            copies of UCC financing statements covering such Additional Series
            2002-1 Loans, if necessary to perfect the Purchaser's first priority
            interest in such Series 2002-1 Additional Loans and the other
            related Transferred Assets;

                    (B)   On each of the Addition Cut-Off Date and the Addition
            Date, the sale of such Additional Series 2002-1 Loans and the other
            related Transferred Assets to the Purchaser shall not have caused
            the Seller's insolvency or have been made in contemplation of the
            Seller's insolvency;

                    (C)   No selection procedure shall have been utilized by the
            Seller that would result in a selection of such Additional Series
            2002-1 Loans (from the Eligible Loans available to the Seller) that
            would be materially adverse to the interests of the Purchaser as of
            the Addition Date;

                    (D)   The Seller shall have indicated in its accounting,
            computer and other records that the Additional Series 2002-1 Loans
            and the other related Transferred Assets have been sold to the
            Purchaser and shall have delivered to the Purchaser the required
            Series 2002-1 Loan Schedule;

                                        6


                    (E)   The Seller and the Purchaser shall have entered into a
            duly executed, written assignment substantially in the form of
            Exhibit B to the Agreement (an "ASSIGNMENT");

                    (F)   The Seller shall have delivered to the Purchaser an
            Officer's Certificate of the Seller dated the Addition Date,
            confirming, to the extent applicable, the items set forth in Section
            2(d)(iii) (A) through (E);

                    (G)   The Seller shall have executed the letter agreement
            relating to the amendment of documents and the letter agreement
            relating to inspections and audits which agreements were entered
            into by Fairfield Acceptance Corporation, the Purchaser and Sierra
            Receivables Funding Company, LLC on the date of this PA Supplement;
            and

                    (H)   The Purchaser shall have paid the Additional Pool
            Purchase Price as provided in Section 3 of the Agreement.

                    (iv)  The Seller shall have no obligation to sell the
     Additional Series 2002-1 Loans if it has not been paid the Additional Pool
     Purchase Price therefor.

            (e) TREATMENT AS SALE. It is the express and specific intent of
the parties that the sale of the Series 2002-1 Loans and related Transferred
Assets from the Seller to the Company as provided in this Section 2 (the
"PURCHASE") is and shall be construed for all purposes as a true and absolute
sale of such Series 2002-1 Loans and related Transferred Assets, shall be
absolute and irrevocable and provide the Company with the full benefits of
ownership of the Series 2002-1 Loans and related Transferred Assets and will be
treated as such for all federal income tax reporting and all other purposes.

            (f) RECHARACTERIZATION. Without prejudice to the provisions of
Section 2(e) providing for the absolute transfer of the Seller's interest in the
Series 2002-1 Loans and related Transferred Assets to the Company in order to
secure the prompt payment and performance of all of the obligations of the
Seller to the Company and the Company's assignees arising in connection with the
Agreement, this PA Supplement and the other Facility Documents, whether now or
hereafter existing, due or to become due, direct or indirect, or absolute or
contingent, the Seller hereby assigns and grants to the Company a first priority
security interest in all of the Seller's right, title and interest, whether now
owned or hereafter acquired, if any, in, to and under all of the Series 2002-1
Loans and related Transferred Assets and the proceeds thereof.

            (g) SECURITY INTEREST IN TRANSFERRED ASSETS. The Seller
Sacknowledges that the Series 2002-1 Loans and related Transferred Assets are
subject to the Lien of the Indenture and Servicing Agreement for the benefit of
the Trustee and the Series 2002-1 Noteholders (or to the Collateral Agent on
behalf of the Trustee and the Series 2002-1 Noteholders).

            (h) TRANSFER OF LOANS. All Series 2002-1 Loans conveyed to the
Company hereunder shall be held by the Custodian pursuant to the terms of the
Custodial Agreement for the benefit of the Company, the Issuer, the Trustee and
the Collateral Agent. Upon each Purchase hereunder, the Custodian shall execute
and deliver to the Company a certificate

                                        7


acknowledging receipt of the applicable Series 2002-1 Loans pursuant to the
Custodial Agreement.

     The Seller acknowledges that the Company will convey the Series 2002-1
Loans and the other related Transferred Assets to the Issuer and that the Issuer
will grant a security interest in the Series 2002-1 Loans and other related
Transferred Assets to the Collateral Agent pursuant to the Indenture and
Servicing Agreement and the related Series 2002-1 Supplement. The Seller agrees
that, upon such grant, the Issuer, the Trustee and the Collateral Agent may
enforce all of the Seller's obligations hereunder and under the Agreement
directly, including without limitation the repurchase obligations of the Seller
set forth in Section 7.

     SECTION 3. PURCHASE PRICE.

     No Series 2002-1 Loans shall be sold on the Closing Date. The purchase
price for Additional Loans sold on an Addition Date shall be the Additional Pool
Purchase Price.

     SECTION 4. PAYMENT OF PURCHASE PRICE.

     Sections 4(a) through (c) are set forth in the Agreement.

     (d)    The closing shall take place at the offices of Orrick, Herrington &
Sutcliffe LLP, Washington Harbour, 3050 K Street, NW, Washington, D.C. 20007, at
10:00 a.m. local time on the Closing Date, or such other time and place as shall
be mutually agreed upon among the parties hereto.

     SECTION 5. CONDITIONS PRECEDENT TO SALE OF SERIES 2002-1 LOANS AND
ADDITIONAL LOANS.

     (a)    CONDITIONS PRECEDENT TO SALE OF SERIES 2002-1 LOANS. The Purchaser's
obligations hereunder to Purchase and pay for the Series 2002-1 Loans and
related Transferred Assets are subject to the fulfillment of the following
conditions on or before the Closing Date:

            (i)   (A) The Purchaser shall have received the Series 2002-1 Pool
                  Purchase Agreement relating to each Series 2002-1 Loan
                  executed by all the parties thereto and (B) all conditions
                  precedent to the sale of the Series 2002-1 Pool Loans
                  thereunder shall have been fulfilled to the extent they are
                  capable of being fulfilled prior to the performance by the
                  Purchaser of its obligations under this PA Supplement.

            (ii)  The representations and warranties of the Seller made in the
                  Agreement and herein shall be true and correct in all material
                  respects on the Closing Date.

     (b)    CONDITIONS PRECEDENT TO SALE OF ADDITIONAL LOANS. No Purchase of
Additional Loans and related Transferred Assets may be made hereunder until the
Purchaser shall have received each of the following in form and substance
acceptable to the Purchaser:

                                        8


            (i)   Copies of search reports certified by parties acceptable to
     the Purchaser dated a date reasonably prior to the initial Addition Date
     (A) listing all effective financing statements which name the Seller (under
     its present name and any previous names) as debtor or seller and which are
     filed with respect to the Seller in each relevant jurisdiction, together
     with copies of such financing statements (none of which shall cover any
     portion of the Series 2002-1 Loans being purchased from the Seller and
     related Transferred Assets except as contemplated by the Facility
     Documents);

            (ii)  Copies of proper UCC Financing Statement Amendments (Form
     UCC3), if any, necessary to terminate all security interests and other
     rights of any Person in the Series 2002-1 Loans being purchased from the
     Seller and related Transferred Assets previously granted by the Seller
     (except as contemplated by the Facility Documents);

            (iii) Copies of proper UCC Financing Statements (Form UCC1) naming
     the Seller as debtor or seller of the Series 2002-1 Loans being purchased
     from the Seller and related Transferred Assets, the Issuer as total
     assignee and the Purchaser as assignor secured party, and such other
     similar instruments or documents with respect to the Seller as may be
     necessary or in the opinion of the Purchaser desirable under the UCC of all
     appropriate jurisdictions or any comparable law to evidence the perfection
     of the Purchaser's interest in the Series 2002-1 Loans and related
     Transferred Assets;

            (iv)  An opinion or opinions of counsel to the Seller, in the form
     required by the Purchaser, with respect to the following: (A) certain
     security interest matters, and (B) "true sale" and substantive
     consolidation matters; and

            (v)   Evidence that one or more Lockbox Accounts have been
     established.

     SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE SELLER.

            (a) REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants as of the Closing Date and as of each Addition Date, or
as of such other date specified in such representation and warranty, that:

                  (xvii) ACCURACY OF INFORMATION. All information with respect
     to the Seller and the Loans contained in the Confidential Information
     Memorandum dated June 2002 with respect to the Series 2002-1 Notes and
     Series 2002-1 Loans (including, without limitation, the Credit Standards
     and Collection Policy) was true and accurate in every respect material to
     the transactions contemplated hereby on the date as of which it was
     delivered, and did not omit to state any fact necessary to make the
     statements contained therein not materially misleading or, if any such
     information contained therein has been discovered to have been inaccurate
     on such date, such information has been corrected by subsequent information
     provided in writing to the Issuer.

                  (xviii) NO MATERIAL ADVERSE CHANGE. As of the Closing Date,
     there has been no material adverse change with respect to the business
     operations or financial condition of the Seller since December 31, 2001.

                                        9


          Sections 6(a)(i) through (xvi) are set forth in the Agreement.

            (b) REPRESENTATIONS AND WARRANTIES REGARDING THE SERIES 2002-1
LOANS. The Seller represents and warrants to the Company as of the Cut-Off Date
and Addition Cut-Off Date as to each Series 2002-1 Loan conveyed on and as of
the Closing Date or the related Addition Date, as applicable (except as
otherwise expressly stated) as follows:

                  (xxiii) LOAN SCHEDULE. The information set forth in the Series
          2002-1 Loan Schedule is true and correct with respect to such Series
          2002-1 Loan.

                  (xxiv) GOOD TITLE TO SERIES 2002-1 LOANS. The Seller has good
          and marketable title to such Series 2002-1 Loan free and clear of any
          Lien other than Permitted Encumbrances. (A) With respect to the
          related Timeshare Property that consists of a Vacation Credit and the
          related Loan Documents, the Seller has not sold, assigned or pledged
          such related Series 2002-1 Loan or any interest therein to any Person
          other than the Company and (B) with respect to the related Timeshare
          Property that consists of an UDI, the Assignment of Mortgage of such
          related Mortgage from the Seller to the Company and each related
          endorsement of the related Mortgage note constitutes a duly executed,
          legal, valid, binding and enforceable sale, assignment or endorsement
          of such related Mortgage and related Mortgage note, and all monies due
          or to become due thereunder and all proceeds thereof.

                  (xxv) NO DEFAULTS. As of the Cut-Off Date or related Addition
          Cut-Off Date, as applicable, such Series 2002-1 Loan is not a
          Defaulted Loan and no event has occurred which, with the taking of any
          action or the expiration of any grace or cure period or both, would
          cause such Series 2002-1 Loan to be a Defaulted Loan. The Seller has
          not waived any such default, breach, violation or event permitting
          acceleration with respect to such Series 2002-1 Loan.

                  (xxvi) EQUAL INSTALLMENTS. Such Series 2002-1 Loan has a fixed
          Loan Rate and provides for substantially equal monthly payments that
          fully amortize the Series 2002-1 Loan over its term.

                  (xxvii) EXCESS CONCENTRATION AMOUNT. The Purchase of such
          Series 2002-1 Loan occurring on such Closing Date or Addition Date, as
          applicable, and the inclusion of such Series 2002-1 Loan as a Series
          2002-1 Pledged Loan pursuant to the Series 2002-1 Supplement to the
          Indenture and Servicing Agreement, does not cause an increase in the
          Excess Concentration Amount.

          Sections 6(b)(i) through (xxii) are set forth in the Agreement.

          SECTION 7. REPURCHASES OR SUBSTITUTION OF SERIES 2002-1 LOANS.

            (a) REPURCHASE OR SUBSTITUTION OBLIGATION. Subject to Section 7(b),
upon discovery by the Seller or upon written notice from the Company, the Issuer
or the Trustee that any Series 2002-1 Loan is a Defective Loan, the Seller
shall, within 90 days after the earlier of its discovery or receipt of notice
thereof, cure such Defective Loan in all material respects or

                                       10


either (i) repurchase such Defective Loan from the Company or its assignee at
the Repurchase Price or (ii) substitute one or more Qualified Substitute Loans
for such Defective Loan. For purposes of this Agreement, the term "Repurchase
Price" shall mean an amount equal to the outstanding Principal Balance of such
Defective Loan as of the close of business on the Due Date immediately preceding
the Payment Date on which the repurchase is to be made, plus accrued but unpaid
interest thereon to the date of the repurchase. The Company hereby directs the
Seller, for so long as the Indenture and Servicing Agreement is in effect, to
make such payment on its behalf to the Collection Account pursuant to Section
7(b). The following defects with respect to documents in any Loan File, solely
to the extent they do not impair the validity or enforceability of the subject
document under applicable law, shall not be deemed to constitute a breach of the
representations and warranties contained in Section 6(b): misspellings of or
omissions of initials in names; name changes from divorce or marriage;
discrepancies as to payment dates in a Series 2002-1 Loan of no more than 30
days; discrepancies as to Scheduled Payments of no more than $5.00;
discrepancies as to origination dates of not more than 30 days; inclusion of
additional parties other than the primary Obligor not listed in the Master
Servicer's records or in the Series 2002-1 Loan Schedule and non-substantive
typographical errors and other non-substantive minor errors of a clerical or
administrative nature.

            (b) REPURCHASES AND SUBSTITUTIONS. The Seller shall provide written
notice to the Company of any repurchase pursuant to Section 7(a) not less than
two Business Days prior to the date on which such repurchase is to be effected,
specifying the Defective Loan and the Repurchase Price therefor. Upon the
repurchase of a Defective Loan pursuant to Section 7(a), the Seller shall
deposit the Repurchase Price in the Collection Account on behalf of the Company
no later than 12:00 noon, New York time, on the Payment Date on which such
repurchase is made (the "REPURCHASE DATE").

     If the Seller elects to substitute a Qualified Substitute Loan or Loans for
a Defective Loan pursuant to this Section 7(b), the Seller shall deliver such
Qualified Substitute Loan in the same manner as the other Series 2002-1 Loans
sold hereunder, including delivery of the applicable Loan Documents as required
pursuant to the Custodial Agreement and satisfaction of the same conditions with
respect to such Qualified Substitute Loan as to the Purchase of Additional Loans
set forth in Section 2(d)(iii). Payments due with respect to Qualified
Substitute Loans prior to the last day of the Due Period next preceding the date
of substitution shall not be property of the Company, but will be retained by
the Master Servicer and remitted by the Master Servicer to the Seller on the
next succeeding Payment Date. Scheduled Payments due on a Defective Loan prior
to the last day of the Due Period next preceding the date of substitution shall
be property of the Company, and after such last day of the Due Period next
preceding the date of substitution the Seller shall be entitled to retain all
Scheduled Payments due thereafter and other amounts received in respect of such
Defective Loan. The Seller shall cause the Master Servicer to deliver a schedule
of any Defective Loans so removed and Qualified Substitute Loans so substituted
to the Company and such schedule shall be an amendment to the Series 2002-1 Loan
Schedule. Upon such substitution, the Qualified Substitute Loan or Loans shall
be subject to the terms of this PA Supplement in all respects, the Seller shall
be deemed to have made the representations and warranties with respect to each
Qualified Substitute Loan set forth in Section 6(b) of the Agreement and this PA
Supplement and Section 6(c) of the Agreement, in each case as of the date of
substitution, and the Seller shall be deemed to have made a representation and
warranty that each Loan so substituted is an Qualified Substitute Loan as of the
date of substitution. The

                                       11


Seller shall be obligated to repurchase or substitute for any Eligible
Substitute Loan as to which the Seller has breached the Seller's representations
and warranties in Section 6(b) to the same extent as for any other Series 2002-1
Loan, as provided herein. In connection with the substitution of one or more
Qualified Substitute Loans for one or more Defective Loans, the Master Servicer
shall determine the amount (such amount, a "SUBSTITUTION ADJUSTMENT AMOUNT"), if
any, by which the aggregate principal balance of all such Qualified Substitute
Loans as of the date of substitution is less than the aggregate principal
balance of all such Defective Loans (after application of the principal portion
of the Scheduled Payments due in the month of substitution that are to be
distributed to the Company in the month of substitution). The Seller shall
deposit the amount of such shortfall into the Collection Account in immediately
available funds on the date of substitution, without any reimbursement therefor.

     Upon each repurchase or substitution, the Company shall automatically and
without further action sell, transfer, assign, set over and otherwise convey to
the Seller, without recourse, representation or warranty, all of the Company's
right, title and interest in and to the related Defective Loan, the related
Timeshare Property, the Loan File relating thereto and any other related
Transferred Assets, all monies due or to become due with respect thereto and all
Collections with respect thereto (including payments received from Obligors from
and including the last day of the Due Period next preceding the date of
transfer, subject to the payment of any Substitution Adjustment Amount). The
Company shall execute such documents, releases and instruments of transfer or
assignment and take such other actions as shall reasonably be requested by the
Seller to effect the conveyance of such Defective Loan, the related Timeshare
Property and related Loan File pursuant to this Section 7(b).

     Promptly after the occurrence of a Repurchase Date and after the repurchase
of Defective Loans in respect of which the Repurchase Price has been paid on
such date, the Seller shall direct the Master Servicer to delete such Defective
Loans from the Series 2002-1 Loan Schedule.

     The obligation of the Seller to repurchase or substitute for any Defective
Loan shall constitute the sole remedy against the Seller with respect to any
breach of the representations and warranties set forth in Section 6(b) available
hereunder to the Company or its successors or assigns.

            (c) REPURCHASES OF SERIES 2002-1 LOANS THAT BECOME DEFAULTED LOANS.
If any Series 2002-1 Loan becomes a Defaulted Loan during any Due Period, the
Seller may repurchase such Defaulted Loan from the Company or its assignees at
the Repurchase Price therefor and in accordance with the additional provisions
applicable to repurchases of Defective Loans under Section 7(b).

            (d) MAXIMUM REPURCHASES. Notwithstanding anything to the contrary in
the Agreement or this PA Supplement, no Defaulted Loans shall be repurchased by
the Seller to the extent that the aggregate principal balance of all Defaulted
Loans so repurchased is greater than the Defaulted Loan Repurchase Cap.

     SECTION 8.  COVENANTS OF THE SELLER.

     Section 8 is set forth in the Agreement.

                                       12


     SECTION 9.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     Section 9 is set forth in the Agreement.

     SECTION 10. COVENANTS OF THE COMPANY.

     Section 10 is set forth in the Agreement.

     SECTION 11. MISCELLANEOUS PROVISIONS.

     Sections 11(a) through (j) are set forth in the Agreement.

            (k) RATIFICATION OF AGREEMENT. As supplemented by this PA
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this PA Supplement shall be read, taken and
construed as one and the same instrument.

            (l) AMENDMENT. This PA Supplement may be amended from time to time
or the provisions hereof may be waived or otherwise modified by the parties
hereto by written agreement signed by the parties hereto.

            (m) COUNTERPARTS. This PA 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.

            (n) GOVERNING LAW. THIS PA SUPPLEMENT IS GOVERNED BY AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES.

            (o) SUCCESSORS AND ASSIGNS. This PA Supplement shall be binding upon
each of the Seller and the Company and their respective permitted successors and
assigns, and shall inure to the benefit of, and be enforceable by, each of the
Seller and the Company and each of the Issuer, the Trustee, the Collateral Agent
and the Noteholders.

                                       13


     IN WITNESS WHEREOF, the parties have caused their names to be signed hereto
by their respective officers thereunto duly authorized, all as of the day and
year first above written.

                                         TRENDWEST RESORTS, INC.

                                         By:    /s/ Timothy P. O'Neil
                                            ------------------------------------
                                             Name: Timothy P. O'Neil
                                             Title: Chief Financial Officer


                                         SIERRA DEPOSIT COMPANY, LLC

                                         By:    /s/ Ralph E. Turner
                                            ------------------------------------
                                             Name: Ralph E. Turner
                                             Title: President and Treasurer

                  [Signature page for Trendwest PA Supplement]




                                                                   EXHIBIT 10.67

                                                                  EXECUTION COPY

- --------------------------------------------------------------------------------

                         MASTER LOAN PURCHASE AGREEMENT

                           Dated as of August 29, 2002

                                 by and between

                         EFI DEVELOPMENT FUNDING, INC.,
                                    as Seller

                                       and

                           SIERRA DEPOSIT COMPANY, LLC
                                  as Purchaser

- --------------------------------------------------------------------------------



                                TABLE OF CONTENTS




                                                                                                               Page
                                                                                                               ----
                                                                                                              
RECITALS..........................................................................................................1

     Section 1.   Definitions.....................................................................................1

     Section 2.   Purchase and Sale of Loans.....................................................................14

     Section 3.   Pool Purchase Price............................................................................14

     Section 4.   Payment of Purchase Price......................................................................15

            (a)   Closing Dates..................................................................................15

            (b)   Manner of Payment of Additional Pool Purchase Price............................................15

            (c)   Scheduled Payments Under Loans and Cut-Off Date................................................15

     Section 5.   Conditions Precedent to Sale of Loans..........................................................15

     Section 6.   Representations and Warranties of the Seller...................................................15

            (a)   General Representations and Warranties of the Seller...........................................15

            (b)   Representations and Warranties Regarding the Loans.............................................19

            (c)   Representations and Warranties Regarding the Loan Files........................................24

            (d)   Survival of Representations and Warranties.....................................................24

            (e)   Indemnification of the Company.................................................................25

     Section 7.   Repurchases or Substitution of Loans for Breach of Representations and Warranties..............25

     Section 8.   Covenants of the Seller........................................................................25

            (a)   Affirmative Covenants of the Seller............................................................25

            (b)   Negative Covenants of the Seller...............................................................29

     Section 9.   Representations and Warranties of the Company..................................................30

     Section 10.  Covenants of the Company.......................................................................32

     Section 11.  Miscellaneous..................................................................................33

            (a)   Amendment......................................................................................33

            (b)   Assignment.....................................................................................33

            (c)   Counterparts...................................................................................33

            (d)   Termination................................................................................... 33

            (e)   Governing Law..................................................................................33

            (f)   Notices........................................................................................33

            (g)   Severability of Provisions.....................................................................33

            (h)   Successors and Assigns.........................................................................33



                                        i


                                TABLE OF CONTENTS
                                   (continued)




                                                                                                               Page
                                                                                                               ----

                                                                                                              
            (i)   Costs, Expenses and Taxes......................................................................34

            (j)   No Bankruptcy Petition.........................................................................34

            (k)   Treatment of Timeshare Upgrades................................................................34



                                       ii


                                    SCHEDULES

Schedule 1 - Loan Schedule

Schedule 2 - Resorts

Schedule 3 - Environmental Issues

Schedule 4 - Lockbox Accounts

Schedule 5 - Litigation

                                    EXHIBITS

Exhibit A    Form of Custodial Agreement

Exhibit B    Form of Assignment of Additional Loans

Exhibit C    Credit Standards and Collection Policies of EFI Development
             Funding, Inc.

Exhibit D    Forms of Loans

Exhibit E    Form of Lockbox Agreement

                                       iii


                         MASTER LOAN PURCHASE AGREEMENT

     THIS MASTER LOAN PURCHASE AGREEMENT (this "AGREEMENT"), dated as of August
29, 2002, is made by and between EFI DEVELOPMENT FUNDING, INC., a Delaware
corporation, as seller (the "SELLER"), and SIERRA DEPOSIT COMPANY, LLC, a
Delaware limited liability company, as purchaser (hereinafter referred to as the
"PURCHASER" or the "COMPANY").

                                    RECITALS

     WHEREAS, EFI has purchased certain Loans from time to time from Developers,
which Loans were originated in connection with the sale to Obligors of Timeshare
Properties at various Resorts;

     WHEREAS, each of the Seller and the Company wishes to enter into this
Agreement and the related Master Loan Purchase Agreement Supplement for each
Series of Notes (each, a "PA SUPPLEMENT") in order to, among other things,
effect the sale to the Company on the related Closing Date of Initial Loans and
related Transferred Assets that the Seller owns as of the close of business on
the related Cut-Off Date, and the sale to the Company of Additional Loans
(including Additional Upgrade Balances) and related Transferred Assets that the
Seller will own from time to time thereafter as of the close of business on the
related Addition Cut-Off Dates; and

     WHEREAS, the Company intends to transfer and assign the Loans and related
Transferred Assets to the Issuer, which will then grant security interests in
the Loans and related Transferred Assets to Wachovia Bank, National Association,
as Collateral Agent on behalf of the Trustee and the holders of Notes issued
from time to time pursuant to a Master Indenture and Servicing Agreement of even
date herewith (the "INDENTURE AND SERVICING AGREEMENT"), together with any
Indenture Supplements thereto, each by and between Sierra Receivables Funding
Company, LLC as Issuer, FAC as Master Servicer, the Trustee and the Collateral
Agent.

     NOW, THEREFORE, in consideration of the purchase price set forth herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:

SECTION 1.   DEFINITIONS.

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

     "ADDITION CUT-OFF DATE" shall mean, for Additional Loans of any Series, the
date set forth in the related Assignment.

     "ADDITION DATE" shall mean, with respect to any Series, the Addition Date
as defined in the related PA Supplement.

     "ADDITIONAL LOAN" shall mean, with respect to any Series, each installment
contract or contract for deed or contract or note secured by a mortgage, deed of
trust, vendor's lien or



retention of title, in each case relating to the sale of one or more Timeshare
Properties or Green Timeshare Properties to an Obligor and each Additional
Upgrade Balance, in each case constituting one of the Loans of such Series
purchased from the Seller on an Addition Cut-Off Date and listed on Schedule 1
to the related Assignment.

     "ADDITIONAL POOL PURCHASE PRICE" shall have the meaning set forth in
Section 3.

     "ADDITIONAL UPGRADE BALANCE" shall mean, with respect to any Loan, any
future borrowing made by the related Obligor pursuant to a modification of the
Loan relating to a Timeshare Upgrade after the Cut-Off Date or the Addition
Cut-Off Date, as applicable, with respect to such Loan, together with all money
due or to become due in respect of such borrowing.

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

     "AGREEMENT" shall mean this Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.

     "AMORTIZATION EVENT" shall mean, with respect to any Series, one or more of
the events constituting an Amortization Event as defined in the related
Indenture Supplement.

     "ASSESSMENTS" shall mean any assessments made with respect to a Timeshare
Property, including but not limited to real estate taxes, recreation fees,
community club or property owners' association dues, water and sewer improvement
district assessments or other similar assessments, the nonpayment of which could
result in the imposition of a Lien or other encumbrance upon such Timeshare
Property.

     "ASSIGNMENT" shall mean, with respect to any Series, an Assignment as
defined in the related PA Supplement.

     "ASSIGNMENT OF MORTGAGE" shall mean any assignment (including any
collateral assignment) of any Mortgage.

     "BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, Title 11 of
the United States Code, as amended.

     "BENEFIT PLAN" shall mean any employee benefit plan as defined in
Section 3(3) of ERISA in respect of which the Company or any ERISA Affiliate of
the Company is, or at any time during the immediately preceding six years was,
an "employer" as defined in Section 3(5) of ERISA.

     "BUSINESS DAY" shall mean any day other than (i) a Saturday or Sunday or
(ii) a day on which banking institutions in New York, New York, Las Vegas,
Nevada, or the city in which the Corporate Trust Office of the Trustee is
located, or any other city specified in the PA Supplement for a Series, are
authorized or obligated by law or executive order to be closed.

                                        2


     "CENDANT" shall mean Cendant Corporation or any successor thereof.

     "CLOSING DATE" shall mean, with respect to any Series, the Closing Date as
defined in the related PA Supplement.

     "COLLATERAL" shall have the meaning set forth in the Indenture and
Servicing Agreement.

     "COLLATERAL AGENCY AGREEMENT" shall mean the Collateral Agency Agreement
dated as of January 15, 1998 by and between Fleet National Bank as predecessor
Collateral Agent, Fleet Securities, Inc. as deal agent and the secured parties
named therein, as amended by the First Amendment to Collateral Agency Agreement
dated as of July 31, 1998, as further amended by the Second Amendment to
Collateral Agreement dated as of July 25, 2000, as further amended by the Third
Amendment to Collateral Agency Agreement dated as of July 1, 2001, and as
further amended by the Fourth Amendment to Collateral Agency Agreement dated as
of August 29, 2002 by and among the Collateral Agent, the Trustee and other
secured parties, as such Collateral Agency Agreement may be amended,
supplemented or otherwise modified from time to time in accordance therewith.

     "COLLATERAL AGENT" shall mean Wachovia Bank, National Association, as
Collateral Agent, its successors and assigns and any entity which is substituted
as Collateral Agent under the terms of the Collateral Agency Agreement.

     "COLLECTION ACCOUNT" shall mean the account or accounts established
pursuant to Section 7.1(a) of the Indenture and Servicing Agreement.

     "COLLECTIONS" shall mean, with respect to any Loan, all funds, cash
collections and other cash proceeds of such Loan, including without limitation
(i) all Scheduled Payments or recoveries made in the form of money, checks and
like items to, or a wire transfer or an automated clearinghouse transfer
received in, any of the Lockbox Accounts or received by the Issuer or the Master
Servicer (or any Subservicer) in respect of such Loan, (ii) all amounts received
by the Issuer, the Master Servicer (or any Subservicer) or the Trustee in
respect of any Insurance Proceeds relating to such Loan or the related Timeshare
Property and (iii) all amounts received by the Issuer, the Master Servicer (or
any Subservicer) or the Trustee in respect of any proceeds in respect of a
condemnation of property in any Resort, which proceeds relate to such Loan or
the related Timeshare Property.

     "COMPANY" shall have the meaning set forth in the preamble.

     "CONTAMINANTS" shall have the meaning set forth in Section 6(b)(xii).

     "CORPORATE TRUST OFFICE" shall have the meaning set forth in the Indenture
and Servicing Agreement.

     "CREDIT CARD ACCOUNT" shall mean an arrangement whereby an Obligor makes
Scheduled Payments under a Loan via pre-authorized debit to a Major Credit Card.

                                        3


     "CREDIT STANDARDS AND COLLECTION POLICIES" shall mean the Credit Standards
and Collection Policies of EFI, a copy of which is attached to this Agreement as
Exhibit C, as the same may be amended from time to time in accordance with the
provisions of Section 8(b)(iii).

     "CUSTODIAL AGREEMENT" shall mean the custodial agreement dated as of
August 29, 2002 by and between the Issuer, FAC, EFI, Trendwest, Wachovia Bank,
National Association, as Custodian, the Trustee and the Collateral Agent, a copy
of which is attached to this Agreement as Exhibit A, as the same may be amended,
supplemented or otherwise modified from time to time thereafter in accordance
with the terms hereof.

     "CUSTODIAN" shall mean, at any time, the custodian under the Custodial
Agreement at such time.

     "CUSTOMARY PRACTICES" shall mean the Master Servicer's practices with
respect to the servicing and administration of Loans as in effect from time to
time, which practices shall be consistent with the practices employed by prudent
lending institutions that originate and service instruments similar to the Loans
or other timeshare loans in the jurisdictions in which the Resorts are located.

     "CUT-OFF DATE" shall mean, with respect to any Series, the Cut-Off Date as
defined in the related PA Supplement.

     "DE MINIMUS LEVELS" shall have the meaning set forth in Section 6(b)(xii).

     "DEBTOR RELIEF LAWS" shall mean the Bankruptcy Code and all other
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments or similar
debtor relief laws from time to time in effect affecting the rights of creditors
generally.

     "DEFAULTED LOAN" shall mean any 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 has been the
subject of a proceeding under a Debtor Relief Law or (d) for which cancellation
or foreclosure actions have been commenced.

     "DEFAULTED LOAN REPURCHASE CAP" shall mean, as of any date of
determination, an amount equal to the PRODUCT of (a) 18.0% MULTIPLIED BY (b) the
aggregate Loan principal balance of all Loans (calculated as of the Cut-Off Date
or related Addition Cut-Off Date, as applicable, for each Loan) sold by the
Seller to the Depositor pursuant to this Agreement on or prior to such date of
determination.

     "DEFECTIVE LOAN" shall mean, with respect to any Series, any Loan with any
uncured material breach of a representation or warranty of the Seller set forth
in Section 6(b) hereof and in the related PA Supplement.

     "DELINQUENT LOAN" shall mean, with respect to any Series, a Loan with any
portion of a Scheduled Payment delinquent more than 30 days, other than any Loan
that is a Defaulted Loan.

                                        4


     "DEPOSITOR ADMINISTRATIVE SERVICES AGREEMENT" shall mean the administrative
services agreement dated as of August 29, 2002 by and between FAC as
administrator and the Company.

     "DEVELOPER" shall mean any developer of a Resort that originates Loans in
accordance with the Credit Standards and Collection Policies for sale to EFI.

     "DUE DATE" shall mean, with respect to any Loan, the date on which an
Obligor is required to make a Scheduled Payment thereon.

     "DUE PERIOD" shall mean, with respect to any Payment Date, the immediately
preceding calendar month.

     "EFI" shall mean EFI Development Funding, Inc., a Delaware corporation and
a wholly-owned indirect Subsidiary of Cendant.

     "ELIGIBLE LOAN" shall mean, with respect to any Series, an Eligible Loan as
defined in the related PA Supplement.

     "ENVIRONMENTAL LAWS" shall have the meaning set forth in Section 6(b)(xii).

     "EQUITY PERCENTAGE" shall mean, with respect to a Loan, a fraction,
expressed as a percentage, the NUMERATOR of which is the EXCESS of (A) the
Timeshare Price of the related Timeshare Property relating to a Loan paid or to
be paid by an Obligor OVER (B) the outstanding principal balance of such Loan at
the time of sale of such Timeshare Property to such Obligor (LESS the amount of
any valid check presented by such Obligor at the time of such sale that has
cleared the payment system), and the DENOMINATOR of which is the Timeshare Price
of the related Timeshare Property, PROVIDED that any cash downpayments or
principal payments made on any initial Loan that have been fully prepaid as part
of a Timeshare Upgrade and financed downpayments under such initial Loan
financed over a period not exceeding six months from the date of origination of
such Loan that have actually been paid within such six-month period shall be
included for purposes of calculating the numerator of such fraction.

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

     "ERISA AFFILIATE" shall mean, with respect to any Person, (i) any
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Internal Revenue Code) as such
Person; (ii) a trade or business (whether or not incorporated) under common
control (within the meaning of Section 414(c) of the Internal Revenue Code) with
such Person; or (iii) a member of the same affiliated service group (within the
meaning of Section 414(m) of the Internal Revenue Code) as such Person, any
corporation described in clause (i) or any trade or business described in clause
(ii).

     "ERISA LIABILITIES" shall have the meaning set forth in Section 8(b)(vi).

     "EVENT OF DEFAULT" shall mean, with respect to any Series, one or more of
the events constituting an Event of Default under the related Indenture
Supplement.

                                        5


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

     "FACILITY DOCUMENTS" shall mean, collectively, this Agreement, each PA
Supplement, the Indenture and Servicing Agreement, each Indenture Supplement,
the Pool Purchase Agreement, each PPA Supplement, the Custodial Agreement, the
Lockbox Agreements, the Collateral Agency Agreement, the Loan Conveyance
Documents, the Depositor Administrative Services Agreement, the Issuer
Administrative Services Agreement, the Financing Statements and all other
agreements, documents and instruments delivered pursuant thereto or in
connection therewith.

     "FIXED WEEK" shall mean a Timeshare Property representing a Fee Simple
interest in a lodging unit at a Resort that entitles the related Obligor to
occupy such lodging unit for a specified one-week period each year.

     "FRI" shall mean Fairfield Resorts, Inc., a Delaware corporation and the
parent corporation of FAC.

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

     "GRANT" shall have the meaning set forth in the Indenture and Servicing
Agreement.

     "GREEN LOAN" shall mean a Loan the proceeds of which are used to finance
the purchase of a Green Timeshare Property.

     "GREEN TIMESHARE PROPERTY" shall mean a Timeshare Property for which
construction on the related Resort has not yet begun or is subject to
completion.

     "INDEMNIFIED AMOUNTS" shall have the meaning set forth in Section 6(e).

     "INDENTURE AND SERVICING AGREEMENT" shall have the meaning set forth in the
recitals.

     "INDENTURE SUPPLEMENT" shall mean, with respect to any Series, an indenture
supplement to the Indenture and Servicing Agreement, executed and delivered in
connection with the issuance of the Notes of such Series pursuant to
Section 2.10 of the Indenture and Servicing Agreement, and all amendments
thereof and supplements thereto.

     "INDEPENDENT DIRECTOR" shall mean an individual who is an Independent
Director as defined in the Limited Liability Company Agreement of the Company as
in effect on the date of this Agreement.

     "INITIAL CLOSING DATE" shall mean August 29, 2002.

     "INITIAL LOAN" shall mean, with respect to any Series, each Loan listed on
the related Loan Schedule on the Closing Date for such Series.

                                        6


     "INSOLVENCY EVENT" shall mean, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Debtor Relief Law now or hereafter in
effect, or the filing of a petition against such Person in an involuntary case
under any applicable Debtor Relief Law now or hereafter in effect, which case
remains unstayed and undismissed within 30 days of such filing, or the
appointing of a receiver, conservator, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its property, or the ordering of the winding-up or liquidation of such Person's
business; or (b) the commencement by such Person of a voluntary case under any
applicable Debtor Relief Law now or hereafter in effect, or the consent by such
Person to the entry of an order for relief in an involuntary case under any such
Debtor Relief Law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for such Person or for any substantial part of its property,
or the making by such Person of any general assignment for the benefit of
creditors, or the failure by such Person generally to pay its debts as such
debts become due or the admission by such Person of its inability to pay its
debts generally as they become due.

     "INSOLVENCY PROCEEDING" shall mean any proceeding relating to an Insolvency
Event.

     "INSTALLMENT CONTRACT" shall mean, with respect to any Series, an
installment sale contract for deed and retained title in a related Timeshare
Property by and between the Seller and an Obligor.

     "INSURANCE PROCEEDS" shall mean proceeds of any insurance policy relating
to any Loan or the related Timeshare Property, including any refund of unearned
premium, but only to the extent such proceeds are not to be applied to the
restoration of any improvements on the related Timeshare Property or released to
the Obligor in accordance with Customary Practices.

     "INTERNAL REVENUE CODE" shall mean the United States Internal Revenue Code
of 1986, as amended from time to time.

     "ISSUER" shall mean Sierra Receivables Funding Company, LLC, a Delaware
limited liability company.

     "ISSUER ADMINISTRATIVE SERVICES AGREEMENT" shall mean the administrative
services agreement dated as of August 29, 2002 by and between FAC, as
administrator, and the Issuer.

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

                                        7


     "LOAN" shall mean, with respect to any Series, each installment contract or
contract for deed or contract or note secured by a mortgage, deed of trust,
vendor's lien or retention of title, in each case relating to the sale of one or
more Timeshare Properties or Green Timeshare Properties to an Obligor, that is
listed on the Loan Schedule for such Series on the related Closing Date and any
Additional Loans that are listed from time to time on such Loan Schedule in
accordance with the related PA Supplement.

     "LOAN CONVEYANCE DOCUMENTS" shall mean, with respect to any Loan, (a) the
Assignment of Additional Loans in the form of Exhibit B, if applicable, and (b)
any such other releases, documents, instruments or agreements as may be required
by the Company, the Issuer or the Trustee in order to more fully effect the sale
(including any prior assignments) of such Loan and any related Transferred
Assets.

     "LOAN DOCUMENTS" shall mean, with respect to any Loan, all papers and
documents related to such Loan, including the original of all applicable
promissory notes, stamped as required by the Custodial Agreement, the original
of any related recorded or (to the extent permitted under this Agreement)
unrecorded Mortgage (or a copy of such recorded Mortgage if the original of the
recorded Mortgage is not available, certified to be a true and complete copy of
the original) and a copy of any recorded or (to the extent permitted under this
Agreement) unrecorded warranty deed transferring legal title to the related
Timeshare Property to the Obligor; PROVIDED, HOWEVER, that the Loan Documents
may be provided in microfiche or other electronic form to the extent permitted
under the Custodial Agreement.

     "LOAN FILE" shall mean, with respect to any Loan, the Loan Documents
pertaining to such Loan and any additional amendments, supplements, extensions,
modifications or waiver agreements required to be added to the Loan File
pursuant to this Agreement, the Credit Standards and Collection Policies and/or
Customary Practices.

     "LOAN POOL" shall mean, with respect to any Series, all Loans identified in
the Loan Schedule for such Series.

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

     "LOAN SCHEDULE" shall mean, with respect to any Series, the list of Loans
attached to the related PA Supplement as Schedule 1, as amended from time to
time on each Addition Date and Repurchase Date as provided in the related PA
Supplement, which list shall set forth the following information with respect to
each Loan therein as of the applicable date:

          (a)  the Loan number;

          (b)  the Obligor's name and the home address and telephone number for
               such Obligor set forth in the Loan;

          (c)  the Resort in which the related Timeshare Property is located;

                                        8


          (d)  as to Fixed Weeks, the building, unit and week thereof; as to
               Timeshare Properties other than UDIs, the number of Vacation
               Credits related thereto for which occupancy rights in a Timeshare
               Property may be redeemed and which are represented thereby;

          (e)  the Loan Rate;

          (f)  whether the Obligor has elected a PAC with respect to the Loan;

          (g)  the original term of the Loan;

          (h)  the original Loan principal balance and outstanding Loan
               principal balance as of the Cut-Off Date or related Addition
               Cut-Off Date, as applicable;

          (i)  the amount of the Scheduled Payment on the Loan; and

          (j)  whether the related Timeshare Property has been deeded to the
               Obligor.

The Loan Schedule also shall set forth the aggregate amounts described under
clause (h) above for all outstanding Loans. The Loan Schedule may be in the form
of more than one list, collectively setting forth all of the information
required.

     "LOCKBOX ACCOUNT" shall mean any of the accounts established pursuant to a
Lockbox Agreement.

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

     "LOCKBOX BANK" shall mean any of the commercial banks holding one or more
Lockbox Accounts for the purpose of receiving Collections.

     "LOT" shall mean a fully or partially developed parcel of real estate.

     "MAJOR CREDIT CARD" shall mean a credit card issued by any Visa USA, Inc.,
MasterCard International Incorporated, American Express Company, Discover Bank
or Diners Club International Ltd. credit card entity.

     "MASTER SERVICER" shall mean the master servicer under the Indenture and
Servicing Agreement.

     "MATERIAL ADVERSE EFFECT" shall mean, with respect to any Person and any
event or circumstance, a material adverse effect on:

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

                                        9


     any of such Person;

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

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

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

          (e)  the value, validity, enforceability or collectibility of the
     Loans pledged as collateral for any Series of Notes or any of the other
     Transferred Assets pledged as collateral for any Series of Notes.

     "MORTGAGE" shall mean any mortgage, deed of trust, purchase money deed of
trust or deed to secure debt encumbering the related Timeshare Property, granted
by the related Obligor to the Seller to secure payments or other obligations
under a Loan.

     "MULTIEMPLOYER PLAN" shall have the meaning set forth in Section 3(37) of
ERISA.

     "NOTE" shall mean any Loan-backed note issued, executed and authenticated
in accordance with the Indenture and Servicing Agreement and any related
Indenture Supplement.

     "NOTEHOLDER" shall have the meaning set forth in the Indenture and
Servicing Agreement.

     "OBLIGOR" shall mean, with respect to any Loan, the Person or Persons
obligated to make Scheduled Payments thereon.

     "OPINION OF COUNSEL" shall mean a written opinion of counsel in form and
substance reasonably satisfactory to the recipient thereof.

     "PAC" shall mean an arrangement whereby an Obligor makes Scheduled Payments
under a Loan via pre-authorized bank account debit.

     "PA SUPPLEMENT" shall have the meaning set forth in the recitals.

     "PAYMENT DATE" shall mean, with respect to any Series, the payment date set
forth in the related Indenture Supplement.

     "PERMITTED ENCUMBRANCE" shall mean, with respect to a Loan, any of the
following Liens against the related Timeshare Property: (i) the interest therein
of the Obligor, (ii) the Lien of due and unpaid Assessments, (iii) covenants,
conditions and restrictions, rights of way, easements and other matters of
public record, such exceptions appearing of record being consistent with the
normal business practices of the Seller or specifically disclosed in the
applicable land sales registrations filed with the applicable regulatory
agencies and (iv) other

                                       10


matters to which properties of the same type as those underlying such Loan are
commonly subject that do not materially interfere with the benefits of the
security intended to be provided by such Timeshare Property.

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

     "PLAN" shall mean an employee benefit plan or other retirement arrangement
subject to ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended from time to time.

     "PLAN INSOLVENCY" shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.

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

     "POOL PURCHASE AGREEMENT" shall mean the master purchase agreement relating
to the Loans, dated the date hereof, by and between the Company and the Issuer,
and all amendments thereof and supplements thereto including, with respect to
any Series, the related PPA Supplement.

     "POOL PURCHASE PRICE" shall mean, with respect to any Series, the Pool
Purchase Price as defined in the related PA Supplement.

     "POST OFFICE BOX" shall mean each post office box to which Obligors are
directed to mail payments in respect of the Loans of any Series.

     "PPA SUPPLEMENT" shall mean any supplement to the Pool Purchase Agreement
relating to a particular Series of Notes.

     "PURCHASE" shall mean, with respect to any Series, a Purchase as defined in
the related PA Supplement.

     "PURCHASER" shall have the meaning set forth in the preamble.

     "QUALIFIED SUBSTITUTE LOAN" shall mean, with respect to any Series, a
substitute Loan that (i) is an Eligible Loan on the applicable date of
substitution for such substitute Loan, (ii) on such date of substitution has a
Loan Rate not less than the Loan Rate of the substituted Loan and (iii) is not
selected in a manner adverse to the Purchaser and its assignees.

     "RECORDS" shall mean all copies of Loans (not including originals) and
other documents, books, records and other information (including without
limitation computer programs, tapes, discs, punch cards, data processing
software and related property and rights)

                                       11


maintained by the Seller or any of its respective Affiliates (not including the
Purchaser or the Issuer) with respect to Loans, the related Transferred Assets
and the related Obligors.

     "REORGANIZATION" shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning of Section 4241
of ERISA.

     "REPORTABLE EVENT" shall mean any of the events described in Section 4043
of ERISA.

     "REPURCHASE DATE" shall mean, with respect to any Series, the Repurchase
Date as defined in the related PA Supplement.

     "REPURCHASE PRICE" shall mean, with respect to any Series, the Repurchase
Price as defined in the related PA Supplement.

     "RESERVATION SYSTEM" shall mean the system with respect to Timeshare
Properties pursuant to which a reservation for a particular location, time,
length of stay and unit type is received, accepted, modified or canceled.

     "RESERVE ACCOUNT" shall, with respect to any Series, mean any reserve
account established pursuant to the related Indenture Supplement.

     "RESORT" shall mean each resort or development listed on Schedule 2 (as
such Schedule 2 may be amended from time to time with the written consent of the
Company and the Seller in connection with proposed sales of Additional Loans
relating to resorts or developments with respect to which Loans have not
previously been sold under this Agreement).

     "SCHEDULED PAYMENT" shall mean each scheduled monthly payment of principal
and interest on a Loan.

     "SELLER" shall have the meaning set forth in the preamble.

     "SERIES" shall mean any Series of Notes issued and established pursuant to
an Indenture Supplement.

     "SERIES TERMINATION DATE" shall mean, with respect to any Series, the
Series Termination Date as defined in the related PA Supplement.

     "STATE" shall mean any of the 50 United States or the District of Columbia.

     "SUBSERVICER" shall have the meaning set forth in the Indenture and
Servicing Agreement.

     "SUBSERVICING AGREEMENT" shall have the meaning set forth in the Indenture
and Servicing Agreement.

     "SUBSIDIARY" shall mean, with respect to any Person, any corporation or
other entity of which more than 50% of the outstanding capital stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors of such corporation

                                       12


(notwithstanding that at the time capital stock of any other class or classes of
such corporation shall or might have voting power upon the occurrence of any
contingency) or other persons performing similar functions is at the time
directly or indirectly owned by such Person.

     "SUBSTITUTION ADJUSTMENT AMOUNT" shall, with respect to any Series, have
the meaning set forth in the related PA Supplement.

     "TIMESHARE PRICE" shall mean the original price of the Timeshare Property
paid by an Obligor, PLUS any accrued and unpaid interest and other amounts owed
by the Obligor.

     "TIMESHARE PROPERTY" shall mean the underlying ownership interest that is
the subject of a Loan, which ownership interest may be either a Fixed Week, a
UDI or Vacation Credits.

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

     "TIMESHARE UPGRADE" shall mean the upgrade by an Obligor of the Obligor's
existing Timeshare Property to an upgraded Timeshare Property.

     "TRANSFERRED ASSETS" shall mean, with respect to any Series, any and all
right, title and interest of the Seller in, to and under:

          (a)  the Loans from time to time, including without limitation the
     Initial Loans as of the close of business on the Cut-Off Date and the
     Additional Loans as of the close of business on the related Addition
     Cut-Off Dates and all Scheduled Payments, other Collections and other funds
     received in respect of such Initial Loans and Additional Loans on or after
     the Cut-Off Date or Addition Cut-Off Date, as applicable, and any other
     monies due or to become due on or after the Cut-Off Date or Addition
     Cut-Off Date, as applicable, in respect of any such Loans, and any security
     therefor;

          (b)  the Timeshare Properties relating to the Loans;

          (c)  any Mortgages relating to the Loans;

          (d)  any Insurance Policies relating to the Loans;

          (e)  the Loan Files and other Records relating to the Loans;

          (f)  the Loan Conveyance Documents relating to the Loans;

          (g)  all interest, dividends, cash, instruments, financial assets and
     other investment property and other property from time to time received,
     receivable or otherwise distributed in respect of, or in exchange for, or
     on account of, the sale or

                                       13


     other disposition of the Transferred Assets, and including all payments
     under Insurance Policies (whether or not any of the Seller, the Purchaser,
     the Master Servicer, the Issuer 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 Transferred Assets, and any security
     granted or purported to be granted in respect of any Transferred Assets;
     and

          (h)  all proceeds of any of the foregoing property described in
     clauses (a) through (g).

     "TRENDWEST" shall mean Trendwest Resorts, Inc., a wholly-owned indirect
Subsidiary of Cendant.

     "TRUSTEE" shall mean Wachovia Bank, National Association, as Trustee under
the Indenture and Servicing Agreement, and its successors and assigns.

     "UCC" shall mean the Uniform Commercial Code, as amended from time to time,
as in effect in any specified jurisdiction.

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

     "VACATION CREDITS" shall mean ownership interests that entitle the owner
thereof to use a Resort.

SECTION 2.   PURCHASE AND SALE OF LOANS.

     The Seller may from time to time sell and assign to the Company, and the
Company may from time to time Purchase from the Seller, all the Seller's right,
title and interest in, to and under the Loans listed on the Loan Schedule with
respect to the related PA Supplement. The principal terms of the Purchase and
sale of Loans for each Series shall be set forth in the related PA Supplement.

SECTION 3.   POOL PURCHASE PRICE.

     Provisions with respect to the Purchase and sale of the Loans for each
Series shall be set forth in the related PA Supplement.

     The purchase price for any Additional Loans and other related Transferred
Assets (the "ADDITIONAL POOL PURCHASE PRICE") conveyed to the Company under this
Agreement and the related PA Supplement on each Addition Date shall be a dollar
amount equal to the aggregate outstanding principal balance of such Additional
Loans sold on such date, subject to adjustment to reflect such factors as the
Company and the Seller mutually agree will result in an Additional Pool Purchase
Price equal to the fair market value of such Additional Loans and other related
Transferred Assets.

                                       14


SECTION 4.   PAYMENT OF PURCHASE PRICE.

          (a)  CLOSING DATES. On the terms and subject to the conditions of this
Agreement and the related PA Supplement, payment of the Pool Purchase Price for
each Series shall be made by the Company on the related Closing Date in
immediately available funds to the Seller to such accounts at such banks as the
Seller shall designate to the Company not less than one Business Day prior to
the such Closing Date.

          (b)  MANNER OF PAYMENT OF ADDITIONAL POOL PURCHASE PRICE. On the terms
and subject to the conditions in this Agreement and the related PA Supplement,
the Company shall pay to the Seller, on each Business Day on which any
Additional Loans are purchased from the Seller by the Company pursuant to
Section 2 of the related PA Supplement, the Additional Pool Purchase Price for
such Additional Loans by paying such Additional Pool Purchase Price to the
Seller in cash.

          (c)  SCHEDULED PAYMENTS UNDER LOANS AND CUT-OFF DATE. The Company
shall be entitled to all Scheduled Payments, other Collections and all other
funds with respect to any Loan received on or after the related Cut-Off Date or
Addition Cut-Off Date, as applicable. The principal balance of each Loan as of
the related Cut-Off Date or Addition Cut-Off Date, as applicable, shall be
determined after deduction, in accordance with the terms of each such Loan, of
payments of principal received before such Cut-Off Date or Addition Cut-Off
Date.

SECTION 5.   CONDITIONS PRECEDENT TO SALE OF LOANS.

          No Purchase of Loans and related Transferred Assets shall be made
hereunder or under any PA Supplement on any date on which:

             (a)   the Company does not have sufficient funds available to pay
   the related Pool Purchase Price or Additional Pool Purchase Price in cash; or

             (b)   an Insolvency Event has occurred and is continuing with
   respect to the Seller or the Company.

SECTION 6.   REPRESENTATIONS AND WARRANTIES OF THE SELLER.

          (a)  GENERAL REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants as of each Closing Date and as of each Addition Date, or
as of such other date specified in such representation and warranty, that:

             (i)       ORGANIZATION AND GOOD STANDING.

                       (A)   The Seller is a corporation duly organized, validly
             existing and in good standing under the laws of the state of its
             organization and has full corporate power, authority and legal
             right to own its properties and conduct its business as such
             properties are presently owned and such business is presently
             conducted, and to execute, deliver and perform its obligations
             under this Agreement, any related PA Supplement and each of the
             Facility Documents to which it is a party. The Seller is organized
             in the jurisdiction set forth in the preamble. The Seller is duly

                                       15


             qualified to do business and is in good standing as a foreign
             corporation, and has obtained all necessary licenses and approvals
             in each jurisdiction in which failure to qualify or to obtain such
             licenses and approvals would render any Loan unenforceable by the
             Seller.

                       (B)   The name of the Seller set forth in the preamble of
             this Agreement is its correct legal name and such name has not been
             changed in the past six years. The Seller does not utilize any
             trade names, assumed names, fictitious names or "doing business
             names."

             (ii)      DUE AUTHORIZATION AND NO CONFLICT. The execution,
     delivery and performance by the Seller of each of the Facility Documents to
     which it is a party, and the -consummation by the Seller of the
     transactions contemplated hereby and under each other Facility Document to
     which it is a party, has been duly authorized by the Seller by all
     necessary corporate action, does not contravene (i) the Seller's charter or
     by-laws, (ii) any law, rule or regulation applicable to the Seller, (iii)
     any contractual restriction contained in any material indenture, loan or
     credit agreement, lease, mortgage, deed of trust, security agreement, bond,
     note, or other material agreement or instrument binding on the Seller or
     (iv) any order, writ, judgment, award, injunction or decree binding on or
     affecting the Seller or its properties (except where such contravention
     would not have a Material Adverse Effect with respect to the Seller or its
     properties), and does not result in (except as provided in the Facility
     Documents) or require the creation of any Lien upon or with respect to any
     of its properties; and no transaction contemplated hereby requires
     compliance with any bulk sales act or similar law. Each of the Facility
     Documents to which the Seller is a party have been duly executed and
     delivered on behalf of the Seller. To the extent that this representation
     is being made with respect to Title I of ERISA or Section 4975 of the Code,
     it is made subject to the assumption that none of the assets being used to
     purchase the Loans and Transferred Assets constitute assets of any Benefit
     Plan or Plan with respect to which the Seller is a party in interest or
     disqualified person.

             (iii)     GOVERNMENTAL AND OTHER CONSENTS. All approvals,
     authorizations, consents or orders of any court or governmental agency or
     body required in connection with the execution and delivery by the Seller
     of this Agreement, any related PA Supplement or any of the other Facility
     Documents to which it is a party, the consummation by such party of the
     transactions contemplated hereby or thereby, the performance by such party
     of and the compliance by such party with the terms hereof or thereof, have
     been obtained, except where the failure so to do would not have a Material
     Adverse Effect with respect to such Party.

             (iv)      ENFORCEABILITY OF FACILITY DOCUMENTS. Each of the
     Facility Documents to which the Seller is a party has been duly and validly
     executed and delivered by the Seller and constitutes the legal, valid and
     binding obligation of the Seller, enforceable against it in accordance with
     its respective terms, except as enforceability may be subject to or limited
     by Debtor Relief Laws or by general principles of equity (whether
     considered in a suit at law or in equity).

                                       16


             (v)       NO LITIGATION. Except as disclosed in Schedule 5 to this
     Agreement or to any Assignment, there are no proceedings or investigations
     pending, or to the knowledge of the Seller threatened, against the Seller
     before any court, regulatory body, administrative agency, or other tribunal
     or governmental instrumentality (A) asserting the invalidity of this
     Agreement or any of the other Facility Documents, (B) seeking to prevent
     the consummation of any of the transactions contemplated by this Agreement
     or any of the other Facility Documents, (C) seeking any determination or
     ruling that would adversely affect the performance by the Seller of its
     obligations under this Agreement, any related PA Supplement or any of the
     other Facility Documents to which it is a party, (D) seeking any
     determination or ruling that would adversely affect the validity or
     enforceability of this Agreement or any of the other Facility Documents or
     (E) seeking any determination or ruling that would, if adversely
     determined, be reasonably likely to have a Material Adverse Effect with
     respect to such party.

             (vi)      GOVERNMENTAL REGULATIONS. The Seller is not (A) an
     "investment company" registered or required to be registered under the
     Investment Company Act of 1940, as amended, or (B) a "public utility
     company" or a "holding company," a "subsidiary company" or an "affiliate"
     of any public utility company within the meaning of Section 2(a)(5),
     2(a)(7), 2(a)(8) or 2(a)(ii) of the Public Utility Holding Company Act of
     1935, as amended.

             (vii)     MARGIN REGULATIONS. The Seller is not engaged,
     principally or as one of its important activities, in the business of
     extending credit for the purpose of purchasing or carrying any margin stock
     (as each such term is defined or used in any of Regulations T, U or X of
     the Board of Governors of the Federal Reserve System). No part of the
     proceeds of any of the notes issued by the Issuer has been used by the
     Seller for so purchasing or carrying margin stock or for any purpose that
     violates or would be inconsistent with the provisions of any of Regulations
     T, U or X of the Board of Governors of the Federal Reserve System.

             (viii)    LOCATION OF CHIEF EXECUTIVE OFFICE AND RECORDS. The
     principal place of business and chief executive office of the Seller, and
     the office where the Seller maintains all of its Records, is 2 Clinton
     Square, Syracuse, New York 13202. The Seller has not changed its principal
     place of business or chief executive office (or the office where such
     entity maintains all of its Records) during the previous six years. At any
     time after the Initial Closing Date, upon 30 days' prior written notice to
     the Trustee as assignee of the Company and the Issuer, the Seller may
     change its name or may change its type or its jurisdiction of organization
     to another jurisdiction within the United States, but only so long as all
     action necessary or reasonably requested by the Company to amend the
     existing financing statements and to file additional financing statements
     in all applicable jurisdictions to perfect the transfer of the Loans and
     the related Transferred Assets is taken.

             (ix)      LOCKBOX ACCOUNTS. Except in the case of any Lockbox
     Account pursuant to which only Collections in respect of Loans subject to a
     PAC or Credit Card Account are deposited, the Seller has filed a standing
     delivery order with the United States Postal Service authorizing each
     Lockbox Bank to receive mail delivered to the related Post

                                       17


     Office Box. The account numbers of all Lockbox Accounts, together with the
     names, addresses, ABA numbers and names of contact persons of all the
     Lockbox Banks maintaining such Lockbox Accounts and the related Post Office
     Boxes, are set forth in Schedule 4. From and after the Initial Closing
     Date, the Seller shall not have any right, title and/or interest in or to
     any of the Lockbox Accounts or the Post Office Boxes and will maintain no
     Lockbox accounts in its own name for the collection of payments in respect
     of Loans. The Seller has no lockbox or other accounts for the collection of
     payments in respect of the Loans other than the Lockbox Accounts.

             (x)       FACILITY DOCUMENTS. This Agreement and any PA Supplement
     are the only agreements pursuant to which the Seller sells the Loans and
     other related Transferred Assets to the Company. The Seller has furnished
     to the Company true, correct and complete copies of each Facility Document
     to which the Seller is a party, each of which is in full force and effect.
     Neither the Seller nor any of its Affiliates (not including the Purchaser
     or the Issuer) is in default thereunder in any material respect.

             (xi)      TAXES. The Seller has timely filed or caused to be filed
     all federal, state and local tax returns required to be filed by it, and
     has paid or caused to be paid all taxes shown to be due and payable on such
     returns or on any assessments received by it, other than any taxes or
     assessments the validity of which are being contested in good faith by
     appropriate proceedings and with respect to which the Seller has set aside
     adequate reserves on its books in accordance with GAAP, and which
     proceedings have not given rise to any Lien.

             (xii)     ACCOUNTING TREATMENT. The Seller has accounted for the
     transactions contemplated in the Facility Documents to which it is a party
     in accordance with GAAP.

             (xiii)    ERISA. There has been no (A) occurrence or expected
     occurrence of any Reportable Event with respect to any Benefit Plan subject
     to Title IV of ERISA of the Seller or any ERISA Affiliate, or any
     withdrawal from, or the termination, Reorganization or Plan Insolvency of
     any Multiemployer Plan or (B) institution of proceedings or the taking of
     any other action by Pension Benefit Guaranty Corporation or by the Seller
     or any ERISA Affiliate or any such Multiemployer Plan with respect to the
     withdrawal from, or the termination, Reorganization or Plan Insolvency of,
     any such Plan.

             (xiv)     NO ADVERSE SELECTION. No selection procedures materially
     adverse to the Company, the Issuer, the Noteholders, the Trustee or the
     Collateral Agent have been employed by the Seller in selecting the Loans
     for inclusion in the Loan Pool on such Closing Date or Addition Date, as
     applicable.

             (xv)      VACATION CREDIT PROGRAM.

                       (A)   As of each Closing Date or any Addition Date, as
             applicable, for each Timeshare Property Regime for which the
             related Timeshare Properties are comprised primarily of Vacation
             Credits, the ratio of (1) the total number of Vacation Credits
             actually allocated to such Timeshare Property Regime for the

                                       18


             succeeding twelve-month period to (2) the total number of Vacation
             Credits allocable to available space in such Timeshare Property
             Regime over such twelve-month period, does not exceed 1.0 to 1.0.

                       (B)   On each Closing Date or any Addition Date, as
             applicable, for each owner of Vacation Credits, the ratio,
             expressed as a percentage, of (1) the number of Vacation Credits
             allocated to such owner to (2) the total number of Vacation Credits
             assigned to all Vacation Credit owners in the applicable Timeshare
             Property Regime(s), does not exceed the percentage of such owner's
             undivided interest in such Timeshare Property Regime(s) as
             described in such owner's Loan.

             (xvi)     SEPARATE IDENTITY. The Seller and its Affiliates have
     observed the applicable legal requirements on their part for the
     recognition of the Company as a legal entity separate and apart from the
     Seller and its Affiliates (other than the Company) and have taken all
     actions necessary on their part to be taken in order to ensure that the
     facts and assumptions relating to the Company set forth in the opinion of
     Orrick, Herrington & Sutcliffe LLP of even date herewith relating to
     substantive consolidation matters with respect to the Seller and the
     Company are true and correct; PROVIDED, HOWEVER, that the Seller makes no
     representations or warranties in this Section 6(a)(xvi) with respect to the
     Company or the Issuer.

     (b)     REPRESENTATIONS AND WARRANTIES REGARDING THE LOANS. The Seller
represents and warrants to the Company as of the applicable Cut-Off Date and
Addition Cut-Off Date as to each Loan conveyed on and as of each Closing Date or
the related Addition Date, as applicable (except as otherwise expressly stated)
as follows:

             (i)       ELIGIBILITY. Such Loan is an Eligible Loan.

             (ii)      NO WAIVERS. The terms of such Loan have not been waived,
     altered, modified or extended in any respect other than (A) modifications
     entered into in accordance with Customary Practices and Credit Standards
     and Collections Policies that do not reduce the amount or extend the
     maturity of required Scheduled Payments and (B) modifications in the
     applicability of a PAC (which may result in a change in the related Loan
     Rate).

             (iii)     BINDING OBLIGATION. Such Loan is the legal, valid and
     binding obligation of the Obligor thereunder and is enforceable against the
     Obligor in accordance with its terms, except as such enforceability may be
     limited by Debtor Relief Laws or by general principles of equity (whether
     considered in a suit at law or in equity).

             (iv)      NO DEFENSES. Such Loan is not subject to any statutory
     right of rescission, setoff, counterclaim or defense, including without
     limitation the defense of usury.

             (v)       LAWFUL ASSIGNMENT. Such Loan was not originated in, and
     is not subject to the laws of, any jurisdiction the laws of which would
     make the transfer of the Loan under this Agreement or any PA Supplement
     unlawful.

                                       19


             (vi)      COMPLIANCE WITH LAW. The Seller has complied with
     requirements of all material federal, state and local laws (including
     without limitation usury, truth in lending and equal credit opportunity
     laws) applicable to such Loan in all material respects. The related
     Timeshare Property Regime is in compliance with any and all applicable
     zoning and building laws and regulations and any other laws and regulations
     relating to the use and occupancy of such Timeshare Property Regime, except
     where such noncompliance would not have a Material Adverse Effect with
     respect to the Seller. The Seller has not received notice of any material
     violation of any legal requirements applicable to such Timeshare Property
     Regime, except where such violation would not have a Material Adverse
     Effect with respect to the Seller. The Timeshare Property Regime related to
     such Loan complies with all applicable state statutes, including without
     limitation condominium statutes, timeshare statutes, HUD filings relating
     to interstate land sales (if applicable) and the requirements of any
     governmental authority or local authority having jurisdiction with respect
     to such Timeshare Property Regime, and constitutes a valid and conforming
     condominium and timeshare regime under the laws of the State in which the
     related Resort is located, except where such noncompliance would not have a
     Material Adverse Effect with respect to the Seller.

             (vii)     LOAN IN FORCE; NO SUBORDINATION. Such Loan is in full
     force and effect and has not been subordinated, satisfied in whole or in
     part or rescinded.

             (viii)    CAPACITY OF PARTIES. All parties to such Loan had legal
     capacity to execute the Loan.

             (ix)      ORIGINAL LOANS. All original executed copies of such
     Loans are in the custody of the Custodian, except to the extent otherwise
     permitted pursuant to Section 6(b)(xiv).

             (x)       LOAN FORM/GOVERNING LAW. Such Loan was executed in
     substantially the form of one of the forms of Loan in Exhibit D (as such
     Exhibit D may be amended from time to time with the consent of the Seller
     and the Company), except for changes required by applicable law and certain
     other modifications that do not, individually or in the aggregate, affect
     the enforceability or collectibility of such Loan. In addition, such Loan
     was originated in and is governed by the laws of the State in which the
     related Resort is located.

             (xi)      INTEREST IN REAL PROPERTY. Each Timeshare Property that
     is either a Fixed Week or a UDI constitutes a fee simple interest in real
     property, and (except for a Timeshare Property that is a Green Timeshare
     Property) such Timeshare Property has been deeded to the related Obligor in
     accordance with the requirements of the related Loan and applicable law.

             (xii)     ENVIRONMENTAL COMPLIANCE. Each Timeshare Property Regime
     related to a Loan is now, and at all times during the Seller's ownership
     thereof (or the ownership of any Affiliate thereof other than the Company
     and the Issuer), has been free of contamination from any substance,
     material or waste identified as toxic or hazardous according to any
     federal, state or local law, rule, regulation or order governing, imposing

                                       20


     standards of conduct with respect to, or regulating in any way the
     discharge, generation, removal, transportation, storage or handling of
     toxic or hazardous substances, materials or waste or air or water pollution
     (hereinafter referred to as "ENVIRONMENTAL LAWS"), including without
     limitation any PCB, radioactive substance, methane, asbestos, volatile
     hydrocarbons, petroleum products or wastes, industrial solvents or any
     other material or substance that now or hereafter may cause or constitute a
     health, safety or other environmental hazard to any person or property (any
     such substance together with any substance, material or waste identified as
     toxic or hazardous under any Environmental Law now in effect or hereinafter
     enacted shall be referred to herein as "CONTAMINANTS"), but excluding from
     the foregoing any levels of Contaminants at or below which such
     Environmental Laws do not apply ("DE MINIMUS LEVELS"). Neither the Seller
     nor any Affiliate of the Seller (other than the Company and the Issuer) has
     caused or suffered to occur any discharge, spill, uncontrolled loss or
     seepage of any petroleum or chemical product or any Contaminant (except for
     De Minimus Levels thereof) onto any property comprising or adjoining any
     Timeshare Property Regime, and neither the Seller nor any Affiliate of the
     Seller (other than the Company and the Issuer) nor any Obligor or occupant
     of all or part of any Timeshare Property Regime is now or has been involved
     in operations at the related Timeshare Property Regime that could lead to
     liability for the Seller, the Company, any Affiliate of the Seller or any
     other owner of such Timeshare Property Regime or the imposition of a Lien
     on such Timeshare Property Regime under any Environmental Law. No practice,
     procedure or policy employed by the Seller (or any Affiliate thereof other
     than the Company and the Issuer) with respect to POAs for which the Seller
     acts as the manager or, to the best knowledge of the Seller, by the manager
     of the POAs with respect to POAs managed by parties unaffiliated with the
     Seller, violates any Environmental Law that, if enforced, would reasonably
     be expected to (A) have a Material Adverse Effect on such POA or the
     ability of such POA to do business, (B) have a Material Adverse Effect on
     the financial condition of the POA or (C) constitute grounds for the
     revocation of any license, charter, permit or registration that is material
     to the conduct of the business of the POA.

             Except as set forth in Schedule 3, (1) all property owned, managed,
     or controlled by the Seller or any Affiliate of the Seller (other than the
     Company and the Issuer) and located within a Resort is now, and at all
     times during the Seller's ownership, management or control thereof (or the
     ownership, management or control of any Affiliate thereof (other than the
     Company and the Issuer)) has been free of contamination from any
     Contaminants, except for De Minimus Levels thereof, (2) neither the Seller
     nor any Affiliate of the Seller (other than the Company and the Issuer) has
     caused or suffered to occur any discharge, spill, uncontrolled loss or
     seepage of any Contaminants onto any property comprising or adjoining any
     of the Resorts, except for De Minimus Levels thereof, and (3) neither the
     Seller nor any Affiliate of the Seller (other than the Company and the
     Issuer) nor any Obligor or occupant of all or part of any of any Resort is
     now or previously has been involved in operations at any Resort that could
     lead to liability for the Seller, the Company, any Affiliate of the Seller
     or any other owner of any Resort or the imposition of a Lien on such Resort
     under any Environmental Law. None of the matters set forth in Schedule 3
     will have a Material Adverse Effect with respect to the Company or its
     assignees or the interests of the Company or its assignees in the Loans.
     Each Resort, and the present use thereof, does

                                       21


     not violate any Environmental Law in any manner that would materially
     adversely affect the value or use of such Resort or the performance by the
     POAs of their respective obligations under their applicable declarations,
     articles or similar charter documents. There is no condition presently
     existing, and to the best knowledge of the Seller no event has occurred or
     failed to occur with respect to any Resort, relating to any Contaminants or
     compliance with any Environmental Laws that would reasonably be expected to
     have a Materially Adverse Effect with respect to such Resort, including in
     connection with the present use of such Resort.

             (xiii)    TAX LIENS. All taxes applicable to such Loan and the
     related Timeshare Property have been paid, except where the failure to pay
     such tax would not have a Material Adverse Effect with respect to the
     Seller or its assignees or the Purchaser or the collectibility or
     enforceability of the Loan. There are no delinquent tax liens in respect of
     the Timeshare Property underlying such Loan.

             (xiv)     LOAN FILES. The related Loan File contains the following
     Loan Documents (which may include microfiche or other electronic copies of
     the Loan Documents to the extent provided in the Custodial Agreement):

                       (A)   for Loans other than Loans described in clause (B)
             below, at least one original of each Loan (or, if the Loan and
             promissory note are contained in separate documents, an original of
             the promissory note); PROVIDED, HOWEVER, that the original Loan may
             have been removed from the Loan File in accordance with the
             Custodial Agreement for the performance of collection services and
             other routine servicing requirements; and

                       (B)   for Loans relating to Timeshare Properties located
             in Resorts in North Carolina or South Carolina with respect to
             which two originals of such Loans have been executed, each original
             Loan is in the Loan File and each contains the following legend
             (whether by stamp or otherwise) on its face:

                       "THIS COPY IS ONE OF TWO ORIGINALS, AND WAS EXECUTED
             SOLELY FOR RECORDATION. TO THE EXTENT THAT POSSESSION OF THIS
             CONTRACT IS REQUIRED TO TRANSFER OR PERFECT A TRANSFER OF ANY
             INTEREST IN OR TO THIS CONTRACT, POSSESSION OF THE OTHER ORIGINAL
             HEREOF IS REQUIRED";

             and

                       (C)   for Loans with respect to which the related
             Timeshare Property has been deeded out to the related Obligor:

                       (1)   a copy of the deed for such Timeshare Property; and

                       (2)   the original recorded Mortgage (or a copy thereof,
             if applicable, for Mortgages that have been submitted for recording
             as set forth herein) and Assignments of Mortgages in favor of the
             Collateral Agent (or a copy of such recorded Mortgage or Assignment
             of Mortgage, as the case may be, certified to be

                                       22


             a true and complete copy thereof, if the original of the recorded
             Mortgage or Assignment of Mortgage is lost or destroyed), PROVIDED
             that in the case of any Loan with respect to which the related
             Mortgage and/or deed has been removed from the Loan File for
             recording in the local real property recording office: (x) the
             original Mortgage shall not have been at such real property
             recording office more than (1) 180 days from the related loan
             closing date (in the case of Loans (other than Green Loans)
             relating to Timeshare Properties located in the State of Florida)
             or (2) 180 days from the date on which the related Timeshare
             Property is required to be deeded to an Obligor (in the case of
             Green Loans or Loans relating to Timeshare Properties located in
             any other State) and (y) in the case of any Loan (other than a
             Green Loan) relating to a Timeshare Property located in the State
             of Florida, the Loan File shall contain one or more certificates
             from the Seller's applicable title agents in Florida to the effect
             that the related Mortgage has been delivered for purposes of
             recordation to the appropriate local real property recording
             office.

             (xv)      LOCKBOX ACCOUNTS. As of the applicable Cut-Off Date, the
     Obligor of such Loan either:

                       (A)   shall have been instructed to remit Payments
             thereunder to a Post Office Box for credit to a Lockbox Account or
             directly to a Lockbox Account, in each case maintained at a Lockbox
             Bank pursuant to the terms of a Lockbox Agreement; or

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

             (xvi)     OWNERSHIP INTEREST. As of the Closing Date or related
     Addition Date, as applicable, the Seller has good and marketable title to
     the Loan, free and clear of all Liens (other than Permitted Encumbrances).

             (xvii)    INTEREST IN LOAN. Such Loan constitutes either a "general
     intangible," an "instrument," "chattel paper" or an "account" under the
     Uniform Commercial Code of the States of Delaware and New York.

             (xviii)   RECORDATION OF ASSIGNMENTS. The collateral Assignment of
     Mortgage to the Collateral Agent relating to the Mortgage with respect to
     each Loan has been recorded or delivered for recordation simultaneously
     with the related Mortgage to the proper office in the jurisdiction in which
     the related Timeshare Property is located, except to the extent the related
     Timeshare Property is located in the State of Florida and the Seller shall
     have delivered an Opinion of Counsel to the effect that recordation of the
     Assignment of Mortgage is not necessary to perfect a security interest
     therein in favor of the Collateral Agent.

                                       23


             (xix)     MATERIAL DISPUTES. To the actual knowledge of the Seller,
     the Loan is not subject to any material dispute.

             (xx)      GOOD TITLE; NO LIENS. Upon the Purchase hereunder
     occurring on such Closing Date or Addition Date, as applicable, the Company
     will be the lawful owner of, and have good title to, each Loan and all of
     the other related Transferred Assets that are the subject of such Purchase,
     free and clear of any Liens (other than any Permitted Encumbrances on the
     related Timeshare Properties). All Loans and related Transferred Assets are
     purchased without recourse to the Seller except as described in this
     Agreement and any PA Supplement. Such Purchase by the Company under this
     Agreement and under any PA Supplement constitutes a valid and true sale and
     transfer for consideration (and not merely the grant of a security interest
     to secure a loan), enforceable against creditors of the Seller, and no Loan
     or other related Transferred Assets that are the subject of such Purchase
     will constitute property of the Seller after such Purchase.

             (xxi)     SOLVENCY. The Seller, both prior to and immediately after
     giving effect to the Purchase of Loans hereunder and under any PA
     Supplement occurring on such Closing Date or Addition Date, as applicable,
     (A) is not insolvent (as such term is defined in Section 101(32)(A) of the
     Bankruptcy Code), (B) is able to pay its debts as they become due and (C)
     does not have unreasonably small capital for the business in which it is
     engaged or for any business or transaction in which it is about to engage.

             (xxii)    POA RESERVES. The capital reserves and maintenance fee
     levels of the POAs related to each Timeshare Property Regime underlying the
     Loans Purchased on such Closing Date or Addition Date, as applicable, are
     adequate in light of the operating requirements of such POAs.

         (c)   REPRESENTATIONS AND WARRANTIES REGARDING THE LOAN FILES. The
Seller represents and warrants to the Company as of each Closing Date and
related Addition Date as to each Loan and the related Loan File conveyed by it
hereunder on and as of such Closing Date or related Addition Date, as applicable
(except as otherwise expressly stated) as follows:

             (i)       POSSESSION. On or immediately prior to each Closing Date
     or related Addition Date, as applicable, the Custodian will have possession
     of each original Loan and the related Loan File, and will have acknowledged
     such receipt and its undertaking to hold such original Loan and the related
     Loan File for purposes of perfection of the Collateral Agent's interest in
     such original Loan and the related Loan File; PROVIDED, HOWEVER, that the
     fact that any document not required to be in its respective Loan File
     pursuant to Section 6(b)(xiv) of this Agreement is not in the possession of
     the Custodian in its respective Loan File does not constitute a breach of
     this representation.

             (ii)      MARKING RECORDS. On or before each Closing Date or
     Addition Date, as applicable, the Seller shall have caused the portions of
     its computer files relating to the Loans sold on such date to the Company
     to be clearly and unambiguously marked to indicate that each such Loan has
     been conveyed on such date to the Company.

         (d)   SURVIVAL OF REPRESENTATIONS AND WARRANTIES. It is understood and
agreed that the representations and warranties contained in this Section 6 shall
remain operative and in full force and effect, shall survive the transfer and
conveyance of the Loans with respect to any Series

                                       24


by the Seller to the Company under this Agreement and any PA Supplement, the
conveyance of the Loans by the Company to the Issuer pursuant to the Pool
Purchase Agreement and any PPA Supplement and the Grant of the Collateral by the
Issuer to the Collateral Agent and shall inure to the benefit of the Company,
the Issuer, the Trustee, the Collateral Agent and the Noteholders and their
respective designees, successors and assigns.

         (e)   INDEMNIFICATION OF THE COMPANY. The Seller shall indemnify,
defend and hold harmless the Company against any and all claims, losses and
liabilities, including reasonable attorneys' fees (the foregoing being
collectively referred to as "INDEMNIFIED AMOUNTS") that may at any time be
imposed on, incurred by or asserted against the Company as a result of a breach
by the Seller of any of its respective representations, warranties or covenants
hereunder. Except as otherwise provided in Section 11(i), the Seller shall pay
to the Company, on demand, any and all amounts necessary to indemnify the
Company for (i) any and all recording and filing fees in connection with the
transfer of the Loans from the Seller to the Company, and any and all
liabilities with respect to, or resulting from any delay in paying when due, any
taxes (including sales, excise or property taxes) payable in connection with the
transfer of the Loans from the Seller to the Company and (ii) costs, expenses
and reasonable counsel fees in defending against the same. The agreements in
this Section 6(e) shall survive the termination of this Agreement or any PA
Supplement and the payment of all amounts payable hereunder, under any PA
Supplement and under the Loans. For purposes of this Section 6(e), any reference
to the Company shall include any officer, director, employee or agent thereof,
or any successor or assignee thereof or of the Company.

SECTION 7.   REPURCHASES OR SUBSTITUTION OF LOANS FOR BREACH OF REPRESENTATIONS
             AND WARRANTIES.

     Provisions with respect to the repurchase or substitution of Loans of any
Series for breach of representations and warranties under this Agreement and any
PA Supplement shall be set forth in the related PA Supplement.

SECTION 8.   COVENANTS OF THE SELLER.

         (a)   AFFIRMATIVE COVENANTS OF THE SELLER. The Seller covenants and
agrees that it will, at any time prior to the Termination Date:

             (i)       COMPLIANCE WITH LAWS, ETC. Comply in all material
     respects with all applicable laws, rules, regulations and orders with
     respect to it, its business and properties, provisions of ERISA, the
     Internal Revenue Code and all applicable laws, regulations and
     interpretations thereunder, and all Loans and Facility Documents to which
     it is a party.

             (ii)      PRESERVATION OF CORPORATE EXISTENCE. Preserve and
     maintain its corporate existence, rights, franchises and privileges in the
     jurisdiction of its incorporation, and qualify and remain qualified in good
     standing as a foreign corporation, and maintain all necessary licenses and
     approvals in each jurisdiction in which it does business, except where the
     failure to preserve and maintain such existence, rights, franchises,
     privileges, qualifications, licenses and approvals would not have a
     Material Adverse Effect with respect to it.

                                       25


             (iii)     AUDITS. Upon at least two Business Days notice during
     regular business hours, permit the Company and/or its agents,
     representatives or assigns access:

                       (A)   to the offices and properties of the Seller in
             order to examine and make copies of and abstracts from all books,
             correspondence and Records of the Seller as appropriate to verify
             the Seller's compliance with this Agreement, any PA Supplement or
             any other Facility Documents to which the Seller is a party and any
             other agreement contemplated hereby or thereby, and the Company
             and/or its agents, representatives and assigns may examine and
             audit the same and make photocopies, computer tapes or other
             computer replicas thereof, as appropriate, and the Seller will
             provide to the Company and/or its agents, representatives and
             assigns, at the expense of the Seller, such clerical and other
             assistance as may be reasonably requested in connection therewith;
             and

                       (B)   to the officers or employees of the Seller
             designated by the Seller in order to discuss matters relating to
             the Loans and the performance of the Seller hereunder, under any PA
             Supplement or any other Facility Documents to which the Seller is a
             party and any other agreement contemplated hereby or thereby, and
             under the other Facility Documents to which it is a party with the
             officers or employees of the Seller having knowledge of such
             matters.

             Each such audit shall be at the sole expense of the Seller. The
     Company shall be entitled to conduct such audits as frequently as it deems
     reasonable in the exercise of the Company's reasonable commercial judgment;
     PROVIDED, HOWEVER, that such audits shall not be conducted more frequently
     than annually unless an Event of Default or an Amortization Event shall
     have occurred. The Company and its agents, representatives and assigns also
     shall have the right to discuss the Seller's affairs with the officers,
     employees and independent accountants of the Seller and to verify under
     appropriate procedures the validity, amount, quality, quantity, value and
     condition of, or any other matter relating to, the Loans and other related
     Transferred Assets.

             (iv)      [Reserved].

             (v)       PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND LOANS. At
     its expense, timely and fully perform and comply in all material respects
     with the Credit Standards and Collection Policies and Customary Practices
     with respect to the Loans and with all provisions, covenants and other
     promises required to be observed by the Seller under the Loans.

             (vi)      [Reserved].

             (vii)     OWNERSHIP INTEREST. Take such action with respect to each
     Loan as is necessary to ensure that the Company maintains a first priority
     ownership interest in such Loan and the other related Transferred Assets,
     in each case free and clear of any Liens arising through or under the
     Seller and, in the case of any Timeshare Properties, other than any
     Permitted Encumbrance thereon, and respond to any inquiries with respect to
     ownership of a Loan sold by it hereunder by stating that, from and after
     the Initial Closing

                                       26


     Date or related Addition Date, as applicable, it is no longer the owner of
     such Loan and that ownership of such Loan has been transferred to the
     Company.

             (viii)    INSTRUMENTS. Not remove any portion of the Loans or
     related Transferred Assets with respect to any Series that consists of
     money or is evidenced by an instrument, certificate or other writing from
     the jurisdiction in which it was held under the related Custodial Agreement
     unless the Company shall have first received an Opinion of Counsel to the
     effect that the Company shall continue to have a first-priority perfected
     ownership or security interest with respect to such property after giving
     effect to such action or actions.

             (ix)      NO RELEASE. Not take any action, and use its best efforts
     not to permit any action to be taken by others, that would release any
     Person from such Person's covenants or obligations under any document,
     instrument or agreement relating to the Loans or the other Transferred
     Assets, or result in the hypothecation, subordination, termination or
     discharge of, or impair the validity or effectiveness of, any such
     document, instrument or agreement, except as expressly provided in this
     Agreement or any PA Supplement or such other instrument or document.

             (x)       INSURANCE AND CONDEMNATION.

                       (A)   The Seller shall do or cause to be done all things
             that it may accomplish with a reasonable amount of cost or effort
             to cause each of the POAs for each Resort, in each case (1) to
             maintain one or more policies of "all-risk" property and general
             liability insurance with financially sound and reputable insurers
             providing coverage in scope and amount that (x) satisfy the
             requirements of the declarations (or any similar charter document)
             governing the POA for the maintenance of such insurance policies
             and (y) are at least consistent with the scope and amount of such
             insurance coverage obtained by prudent POAs and/or management of
             other similar developments in the same jurisdiction and (2) to the
             extent the Seller is the property manager of the Resort and
             possesses the right to direct the application of insurance
             proceeds, to use its best efforts to apply the proceeds of any such
             insurance policies in the manner specified in the related
             declarations (or any similar charter document) governing the POA
             and/or any similar charter documents of such POA (which exercise of
             best efforts shall include voting as a member of the POA or as a
             proxy or attorney-in-fact for a member). For the avoidance of
             doubt, the parties acknowledge that the ultimate discretion and
             control relating to the maintenance of any such insurance policies
             is vested in the POA in accordance with the respective declaration
             (or any similar charter document) relating to each Timeshare
             Property Regime.

                       (B)   The Seller shall remit to the Collection Account
             the portion of any proceeds received pursuant to a condemnation of
             property in any Resort relating to any Timeshare Property to the
             extent the Obligors are required to make such remittance under the
             terms of one or more Loans that have been sold to the Company
             hereunder and under the related PA Supplement.

                                       27


             (xi)      SEPARATE IDENTITY. Take such action as is necessary to
     ensure compliance with Section 6(a)(xvi), including taking all actions
     necessary on its part to be taken in order to ensure that the facts and
     assumptions relating to the Company set forth in the opinion of Orrick,
     Herrington & Sutcliffe LLP of even date herewith relating to substantive
     consolidation matters with respect to the Seller and the Company are true
     and correct.

             (xii)     COMPUTER FILES. Mark or cause to be marked each Loan in
     its computer files as described in Section 6(c)(ii) and deliver to the
     Company, the Issuer, the Trustee and the Collateral Agent a copy of the
     Loan Schedule for each Series as amended from time to time.

             (xiii)    TAXES. File or cause to be filed, and cause each of its
     Affiliates with whom it shares consolidated tax liability to file, all
     federal, state and local tax returns that are required to be filed by it,
     except where the failure to file such returns could not reasonably be
     expected to have a Material Adverse Effect with respect to the Purchaser or
     the Seller, or otherwise be reasonably expected to expose the Purchaser or
     the Seller to material liability. The Seller will pay or cause to be paid
     all taxes shown to be due and payable on such returns or on any assessments
     received by it, other than any taxes or assessments the validity of which
     are being contested in good faith by appropriate proceedings and with
     respect to which the Seller or the applicable Affiliate has set aside
     adequate reserves on its books in accordance with GAAP, and which
     proceedings could not reasonably be expected to have a Material Adverse
     Effect with respect to the Purchaser or the Seller, or otherwise be
     reasonably expected to expose the Purchaser or the Seller to material
     liability.

             (xiv)     FACILITY DOCUMENTS. Comply in all material respects with
     the terms of, and employ the procedures outlined under, this Agreement, any
     PA Supplement and all other Facility Documents to which it is a party, and
     take all such action as may be from time to time reasonably requested by
     the Company to maintain this Agreement, any PA Supplement and all such
     other Facility Documents in full force and effect.

             (xv)      LOAN SCHEDULE. With respect to any Series, promptly amend
     the applicable Loan Schedule to reflect terms or discrepancies that become
     known after each Closing Date or any Addition Date, and promptly notify the
     Company, the Issuer, the Trustee and the Collateral Agent of any such
     amendments.

             (xvi)     SEGREGATION OF COLLECTIONS. Prevent, to the extent within
     its control, the deposit into the Collection Account or any Reserve Account
     of any funds other than Collections in respect of the Loans with respect to
     any Series, and to the extent that, to its knowledge, any such funds are
     nevertheless deposited into the Collection Account or any Reserve Account,
     promptly identify any such funds to the Master Servicer for segregation and
     remittance to the owner thereof.

             (xvii)    MANAGEMENT OF RESORTS. The Seller hereby covenants and
     agrees that it will use its best efforts to cause the Developer with
     respect to each Resort (to the extent that such Developer is responsible
     for maintaining or managing such Resort) to do or

                                       28


     cause to be done all things that it may accomplish with a reasonable amount
     of cost or effort in order to maintain such Resort (including without
     limitation all grounds, waters and improvements thereon and all other
     facilities relating thereto) in at least as good condition, repair and
     working order as would be customary for prudent managers of similar
     timeshare properties.

         (b)   NEGATIVE COVENANTS OF THE SELLER. The Seller covenants and agrees
that it will not, at any time prior to the final Series Termination Date without
the prior written consent of the Company:

             (i)       SALES, LIENS, ETC. AGAINST LOANS AND TRANSFERRED ASSETS.
     Except for the transfers hereunder, sell, assign (by operation of law or
     otherwise) or otherwise dispose of, or create or suffer to exist, any Lien
     arising through or under it (other than, in the case of any Timeshare
     Properties, any Permitted Encumbrances thereon) upon or with respect to any
     Loan or other Transferred Asset or any interest therein. The Seller shall
     immediately notify the Company of the existence of any Lien arising through
     or under it on any Loan or other Transferred Asset.

             (ii)      EXTENSION OR AMENDMENT OF LOAN TERMS. Extend, amend,
     waive or otherwise modify the terms of any Loan (other than as a result of
     a Timeshare Upgrade or in accordance with Customary Practices) or permit
     the rescission or cancellation of any Loan, whether for any reason relating
     to a negative change in the related Obligor's creditworthiness or inability
     to make any payment under the Loan or otherwise.

             (iii)     CHANGE IN BUSINESS OR CREDIT STANDARDS OR COLLECTION
     POLICIES. (A) Make any change in the character of its business or (B) make
     any change in the Credit Standards and Collection Policies or (C) deviate
     from the exercise of Customary Practices, which change or deviation would,
     in any such case, materially impair the value or collectibility of any
     Loan.

             (iv)      CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Add or
     terminate any bank as a bank holding any account for the collection of
     payments in respect of the Loans from those listed in Exhibit E or make any
     change in its instructions to Obligors regarding payments to be made to any
     Lockbox Account at a Lockbox Bank, unless the Company and the Trustee shall
     have received (A) 30 days' prior written notice of such addition,
     termination or change, (B) written confirmation from the Seller that, after
     the effectiveness of any such termination, there will be at least one
     Lockbox in existence and (C) prior to the date of such addition,
     termination or change, (1) executed copies of Lockbox Agreements executed
     by each new Lockbox Bank, the Seller, the Company, the Master Servicer and
     the Trustee and (2) copies of all agreements and documents signed by either
     the Company or the respective Lockbox Bank with respect to any new Lockbox
     Account.

             (v)       CHANGE IN CORPORATE NAME, ETC. Make any change to its
     name or its type or jurisdiction of organization that existed on the
     Initial Closing Date without providing at least 30 days' prior written
     notice to the Company and the Trustee and taking all action necessary or
     reasonably requested by the Trustee to amend its existing financing

                                       29


     statements and file additional financing statements in all applicable
     jurisdictions as are necessary to maintain the perfection of the security
     interest of the Company.

             (vi)      ERISA MATTERS. (A) Engage or permit any ERISA Affiliate
     to engage in any prohibited transaction for which an exemption is not
     available or has not previously been obtained from the U.S. Department of
     Labor; (B) permit to exist any accumulated funding deficiency (as defined
     in Section 302(a) of ERISA and Section 412(a) of the Internal Revenue Code)
     or funding deficiency with respect to any Benefit Plan other than a
     Multiemployer Plan; (C) fail to make any payments to any Multiemployer Plan
     that the Seller or any ERISA Affiliate may be required to make under the
     agreement relating to such Multiemployer Plan or any law pertaining
     thereto; (D) terminate any Benefit Plan so as to result in any liability;
     (E) permit to exist any occurrence of any Reportable Event that represents
     a material risk of a liability of the Seller or any ERISA Affiliate under
     ERISA or the Internal Revenue Code; PROVIDED, HOWEVER, that the ERISA
     Affiliates of the Seller may take or allow such prohibited transactions,
     accumulated funding deficiencies, payments, terminations and Reportable
     Events described in clauses (A) through (E) above so long as such events
     occurring within any fiscal year of the Seller, in the aggregate, involve a
     payment of money by or an incurrence of liability of any such ERISA
     Affiliate (collectively, "ERISA LIABILITIES") in an amount that does not
     exceed $2,000,000 or otherwise result in liability that would result in
     imposition of a lien.

             (vii)     TERMINATE OR REJECT LOANS. Without limiting the
     requirements of Section 8(b)(ii), terminate or reject any Loan prior to the
     end of the term of such Loan, whether such rejection or early termination
     is made pursuant to an equitable cause, statute, regulation, judicial
     proceeding or other applicable law unless, prior to such termination or
     rejection, such Loan and any related Transferred Assets have been
     repurchased by the Seller pursuant to Section 7 of the related PA
     Supplement.

             (viii)    FACILITY DOCUMENTS. Except as otherwise permitted under
     Section 8(b)(ii), terminate, amend or otherwise modify any Facility
     Document to which it is a party or grant any waiver or consent thereunder.

             (ix)      INSOLVENCY PROCEEDINGS. Institute Insolvency Proceedings
     with respect to the Company or the Issuer or consent to the institution of
     Insolvency Proceedings against the Company or the Issuer, or take any
     corporate action in furtherance of any such action.

SECTION 9.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company represents and warrants as of each Closing Date and Addition
Date, or as of such other date specified in such representation and warranty,
that:

         (a)   The Company is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of Delaware and has
full limited liability company power, authority, and legal right to own its
properties and conduct its business as such properties are presently owned and
as such business is presently conducted, and to execute, deliver and perform its
obligations under this Agreement and any PA Supplement. The Company is duly
qualified to do business and is in good standing as a foreign entity, and has
obtained all necessary licenses and approvals in each jurisdiction necessary to
carry on its business as presently

                                       30


conducted and to perform its obligations under this Agreement and any PA
Supplement. One hundred percent (100%) of the outstanding membership interests
of the Company is directly owned (both beneficially and of record) by FAC. Such
membership interests are validly issued, fully paid and nonassessable and there
are no options, warrants or other rights to acquire membership interests from
the Company.

         (b)   The execution, delivery and performance of this Agreement and any
PA Supplement by the Company and the consummation by the Company of the
transactions provided for in this Agreement and any PA Supplement have been duly
approved by all necessary limited liability company action on the part of the
Company.

         (c)   This Agreement and any PA Supplement constitutes the legal, valid
and binding obligation of the Company, enforceable against it in accordance with
its terms, except as such enforceability may be subject to or limited by Debtor
Relief Laws and except as such enforceability may be limited by general
principles of equity.

         (d)   The execution and delivery by the Company of this Agreement and
any PA Supplement, the performance by the Company of the transactions
contemplated hereby and the fulfillment by the Company of the terms hereof
applicable to the Company will not conflict with, violate, result in any breach
of the material terms and provisions of, or constitute (with or without notice
or lapse of time or both) a material default under any provision of any existing
law or regulation or any order or decree of any court applicable to the Company
or its certificate of formation or limited liability company agreement or any
material indenture, contract, agreement, mortgage, deed of trust, or other
material instrument to which the Company is a party or by which it or its
properties is bound.

         (e)   There are no proceedings or investigations pending, or to the
knowledge of the Company threatened, against the Company before any court,
regulatory body, administrative agency, or other tribunal or governmental
instrumentality (A) asserting the invalidity of this Agreement or any PA
Supplement, (B) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or any PA Supplement, (C) seeking any
determination or ruling that, in the reasonable judgment of the Company, would
adversely affect the performance by the Company of its obligations under this
Agreement or any PA Supplement or (D) seeking any determination or ruling that
would adversely affect the validity or enforceability of this Agreement or any
PA Supplement.

         (f)   All approvals, authorizations, consents, orders or other actions
of any person or entity or any governmental body or official required in
connection with the execution and delivery of this Agreement and any PA
Supplement by the Company, the performance by it of the transactions
contemplated hereby and the fulfillment by it of the terms hereof, have been
obtained and are in full force and effect.

         (g)   The Company is solvent and will not become insolvent immediately
after giving effect to the transactions contemplated by this Agreement and any
PA Supplement, the Company has not incurred debts beyond its ability to pay and,
immediately after giving effect to the transactions contemplated by this
Agreement and any PA Supplement, the Company shall have an adequate amount of
capital to conduct its business in the foreseeable future.

                                       31


SECTION 10.  COVENANTS OF THE COMPANY.

     The Company hereby acknowledges that the parties to the Facility Documents
are entering into the transactions contemplated by the Facility Documents in
reliance upon the Company's identity as a legal entity separate from the Seller
and its Affiliates. From and after the date hereof until the final Series
Termination Date under any Indenture Supplement, the Company will take such
actions as shall be required in order that:

         (a)   The Company will conduct its business in office space allocated
to it and for which it pays an appropriate rent and overhead allocation;

         (b)   The Company will maintain corporate records and books of account
separate from those of the Seller and its Affiliates and telephone numbers and
stationery that are separate and distinct from those of the Seller and its
Affiliates;

         (c)   The Company's assets will be maintained in a manner that
facilitates their identification and segregation from those of any of the Seller
and its Affiliates;

         (d)   The Company will observe corporate formalities in its dealings
with the public and with the Seller and its Affiliates and, except as
contemplated by the Facility Documents, funds or other assets of the Company
will not be commingled with those of any of the Seller and its Affiliates. The
Company will at all times, in its dealings with the public and with the Seller
and its Affiliates, hold itself out and conduct itself as a legal entity
separate and distinct from the Seller and its Affiliates. The Company will not
maintain joint bank accounts or other depository accounts to which the Seller
and its Affiliates (other than the Master Servicer) has independent access;

         (e)   The duly elected board of directors of the Company and duly
appointed officers of the Company will at all times have sole authority to
control decisions and actions with respect to the daily business affairs of the
Company;

         (f)   Not less than one member of the Company's board of directors will
be an Independent Director. The Company will observe those provisions in its
limited liability company agreement that provide that the Company's board of
directors will not approve, or take any other action to cause the filing of, a
voluntary bankruptcy petition with respect to the Company unless the Independent
Director and all other members of the Company's board of directors unanimously
approve the taking of such action in writing prior to the taking of such action;

         (g)   The Company will compensate each of its employees, consultants
and agents from the Company's own funds for services provided to the Company;
and

         (h)   Except as contemplated by the Facility Documents, the Company
will not hold itself out to be responsible for the debts of the Seller and its
Affiliates.

                                       32


SECTION 11.  MISCELLANEOUS.

         (a)   AMENDMENT. This Agreement may be amended from time to time or the
provisions hereof may be waived or otherwise modified by the parties hereto by
written agreement signed by the parties hereto; PROVIDED, HOWEVER, that no such
amendment, waiver or modification shall be effective without the prior written
consent of the Trustee.

         (b)   ASSIGNMENT. The Company has the right to assign its interest
under this Agreement and any PA Supplement as may be required to effect the
purposes of the Pool Purchase Agreement without the consent of the Seller, and
the assignee shall succeed to the rights hereunder of the Company. The Seller
agrees to perform its obligations hereunder for the benefit of the Issuer, the
Trustee, the Collateral Agent and the Noteholders, agrees that such parties are
intended third party beneficiaries of this Agreement and agrees that the Trustee
(or the Collateral Agent) and (subject to the terms and conditions of the
Indenture and Servicing Agreement and any applicable Indenture Supplement) the
Noteholders may enforce the provisions of this Agreement and any PA Supplement,
exercise the rights of the Company and enforce the obligations of the Seller
hereunder without the consent of the Company.

         (c)   COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.

         (d)   TERMINATION. The obligations of the Seller under this Agreement
and any PA Supplement shall survive the sale of the Loans to the Company and the
Company's transfer of the Loans and other related Transferred Assets to the
Issuer.

         (e)   GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PRINCIPLES.

         (f)   NOTICES. All demands and notices hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by certified mail, postage prepaid and return receipt requested, or by express
delivery service, to (i) in the case of the Seller, EFI Development Funding,
Inc., 2 Clinton Square, Syracuse, New York 13202, Attention: President, or such
other address as may hereafter be furnished to the Company in writing by the
Seller, and (ii) in the case of the Company, Sierra Deposit Company, LLC, 10750
West Charleston Blvd., Suite 130, Mailstop 2067, Las Vegas, Nevada 89135,
Attention: President, or such other address as may hereafter be furnished to the
Seller in writing by the Company.

         (g)   SEVERABILITY OF PROVISIONS. If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.

         (h)   SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon each
of the Seller and the Company and their respective permitted successors and
assigns, and shall inure to

                                       33


the benefit of each of the Seller and the Company and each of the Issuer, the
Trustee and the Collateral Agent to the extent explicitly contemplated hereby.

         (i)   COSTS, EXPENSES AND TAXES.

             (i)       The Seller agrees to pay on demand to the Company all
     reasonable costs and expenses, if any, incurred or reimbursed (or to be
     reimbursed) by the Company (including reasonable counsel fees and expenses)
     in connection with the enforcement or preservation of the rights and
     remedies under this Agreement.

             (ii)      The Seller agrees to pay, indemnify and hold the Company
     harmless from and against any and all stamp, sales, excise and other taxes
     and fees payable or determined to be payable by or reimbursed (or to be
     reimbursed) by the Company in connection with the execution, delivery,
     filing and recording of this Agreement, and against any liabilities with
     respect to or resulting from any delay in paying or omission to pay such
     taxes and fees.

         (j)   NO BANKRUPTCY PETITION. The Seller covenants and agrees not to
institute against the Company or the Issuer, or join any other person in
instituting against the Company or the Issuer, any proceeding under any Debtor
Relief Law.

         (k)   TREATMENT OF TIMESHARE UPGRADES. Notwithstanding anything in this
Agreement to the contrary (but subject to the other provisions of this
paragraph), the Seller (or the Master Servicer on the Seller's behalf) may
upgrade any Timeshare Property by entering into a new Loan with the related
Obligor, but only if the proceeds of such new Loan are used to prepay all
obligations in full of such Obligor under the existing Loan (the proceeds of
which shall be the property of the Company and shall be deposited in the
Collections Account). Upon its creation, the new Loan created by such Timeshare
Upgrade shall not be property of the Company, but may be sold by the Seller to
the Company as an Additional Loan pursuant to the terms and conditions of this
Agreement and any PA Supplement. The parties hereto intend that the Seller (or
the Master Servicer on the Seller's behalf) will not upgrade a Timeshare
Property pursuant to this Section 11(k) in order to provide direct or indirect
assurance to the Seller, the Trustee or any Noteholder against loss by reason of
the bankruptcy or insolvency (or other credit condition) of, or default by, the
Obligor on, or the uncollectibility of, any Loan.

                                       34


     IN WITNESS WHEREOF, the parties have caused their names to be signed hereto
by their respective officers thereunto duly authorized, all as of the day and
year first above written.

                                  EFI DEVELOPMENT FUNDING,
                                  INC.,
                                   as Seller


                                  By:      /s/ Lisa Henson
                                      -----------------------------------
                                      Name:  Lisa Henson
                                      Title: Vice President


                                  SIERRA DEPOSIT COMPANY, LLC,
                                   as Purchaser


                                  By:      /s/ Ralph E. Turner
                                      -----------------------------------
                                      Name:  Ralph E. Turner
                                      Title: President and Treasurer

                          [Signature page for EFI MLPA]




                                                                   EXHIBIT 10.68

                                                                  EXECUTION COPY

                            SERIES 2002-1 SUPPLEMENT
                           Dated as of August 29, 2002

                                       to

                         MASTER LOAN PURCHASE AGREEMENT
                           Dated as of August 29, 2002

- --------------------------------------------------------------------------------

                     SIERRA RECEIVABLES FUNDING COMPANY, LLC
                                   LOAN-BACKED
                             VARIABLE FUNDING NOTES,
                                  SERIES 2002-1

- --------------------------------------------------------------------------------

                                 by and between

                          EFI DEVELOPMENT FUNDING, INC.
                                    as Seller

                                       and

                           SIERRA DEPOSIT COMPANY, LLC
                                  as Purchaser



                                TABLE OF CONTENTS




                                                                                                           PAGE
                                                                                                          
       Section 1.    Definitions..............................................................................1

       Section 2.    Sale.....................................................................................5

              (a)    Series 2002-1 Loans......................................................................5

              (b)    Filing of Financing Statements...........................................................6

              (c)    Delivery of Series 2002-1 Loan Schedule..................................................6

              (d)    Purchase of Additional Series 2002-1 Loans...............................................6

              (e)    Treatment as Sale........................................................................7

              (f)    Recharacterization.......................................................................7

              (g)    Security Interest in Transferred Assets..................................................7

              (h)    Transfer of Loans........................................................................7

       Section 3.    Purchase Price...........................................................................8

       Section 4.    Payment of Purchase Price................................................................8

       Section 5.    Conditions Precedent to Sale of Series 2002-1 Loans and Additional Loans.................8

              (a)    Conditions Precedent to Sale of Series 2002-1 Loans......................................8

              (b)    Conditions Precedent to Sale of Additional Loans.........................................8

       Section 6.    Representations and Warranties of the Seller.............................................9

              (a)    Representations and Warranties of the Seller.............................................9

              (b)    Representations and Warranties Regarding the Series 2002-1 Loans........................10

       Section 7.    Repurchases or Substitution of Series 2002-1 Loans......................................11

              (a)    Repurchase or Substitution Obligation...................................................11

              (b)    Repurchases and Substitutions...........................................................11

              (c)    Repurchases of Series 2002-1 Loans that Become Defaulted Loans..........................12

              (d)    Maximum Repurchases.....................................................................12

       Section 8.    Covenants of the Seller.................................................................13

       Section 9.    Representations and Warranties of the Company...........................................13

       Section 10.   Covenants of the Company................................................................13

       Section 11.   Miscellaneous Provisions................................................................13

              (l)    Ratification of Agreement...............................................................13

              (m)    Amendment...............................................................................13



                                       -i-


                                                TABLE OF CONTENTS
                                                   (continued)




                                                                                                           PAGE
                                                                                                          
              (n)    Counterparts............................................................................13

              (o)    GOVERNING LAW...........................................................................13

              (p)    Successors and Assigns..................................................................13



                                      -ii-


     THIS PURCHASE AGREEMENT SUPPLEMENT (this "PA SUPPLEMENT"), dated as of
August 29, 2002, is by and between EFI DEVELOPMENT FUNDING, INC., a Delaware
corporation, as seller (the "SELLER"), and SIERRA DEPOSIT COMPANY, LLC, a
Delaware limited liability company, as purchaser (hereinafter referred to as the
"PURCHASER" or the "COMPANY").

     Section 2 of the Agreement provides that the Seller may from time to time
sell and assign to the Company, and the Company may from time to time Purchase
from the Seller, all the Seller's right, title and interest in, to and under
Loans listed on the Loan Schedule of the related PA Supplement on the Closing
Date for the related Series. The principal terms of the Purchase and sale of
Loans for each Series shall be set forth in a PA Supplement to the Agreement.

     Pursuant to this PA Supplement and in accordance with Section 2 of the
Agreement, the Seller hereby sells to the Company, and the Company hereby
Purchases from the Seller, the Series 2002-1 Loans, and the Seller and the
Company hereby specify the principal terms of such sales and Purchases.

SECTION 1.   DEFINITIONS.

     All capitalized terms used herein and not otherwise defined herein have the
meanings ascribed to them in the Agreement. Each capitalized term defined herein
shall relate only to the Series 2002-1 Loans and to no other Loans purchased by
the Company from the Seller.

     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 PA Supplement shall be controlling.

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

     "ADDITION DATE" shall mean the date from and after which Additional Loans
are sold pursuant to Section 2(d).

     "AGREEMENT" shall mean the Master Loan Purchase Agreement dated as of
August 29, 2002 by and between the Seller and the Purchaser, as the same may be
amended, supplemented or otherwise modified from time to time thereafter in
accordance with its terms.

     "ASSIGNMENT" shall have the meaning set forth in Section 2(d)(iii)(E).

     "CLOSING DATE" shall mean August 29, 2002.

     "COMPANY" shall have the meaning set forth in the preamble.

     "CUT-OFF DATE" shall mean August 27, 2002.



     "EFI HYPOTHECATION LOAN" shall mean a loan from Equivest Capital, Inc. to a
Developer.

     "ELIGIBLE LOAN" shall mean a Series 2002-1 Loan:

     (a)     with respect to which (i) the related Timeshare Property is not a
             Lot, (ii) the related Timeshare Property has been purchased by an
             Obligor, (iii) except in the case of a Green Loan, a certificate of
             occupancy for the related Timeshare Property has been issued, (iv)
             except in the case of a Green Loan, the unit for the related
             Timeshare Property is complete and ready for occupancy, is not in
             need of material maintenance or repair, except for ordinary,
             routine maintenance and repairs that are not substantial in nature
             or cost and contains no structural defects materially affecting its
             value, (v) the related Timeshare Property Regime is not in need of
             maintenance or repair, except for ordinary, routine maintenance and
             repairs that are not substantial in nature or cost and contains no
             structural defects materially affecting its value, (vi) there is no
             legal, judicial or administrative proceeding pending, or to the
             Seller's knowledge threatened, for the total condemnation of the
             related Timeshare Property or partial condemnation of any portion
             of the related Timeshare Property Regime that would have a material
             adverse effect on the value of the related Timeshare Property and
             (vii) the related Timeshare Property is not related to a Resort
             located outside of the United States, Canada, Mexico or the United
             States Virgin Islands;

     (b)     with respect to which the rights of the Obligor thereunder are
             subject to declarations, covenants and restrictions of record
             affecting the Resort;

     (c)     in the case of a Series 2002-1 Loan that is an Installment
             Contract, with respect to which the Seller has a valid ownership or
             security interest in an underlying Timeshare Property, subject only
             to Permitted Encumbrances, unless the criteria in paragraph (d) are
             satisfied;

     (d)     with respect to which (i) if the related Timeshare Property has
             been deeded to the Obligor of the related Series 2002-1 Loan, (A)
             the Seller has a valid and enforceable first lien Mortgage on such
             Timeshare Property, except as such enforceability may be limited by
             Debtor Relief Laws and as such enforceability may be limited by
             general principles of equity, regardless of whether such
             enforceability is considered in a proceeding in equity or at law,
             (B) such Mortgage and related mortgage note have been assigned to
             the Collateral Agent, (C) such Mortgage and the related note for
             such Mortgage have been transferred to the custody of the Custodian
             in accordance with the provisions of Section 6(c)(i) of the
             Agreement and (D) if any Mortgage relating to such Series 2002-1
             Loan is a deed of trust, a trustee duly qualified under applicable
             law to serve as such has been properly designated in accordance
             with applicable law and currently so serves or (ii) if the related
             Timeshare Property has not been deeded to the Obligor of the
             related Series 2002-1 Loan, the Seller has legal title to and an
             equitable interest in such Timeshare Property;

                                        2


     (e)     that was issued in a transaction that complied, and is in
             compliance, in all material respects with all material requirements
             of applicable federal, state and local law;

     (f)     that requires the Obligor to pay the unpaid principal balance over
             an original term of not greater than 120 months and (ii) the
             original term of which does not exceed 84 months unless (A) the
             Series 2002-1 Loan relates to a Timeshare Upgrade or (B) the
             weighted average FICO score of all such Series 2002-1 Loans with
             original terms longer than 84 months is at least 640 and the Series
             2002-1 Loan has a FICO score not less than 600;

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

     (h)     that is not a Defective Loan or a Defaulted Loan;

     (i)     that (i) is not a Delinquent Loan as of the Cut-Off Date or related
             Addition Cut-Off Date, as applicable, and (ii) with respect to
             which no Scheduled Payment was (A) delinquent for more than 30 days
             past its Due Date more than once during the 18-month period
             preceding the Cut-Off Date or related Addition Cut-Off Date, as
             applicable, with respect to such Series 2002-1 Loan, or (B)
             delinquent for more than 60 days at any time during such 18-month
             period (each such determination under this clause (ii) being made
             without giving effect to the grant of any extension of the Due Date
             of any such Scheduled Payment).

     (j)     that does not finance the purchase of credit life insurance;

     (k)     with respect to which no Due Date thereunder occurring after the
             Cut-Off Date or the related Addition Cut-Off Date, as applicable,
             has been deferred;

     (l)     with respect to which the related Timeshare Property (A) consists
             of a Fixed Week, Vacation Credits or a UDI and (B) if it consists
             of a Fixed Week, it has been converted into a UDI, which conversion
             does not give rise to the extension of the maturity of any payments
             under such Series 2002-1 Loan;

     (m)     that was originated by a Developer and has been consistently
             serviced by an Affiliate of the Seller, in each case in the
             ordinary course of its respective business and in accordance with
             Customary Practices and Credit Standards and Collection Policies;

     (n)     that has not been specifically reserved against by the Seller or
             classified by the Seller as uncollectible or charged off;

     (o)     that arises from transactions in a jurisdiction in which the Seller
             is duly qualified to do business, except where the failure to so
             qualify will not adversely affect or impair the legality, validity,
             binding effect and enforceability of such Series 2002-1 Loan;

                                        3


     (p)     that has not been cancelled or terminated by the related Obligor
             (regardless of whether such Obligor is legally entitled to do so)
             and constitutes a legal, valid, binding and enforceable obligation
             of the related Obligor, except as such enforceability may be
             limited by Debtor Relief Laws and as such enforceability may be
             limited by general principles of equity, regardless of whether such
             enforceability is considered in a proceeding in equity or at law;

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

     (r)     with respect to which (i) the downpayment has been made and (ii) no
             statutory rescission rights with respect to the related Obligor are
             continuing as of the Cut-Off Date or related Addition Cut-Off Date,
             as applicable;

     (s)     that had an Equity Percentage of 10% or more at the time of the
             sale of the related Timeshare Property to the related Obligor (or,
             in the case of a Loan relating to a Timeshare Upgrade, an Equity
             Percentage of 10% or more of the value of all vacation credits
             owned by the related Obligor);

     (t)     with respect to which the related Obligor has not at any time made
             a written request for rescission of such Series 2002-1 Loan or
             otherwise stated in writing that it does not intend to consummate
             such Loan or to fully perform under such Series 2002-1 Loan;

     (u)     that is not an EFI Hypothecation Loan;

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

     (w)     as of the Cut-Off Date or related Addition Cut-Off Date, as
             applicable, has an outstanding loan balance not greater than
             $100,000; and

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

     "EXCESS CONCENTRATION AMOUNT" shall have the meaning set forth in the
Series 2002-1 Supplement.

     "PA SUPPLEMENT" shall have the meaning set forth in the preamble.

                                        4


     "POOL PURCHASE PRICE" shall have the meaning set forth in Section 3.

     "PURCHASE" shall have the meaning set forth in Section 2(e).

     "PURCHASER" shall have the meaning set forth in the preamble.

     "REPURCHASE DATE" shall have the meaning set forth in Section 7.

     "REPURCHASE PRICE" shall have the meaning set forth in Section 7.

     "SERIES TERMINATION DATE" shall mean the date on which all obligations with
respect to the Series 2002-1 Notes issued under the Series 2002-1 Supplement
have been paid in full and the Series 2002-1 Supplement is discharged.

     "SERIES 2002-1 ADDITIONAL LOAN" shall mean each Additional Loan
constituting one of the Series 2002-1 Loans Purchased from the Seller on an
Addition Cut-Off Date and listed on Schedule 1 to the related Assignment.

     "SERIES 2002-1 LOAN" means each Loan listed from time to time on the Series
2002-1 Loan Schedule.

     "SERIES 2002-1 LOAN SCHEDULE" shall mean the Loan Schedule for the Series
2002-1 Loans.

     "SERIES 2002-1 NOTEHOLDER" shall mean any Noteholder under the Series
2002-1 Supplement.

     "SERIES 2002-1 PLEDGED LOAN" shall have the meaning set forth in the Series
2002-1 Supplement.

     "SERIES 2002-1 SUPPLEMENT" shall mean the supplement to the Master
Indenture and Servicing Agreement executed and delivered in connection with the
original issuance of the Series 2002-1 Notes and all amendments thereof and
supplements thereto.

     "SUBSTITUTION ADJUSTMENT AMOUNT" shall have the meaning set forth in
Section 7.

SECTION 2.   SALE.

             (a)     SERIES 2002-1 LOANS. Subject to the terms and conditions
and in reliance on the representations, warranties, and covenants and agreements
set forth in the Agreement and this PA Supplement, the Seller hereby sells and
assigns to the Company, and the Company hereby Purchases from the Seller,
without recourse except as specifically set forth herein, all of the Seller's
right, title and interest in, to and under the Initial Loans, if any, listed on
the Series 2002-1 Loan Schedule delivered on the Closing Date, together with all
Transferred Assets relating thereto. The Series 2002-1 Additional Loans existing
at the close of business on the related Addition Cut-Off Date and all other
Transferred Assets relating thereto shall be sold by the Seller and purchased by
the Company on the related Addition Date. Notwithstanding the foregoing, and for
avoidance of doubt, the Seller does not assign, and the Purchaser does not

                                        5


agree to assume, any obligations specific to any Developer as developer of any
Timeshare Property underlying an Installment Contract.

             (b)     FILING OF FINANCING STATEMENTS. In connection with the
foregoing sale, the Seller agrees to record and file a financing statement or
statements (and continuation statements or other amendments with respect to such
financing statements) with respect to the Series 2002-1 Loans and related
Transferred Assets described in Section 2(a) sold by the Seller hereunder
meeting the requirements of applicable state law in such manner and in such
jurisdictions as are necessary to perfect the interests of the Purchaser created
hereby under the applicable UCC and to deliver a file-stamped copy of such
financing statements and continuation statements (or other amendments) or other
evidence of such filings to the Purchaser.

             (c)     DELIVERY OF SERIES 2002-1 LOAN SCHEDULE. In connection with
the sale and conveyance hereunder, the Seller agrees on or prior to the Closing
Date and on or prior to the applicable Addition Date (in the case of Additional
Series 2002-1 Loans) to indicate or cause to be indicated clearly and
unambiguously in its accounting, computer and other records that the Series
2002-1 Loans and related Transferred Assets have been sold to the Purchaser
pursuant to this PA Supplement. In addition, in connection with the sale and
conveyance hereunder, the Seller agrees on or prior to the Closing Date and on
or prior to the applicable Addition Date (in the case of Additional Series
2002-1 Loans) to deliver to the Company a Series 2002-1 Loan Schedule for such
Series 2002-1 Loans or Additional Series 2002-1 Loans.

             (d)     PURCHASE OF ADDITIONAL SERIES 2002-1 LOANS.

                     (i)     [Reserved].

                     (ii)    The Seller may, with the consent of the Purchaser,
     designate Eligible Loans to be sold as Additional Series 2002-1 Loans.

                     (iii)   On the Addition Date with respect to any Additional
     Series 2002-1 Loans, such Additional Series 2002-1 Loans shall become
     Series 2002-1 Loans, and the Purchaser shall Purchase the Seller's right,
     title and interest in, to and under the Additional Series 2002-1 Loans and
     the other related Transferred Assets as provided in the Assignment, subject
     to the satisfaction of the following conditions on such Addition Date:

                     (A)     The Seller shall have delivered to the Purchaser
             copies of UCC financing statements covering such Additional Series
             2002-1 Loans, if necessary to perfect the Purchaser's first
             priority interest in such Series 2002-1 Additional Loans and the
             other related Transferred Assets;

                     (B)     On each of the Addition Cut-Off Date and the
             Addition Date, the sale of such Additional Series 2002-1 Loans and
             the other related Transferred Assets to the Purchaser shall not
             have caused the Seller's insolvency or have been made in
             contemplation of the Seller's insolvency;

                     (C)     No selection procedure shall have been utilized by
             the Seller that would result in a selection of such Additional
             Series 2002-1 Loans (from the

                                        6


             Eligible Loans available to the Seller) that would be materially
             adverse to the interests of the Purchaser as of the Addition Date;

                     (D)     The Seller shall have indicated in its accounting,
             computer and other records that the Additional Series 2002-1 Loans
             and the other related Transferred Assets have been sold to the
             Purchaser and shall have delivered to the Purchaser the required
             Series 2002-1 Loan Schedule;

                     (E)     The Seller and the Purchaser shall have entered
             into a duly executed, written assignment substantially in the form
             of Exhibit B to the Agreement (an "ASSIGNMENT");

                     (F)     The Seller shall have delivered to the Purchaser an
             Officer's Certificate of the Seller dated the Addition Date,
             confirming, to the extent applicable, the items set forth in
             Section 2(d)(iii) (A) through (E);

                     (G)     The Seller shall have executed the letter agreement
             relating to the amendment of documents and the letter agreement
             relating to inspections and audits which agreements were entered
             into by Fairfield Acceptance Corporation, the Purchaser and Sierra
             Receivables Funding Company, LLC on the date of this PA Supplement;
             and

                     (H)     The Purchaser shall have paid the Additional Pool
             Purchase Price as provided in Section 3 of the Agreement.

                     (iv)    The Seller shall have no obligation to sell the
     Additional Series 2002-1 Loans if it has not been paid the Additional Pool
     Purchase Price therefor.

             (e)     TREATMENT AS SALE. It is the express and specific intent of
the parties that the sale of the Series 2002-1 Loans and related Transferred
Assets from the Seller to the Company as provided in this Section 2 (the
"PURCHASE") is and shall be construed for all purposes as a true and absolute
sale of such Series 2002-1 Loans and related Transferred Assets, shall be
absolute and irrevocable and provide the Company with the full benefits of
ownership of the Series 2002-1 Loans and related Transferred Assets and will be
treated as such for all federal income tax reporting and all other purposes.

             (f)     RECHARACTERIZATION. Without prejudice to the provisions of
Section 2(e) providing for the absolute transfer of the Seller's interest in the
Series 2002-1 Loans and related Transferred Assets to the Company in order to
secure the prompt payment and performance of all of the obligations of the
Seller to the Company and the Company's assignees arising in connection with the
Agreement, this PA Supplement and the other Facility Documents, whether now or
hereafter existing, due or to become due, direct or indirect, or absolute or
contingent, the Seller hereby assigns and grants to the Company a first priority
security interest in all of the Seller's right, title and interest, whether now
owned or hereafter acquired, if any, in, to and under all of the Series 2002-1
Loans and related Transferred Assets and the proceeds thereof.

             (g)     SECURITY INTEREST IN TRANSFERRED ASSETS. The Seller
acknowledges that the Series 2002-1 Loans and related Transferred Assets are
subject to the Lien of the Indenture and

                                        7


Servicing Agreement for the benefit of the Trustee and the Series 2002-1
Noteholders (or to the Collateral Agent on behalf of the Trustee and the Series
2002-1 Noteholders).

             (h)     TRANSFER OF LOANS. All Series 2002-1 Loans conveyed to the
Company hereunder shall be held by the Custodian pursuant to the terms of the
Custodial Agreement for the benefit of the Company, the Issuer, the Trustee and
the Collateral Agent. Upon each Purchase hereunder, the Custodian shall execute
and deliver to the Company a certificate acknowledging receipt of the applicable
Series 2002-1 Loans pursuant to the Custodial Agreement.

     The Seller acknowledges that the Company will convey the Series 2002-1
Loans and the other related Transferred Assets to the Issuer and that the Issuer
will grant a security interest in the Series 2002-1 Loans and other related
Transferred Assets to the Collateral Agent pursuant to the Indenture and
Servicing Agreement and the related Series 2002-1 Supplement. The Seller agrees
that, upon such grant, the Issuer, the Trustee and the Collateral Agent may
enforce all of the Seller's obligations hereunder and under the Agreement
directly, including without limitation the repurchase obligations of the Seller
set forth in Section 7.

SECTION 3.   PURCHASE PRICE.

     No Series 2002-1 Loans shall be sold on the Closing Date. The purchase
price for Additional Loans sold on an Addition Date shall be the Additional Pool
Purchase Price.

SECTION 4.   PAYMENT OF PURCHASE PRICE.

     Sections 4(a) through (c) are set forth in the Agreement.

     (d)     The closing shall take place at the offices of Orrick, Herrington &
Sutcliffe LLP, Washington Harbour, 3050 K Street, NW, Washington, D.C. 20007, at
10:00 a.m. local time on the Closing Date, or such other time and place as shall
be mutually agreed upon among the parties hereto.

SECTION 5.   CONDITIONS PRECEDENT TO SALE OF SERIES 2002-1 LOANS AND ADDITIONAL
             LOANS.

     (a)     CONDITIONS PRECEDENT TO SALE OF SERIES 2002-1 LOANS. The
Purchaser's obligations hereunder to Purchase and pay for the Series 2002-1
Loans and related Transferred Assets are subject to the fulfillment of the
following conditions on or before the Closing Date:

             (i)     (A) The Purchaser shall have received the Series 2002-1
                     Pool Purchase Agreement relating to each Series 2002-1 Loan
                     executed by all the parties thereto and (B) all conditions
                     precedent to the sale of the Series 2002-1 Pool Loans
                     thereunder shall have been fulfilled to the extent they are
                     capable of being fulfilled prior to the performance by the
                     Purchaser of its obligations under this PA Supplement.

             (ii)    The representations and warranties of the Seller made in
                     the Agreement and herein shall be true and correct in all
                     material respects on the Closing Date.

                                        8


     (b)     CONDITIONS PRECEDENT TO SALE OF ADDITIONAL LOANS. No Purchase of
Additional Loans and related Transferred Assets may be made hereunder until the
Purchaser shall have received each of the following in form and substance
acceptable to the Purchaser:

             (i)     Copies of search reports certified by parties acceptable to
     the Purchaser dated a date reasonably prior to the initial Addition Date
     listing all effective financing statements which name the Seller (under its
     present name and any previous names) as debtor or seller and which are
     filed with respect to the Seller in each relevant jurisdiction, together
     with copies of such financing statements (none of which shall cover any
     portion of the Series 2002-1 Loans being purchased from the Seller and
     related Transferred Assets except as contemplated by the Facility
     Documents);

             (ii)    Copies of proper UCC Financing Statement Amendments (Form
     UCC3), if any, necessary to terminate all security interests and other
     rights of any Person in the Series 2002-1 Loans being purchased from the
     Seller and related Transferred Assets previously granted by the Seller
     (except as contemplated by the Facility Documents);

             (iii)   Copies of proper UCC Financing Statements (Form UCC1)
     naming the Seller as debtor or seller of the Series 2002-1 Loans being
     purchased from the Seller and related Transferred Assets, the Issuer as
     total assignee and the Purchaser as assignor secured party, and such other
     similar instruments or documents with respect to the Seller as may be
     necessary or in the opinion of the Purchaser desirable under the UCC of all
     appropriate jurisdictions or any comparable law to evidence the perfection
     of the Purchaser's interest in the Series 2002-1 Loans and related
     Transferred Assets;

             (iv)    An opinion or opinions of counsel to the Seller, in the
     form required by the Purchaser, with respect to the following: (A) certain
     security interest matters, and (B) "true sale" and substantive
     consolidation matters; and

             (v)     Evidence that one or more Lockbox Accounts have been
     established.

SECTION 6.   REPRESENTATIONS AND WARRANTIES OF THE SELLER.

             (a)     REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants as of the Closing Date and as of each Addition Date, or
as of such other date specified in such representation and warranty, that:

                     (xvii)  ACCURACY OF INFORMATION. All information with
     respect to the Seller contained in the Confidential Information Memorandum
     dated June 2002 with respect to the Series 2002-1 Notes and Series 2002-1
     Loans (including, without limitation, the Credit Standards and Collection
     Policies) was true and accurate in every respect material to the
     transactions contemplated hereby on the date as of which it was delivered,
     and did not omit to state any fact necessary to make the statements
     contained therein not materially misleading or, if any such information
     contained therein has been discovered to have been inaccurate on such date,
     such information has been corrected by subsequent information provided in
     writing to the Issuer.

                                        9


                     (xviii) NO MATERIAL ADVERSE CHANGE. As of the Closing Date,
     there has been no material adverse change with respect to the business
     operations or financial condition of the Seller since December 31, 2001.

     Sections 6(a)(i) through (xvi) are set forth in the Agreement.

             (b)     REPRESENTATIONS AND WARRANTIES REGARDING THE SERIES 2002-1
LOANS. The Seller represents and warrants to the Company as of the Cut-Off Date
and Addition Cut-Off Date as to each Series 2002-1 Loan conveyed on and as of
the Closing Date or the related Addition Date, as applicable (except as
otherwise expressly stated) as follows:

                     (xxiii) LOAN SCHEDULE. The information set forth in the
     Series 2002-1 Loan Schedule is true and correct with respect to such Series
     2002-1 Loan.

                     (xxiv)  GOOD TITLE TO SERIES 2002-1 LOANS. The Seller has
     good and marketable title to such Series 2002-1 Loan free and clear of any
     Lien other than Permitted Encumbrances. The Seller has not sold, assigned
     or pledged such Series 2002-1 Loan or any interest therein to any Person
     other than the Company. With respect to the related Timeshare Property,
     either (A) a generally accepted form of title insurance policy insuring the
     fee estate ownership of the real property subject to the Timeshare Property
     Regime by the Persons owning the respective interests therein and their
     successors and assigns (1) was effective either at the time the Developer
     (or a Subsidiary thereof) acquired the Timeshare Property or at the time of
     registration of the Timeshare Property Regime, (2) is valid and remains in
     full force and effect and (3) was issued by a title insurer qualified to do
     business in the applicable jurisdiction; or (B) either at the time the
     Developer (or a Subsidiary thereof) acquired the Timeshare Property or at
     the time of registration of the Timeshare Property Regime, such fee estate
     ownership had been verified by an attorney's opinion of title, the form and
     substance of which is of a type acceptable for purposes of registration of
     sales of Timeshare Properties and which may be relied upon by Persons
     subsequently owning the respective interests therein and their successors
     and assigns.

                     (xxv)   NO DEFAULTS. As of the Cut-Off Date or related
     Addition Cut-Off Date, as applicable, such Series 2002-1 Loan is not a
     Defaulted Loan and no event has occurred which, with the taking of any
     action or the expiration of any grace or cure period or both, would cause
     such Series 2002-1 Loan to be a Defaulted Loan. The Seller has not waived
     any such default, breach, violation or event permitting acceleration with
     respect to such Series 2002-1 Loan.

                     (xxvi)  EQUAL INSTALLMENTS. Such Series 2002-1 Loan has a
     fixed Loan Rate and provides for substantially equal monthly payments that
     fully amortize the Series 2002-1 Loan over its term.

                     (xxvii) EXCESS CONCENTRATION AMOUNT. The Purchase of such
     Series 2002-1 Loan occurring on such Closing Date or Addition Date, as
     applicable, and the inclusion of such Series 2002-1 Loan as a Series 2002-1
     Pledged Loan pursuant to the

                                       10


     Series 2002-1 Supplement to the Indenture and Servicing Agreement, does not
     cause an increase in the Excess Concentration Amount.

     Sections 6(b)(i) through (xxii) are set forth in the Agreement.

SECTION 7.   REPURCHASES OR SUBSTITUTION OF SERIES 2002-1 LOANS.

             (a)     REPURCHASE OR SUBSTITUTION OBLIGATION. Subject to
Section 7(b), upon discovery by the Seller or upon written notice from the
Company, the Issuer or the Trustee that any Series 2002-1 Loan is a Defective
Loan, the Seller shall, within 90 days after the earlier of its discovery or
receipt of notice thereof, cure such Defective Loan in all material respects or
either (i) repurchase such Defective Loan from the Company or its assignee at
the Repurchase Price or (ii) substitute one or more Qualified Substitute Loans
for such Defective Loan. For purposes of this Agreement, the term "REPURCHASE
PRICE" shall mean an amount equal to the outstanding Principal Balance of such
Defective Loan as of the close of business on the Due Date immediately preceding
the Payment Date on which the repurchase is to be made, plus accrued but unpaid
interest thereon to the date of the repurchase. The Company hereby directs the
Seller, for so long as the Indenture and Servicing Agreement is in effect, to
make such payment on its behalf to the Collection Account pursuant to Section
7(b). The following defects with respect to documents in any Loan File, solely
to the extent they do not impair the validity or enforceability of the subject
document under applicable law, shall not be deemed to constitute a breach of the
representations and warranties contained in Section 6(b): misspellings of or
omissions of initials in names; name changes from divorce or marriage;
discrepancies as to payment dates in a Series 2002-1 Loan of no more than 30
days; discrepancies as to Scheduled Payments of no more than $5.00;
discrepancies as to origination dates of not more than 30 days; inclusion of
additional parties other than the primary Obligor not listed in the Master
Servicer's records or in the Series 2002-1 Loan Schedule and non-substantive
typographical errors and other non-substantive minor errors of a clerical or
administrative nature.

             (b)     REPURCHASES AND SUBSTITUTIONS. The Seller shall provide
written notice to the Company of any repurchase pursuant to Section 7(a) not
less than two Business Days prior to the date on which such repurchase is to be
effected, specifying the Defective Loan and the Repurchase Price therefor. Upon
the repurchase of a Defective Loan pursuant to Section 7(a), the Seller shall
deposit the Repurchase Price in the Collection Account on behalf of the Company
no later than 12:00 noon, New York time, on the Payment Date on which such
repurchase is made (the "REPURCHASE DATE").

     If the Seller elects to substitute a Qualified Substitute Loan or Loans for
a Defective Loan pursuant to this Section 7(b), the Seller shall deliver such
Qualified Substitute Loan in the same manner as the other Series 2002-1 Loans
sold hereunder, including delivery of the applicable Loan Documents as required
pursuant to the Custodial Agreement and satisfaction of the same conditions with
respect to such Qualified Substitute Loan as to the Purchase of Additional Loans
set forth in Section 2(d)(iii). Payments due with respect to Qualified
Substitute Loans prior to the last day of the Due Period next preceding the date
of substitution shall not be property of the Company, but will be retained by
the Master Servicer and remitted by the Master Servicer to the

                                       11


Seller on the next succeeding Payment Date. Scheduled Payments due on a
Defective Loan prior to the last day of the Due Period next preceding the date
of substitution shall be property of the Company, and after such last day of the
Due Period next preceding the date of substitution the Seller shall be entitled
to retain all Scheduled Payments due thereafter and other amounts received in
respect of such Defective Loan. The Seller shall cause the Master Servicer to
deliver a schedule of any Defective Loans so removed and Qualified Substitute
Loans so substituted to the Company and such schedule shall be an amendment to
the Series 2002-1 Loan Schedule. Upon such substitution, the Qualified
Substitute Loan or Loans shall be subject to the terms of this PA Supplement in
all respects, the Seller shall be deemed to have made the representations and
warranties with respect to each Qualified Substitute Loan set forth in Section
6(b) of the Agreement and this PA Supplement and Section 6(c) of the Agreement,
in each case as of the date of substitution, and the Seller shall be deemed to
have made a representation and warranty that each Loan so substituted is an
Qualified Substitute Loan as of the date of substitution. The Seller shall be
obligated to repurchase or substitute for any Eligible Substitute Loan as to
which the Seller has breached the Seller's representations and warranties in
Section 6(b) to the same extent as for any other Series 2002-1 Loan, as provided
herein. In connection with the substitution of one or more Qualified Substitute
Loans for one or more Defective Loans, the Master Servicer shall determine the
amount (such amount, a "SUBSTITUTION ADJUSTMENT AMOUNT"), if any, by which the
aggregate principal balance of all such Qualified Substitute Loans as of the
date of substitution is less than the aggregate principal balance of all such
Defective Loans (after application of the principal portion of the Scheduled
Payments due in the month of substitution that are to be distributed to the
Company in the month of substitution). The Seller shall deposit the amount of
such shortfall into the Collection Account in immediately available funds on the
date of substitution, without any reimbursement therefor.

     Upon each repurchase or substitution, the Company shall automatically and
without further action sell, transfer, assign, set over and otherwise convey to
the Seller, without recourse, representation or warranty, all of the Company's
right, title and interest in and to the related Defective Loan, the related
Timeshare Property, the Loan File relating thereto and any other related
Transferred Assets, all monies due or to become due with respect thereto and all
Collections with respect thereto (including payments received from Obligors from
and including the last day of the Due Period next preceding the date of
transfer, subject to the payment of any Substitution Adjustment Amount). The
Company shall execute such documents, releases and instruments of transfer or
assignment and take such other actions as shall reasonably be requested by the
Seller to effect the conveyance of such Defective Loan, the related Timeshare
Property and related Loan File pursuant to this Section 7(b).

     Promptly after the occurrence of a Repurchase Date and after the repurchase
of Defective Loans in respect of which the Repurchase Price has been paid on
such date, the Seller shall direct the Master Servicer to delete such Defective
Loans from the Series 2002-1 Loan Schedule.

     The obligation of the Seller to repurchase or substitute for any Defective
Loan shall constitute the sole remedy against the Seller with respect to any
breach of the representations and warranties set forth in Section 6(b) available
hereunder to the Company or its successors or assigns.

                                       12


             (c)     REPURCHASES OF SERIES 2002-1 LOANS THAT BECOME DEFAULTED
LOANS. If any Series 2002-1 Loan becomes a Defaulted Loan during any Due Period,
the Seller may repurchase such Defaulted Loan from the Company or its assignees
at the Repurchase Price therefor and in accordance with the additional
provisions applicable to repurchases of Defective Loans under Section 7(b).

             (d)     MAXIMUM REPURCHASES. Notwithstanding anything to the
contrary in the Agreement or this PA Supplement, no Defaulted Loans shall be
repurchased by the Seller to the extent that the aggregate principal balance of
all Defaulted Loans so repurchased is greater than the Defaulted Loan Repurchase
Cap.

SECTION 8.   COVENANTS OF THE SELLER.

     Section 8 is set forth in the Agreement.

SECTION 9.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     Section 9 is set forth in the Agreement.

SECTION 10.  COVENANTS OF THE COMPANY.

     Section 10 is set forth in the Agreement.

SECTION 11.  MISCELLANEOUS PROVISIONS.

             (l)     RATIFICATION OF AGREEMENT. As supplemented by this PA
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this PA Supplement shall be read, taken and
construed as one and the same instrument.

             (m)     AMENDMENT. This PA Supplement may be amended from time to
time or the provisions hereof may be waived or otherwise modified by the parties
hereto by written agreement signed by the parties hereto.

             (n)     COUNTERPARTS. This PA 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.

             (o)     GOVERNING LAW. THIS PA SUPPLEMENT IS GOVERNED BY AND SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING
Section 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES.

             (p)     SUCCESSORS AND ASSIGNS. This PA Supplement shall be binding
upon each of the Seller and the Company and their respective permitted
successors and assigns, and shall inure to the benefit of, and be enforceable
by, each of the Seller and the Company and each of the Issuer, the Trustee, the
Collateral Agent and the Noteholders.

                                       13


     IN WITNESS WHEREOF, the parties have caused their names to be signed hereto
by their respective officers thereunto duly authorized, all as of the day and
year first above written.

                                        EFI DEVELOPMENT FUNDING,
                                        INC.,
                                         as Seller


                                        By:    /s/ Lisa Henson
                                            ----------------------------------
                                            Name: Lisa Henson
                                            Title: Vice President


                                        SIERRA DEPOSIT COMPANY,
                                        LLC,
                                         as Purchaser


                                        By:    /s/ Ralph E. Turner
                                            ----------------------------------
                                            Name: Ralph E. Turner
                                            Title: President and Treasurer

                     [Signature page for EFI PA Supplement]




                                                                   EXHIBIT 10.69

                                                                  EXECUTION COPY


                         MASTER POOL PURCHASE AGREEMENT

                           dated as of August 29, 2002

                                 by and between

                           SIERRA DEPOSIT COMPANY, LLC
                                  as Depositor

                                       and

                     SIERRA RECEIVABLES FUNDING COMPANY, LLC
                                    as Issuer



                                TABLE OF CONTENTS




                                                                                PAGE
                                                                               
Section 1.    Definitions..........................................................1

Section 2.    Purchase and Sale....................................................5

Section 3.    Pool Loan Purchase Price.............................................5

Section 4.    Payment of Purchase Price............................................5

              (a)   Closing Dates..................................................5

              (b)   Manner of Payment of Additional Pool Loan Purchase Price.......6

              (c)   Payment of Adjustments.........................................6

Section 5.    Conditions Precedent to Sale of Pool Loans...........................6

Section 6.    Representations and Warranties of the Depositor......................6

Section 7.    Affirmative Covenants of the Depositor...............................8

              (a)   Separate Legal Entity..........................................8

              (b)   Compliance with Laws, Etc......................................9

              (c)   Preservation of Corporate Existence............................9

              (d)   Keeping of Records and Books of Account........................9

              (e)   Payment of Taxes...............................................9

              (f)   Turnover of Collections........................................9

Section 8.    Negative Covenants of the Depositor.................................10

              (a)   Sales, Liens, Etc.............................................10

              (b)   No Mergers, Etc...............................................10

              (c)   Change in Name................................................10

              (d)   Indebtedness..................................................10

              (e)   Amendments, Etc...............................................10

              (f)   Capital Expenditures..........................................10

              (g)   Limitation on Business........................................10

              (h)   Capital Contributions.........................................10

Section 9.    Repurchases or Substitutions of Pool Loans for
              Breach of Representations and Warranties............................11

Section 10.   Representations and Warranties of the Issuer........................11

Section 11.   Affirmative Covenants of the Issuer.................................12



                                       -i-


                                TABLE OF CONTENTS
                                   (continued)




                                                                                PAGE
                                                                              
Section 12.   Depositor Repurchases...............................................13

              (a)   Optional Substitution of Schedule 1-A Pool Loans..............13

              (b)   Substitution of Other Pool Loans..............................14

              (c)   Substitutions.................................................14

              (d)   Condition Precedent to Substitution of Pool Loans.............14

Section 13.   Termination.........................................................14

              (a)   Purchase Termination Events...................................14

              (b)   Purchase Termination..........................................14

Section 14.   Indemnities by the Depositor........................................14

Section 15.   Miscellaneous.......................................................15

              (a)   Amendment.....................................................15

              (b)   Assignment....................................................15

              (c)   Counterparts..................................................16

              (d)   Governing Law.................................................16

              (e)   Notices.......................................................16

              (f)   Severability of Provisions....................................16

              (g)   Successors and Assigns........................................16

              (h)   No Proceedings................................................16

              (i)   Recourse to the Depositor.....................................17

              (j)   Recourse to the Issuer........................................17

              (k)   Confidentiality...............................................17

Exhibit A     Form of Assignment of Additional Pool Loans........................A-1



                                      -ii-


                         MASTER POOL PURCHASE AGREEMENT

      THIS MASTER POOL PURCHASE AGREEMENT (the "AGREEMENT") dated as of August
29, 2002 is made by and between SIERRA DEPOSIT COMPANY, LLC, a Delaware limited
liability company, as depositor (the "DEPOSITOR") and SIERRA RECEIVABLES FUNDING
COMPANY, LLC, a Delaware limited liability company, as issuer (the "ISSUER").

                                    RECITALS

      WHEREAS, the Depositor has purchased certain Pool Loans and related Pool
Assets (including an interest in the Timeshare Properties underlying such Pool
Loans) from FAC, EFI and Trendwest (collectively with other sellers of Pool
Loans that may be named in the future, the "SELLERS") pursuant to the applicable
Purchase Agreements and related PA Supplements and from time to time hereafter
will purchase from the Sellers additional Pool Loans and related Pool Assets;
and

      WHEREAS, the Depositor wishes to sell the Pool Loans and related Pool
Assets that it now owns and the Pool Loans and related Pool Assets that it from
time to time hereafter will own to the Issuer, and the Issuer is willing to
purchase such Pool Loans and related Pool Assets from the Depositor from time to
time, on the terms and subject to the conditions contained in this Agreement and
the related Pool Purchase Agreement Supplement (each, a "PPA SUPPLEMENT") for
each Series of Notes; and

      WHEREAS, the Issuer intends to grant security interests in the Pool Loans
and related Pool Assets that it purchases from the Depositor to the Collateral
Agent on behalf of the Trustee and the holders of Notes issued from time to time
pursuant to a Master Indenture and Servicing Agreement of even date herewith,
together with any Indenture Supplements thereto (collectively, the "INDENTURE
AND SERVICING AGREEMENT"), each by and between the Issuer, FAC as Master
Servicer, the Trustee and the Collateral Agent.

      NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:

SECTION 1.   DEFINITIONS.

      All terms used but not otherwise specifically defined herein shall have
the meanings ascribed to them in the Purchase Agreements. Whenever used in this
Agreement, the following words and phrases shall have the following meanings:

      "ADDITION CUT-OFF DATE" shall mean any Addition Cut-Off Date under the
applicable Purchase Agreement.

      "ADDITION DATE" shall mean any Addition Date under the applicable Purchase
Agreement.

      "ADDITIONAL POOL LOAN" shall mean, for each Series, a Loan constituting
one of the Pool



Loans of such Series purchased from the Depositor on an Addition Date and listed
on Schedule 1 to the related Assignment.

      "ADDITIONAL POOL LOAN PURCHASE PRICE" shall have the meaning set forth in
Section 3.

      "AGREEMENT" shall have the meaning set forth in the preamble.

      "ASSIGNMENT" shall have the meaning set forth in the applicable PPA
Supplement.

      "CENDANT" shall mean Cendant Corporation or any successor thereof.

      "CLOSING DATE" shall mean, for each Series, the Closing Date set forth in
the applicable PPA Supplement.

      "DEFECTIVE LOAN" shall mean any Defective Loan under the applicable
Purchase Agreement.

      "DEPOSITOR" shall have the meaning set forth in the preamble.

      "DEPOSITOR INDEMNIFIED AMOUNTS" shall have the meaning set forth in
Section 14.

      "DEPOSITOR INDEMNIFIED PARTY" shall have the meaning set forth in
Section 14.

      "DUE DATE" shall mean, with respect to any Pool Loan, the date on which an
Obligor is required to make a Scheduled Payment thereon.

      "EFI" shall mean EFI Development Funding, Inc., a wholly-owned indirect
Subsidiary of Cendant.

      "ELIGIBLE POOL LOAN" shall mean any Pool Loan that is an Eligible Loan as
defined in the applicable PA Supplement.

      "FAC" shall mean Fairfield Acceptance Corporation-Nevada, a Delaware
corporation domiciled in Nevada and a wholly-owned indirect Subsidiary of FRI.

      "FACILITY DOCUMENTS" shall mean, collectively, this Agreement, each PPA
Supplement, the Purchase Agreements, each PA Supplement, the Indenture and
Servicing Agreement, each Indenture Supplement, the Custodial Agreement, the
Lockbox Agreements, the Collateral Agency Agreement, the Title Clearing
Agreements, the Loan Conveyance Documents, the Depositor Administrative Services
Agreement, the Issuer Administrative Services Agreement, the Financing
Statements, all other documents specified in a PPA Supplement as Facility
Documents and all other agreements, documents and instruments delivered pursuant
thereto or in connection therewith.

      "FRI" shall mean Fairfield Resorts, Inc., a Delaware corporation and the
parent corporation of FAC.

      "GUARANTEE" shall mean the performance guarantee dated as of the date
hereof, executed by the Performance Guarantor in favor of the Depositor, the
Issuer and the Trustee.

                                        2


      "INDENTURE AND SERVICING AGREEMENT" shall have the meaning set forth in
the recitals.

      "INDENTURE SUPPLEMENT" shall mean, with respect to any Series, an
indenture supplement to the Indenture and Servicing Agreement, executed and
delivered in connection with the issuance of the Notes of such Series pursuant
to Section 2.10 of the Indenture and Servicing Agreement, and all amendments
thereof and supplements thereto.

      "INDEPENDENT DIRECTOR" shall mean an individual who is an Independent
Director as defined in the Limited Liability Company Agreement of the Depositor
or the Issuer, as applicable, as in effect on the date of this Agreement.

      "INITIAL POOL LOANS" shall mean, with respect to any Series, the Pool
Loans listed on the Pool Loan Schedule on the Closing Date for such Series.

      "INSTALLMENT CONTRACT" shall mean any Installment Contract under the
applicable Purchase Agreement.

      "ISSUER" shall have the meaning set forth in the preamble.

      "ISSUER ADMINISTRATIVE SERVICES AGREEMENT" shall mean the Administrative
Services Agreement dated as of August 29, 2002 by and between FAC as
administrator and the Issuer.

      "LOAN" shall have the meaning assigned to that term in the applicable
Purchase Agreement.

      "MORTGAGE" shall have the meaning assigned to that term in the applicable
Purchase Agreement.

      "NOTES" shall mean any Series of Notes issued by the Issuer pursuant to
the Indenture and Servicing Agreement and the respective Indenture Supplements.

      "OBLIGOR" shall have the meaning assigned to that term in the applicable
Purchase Agreement.

      "ORIGINATOR" shall have the meaning assigned to that term in the
applicable Purchase Agreement.

      "PA SUPPLEMENT" shall mean any supplement to a Purchase Agreement relating
to Loans constituting collateral for a particular Series of Notes.

      "PERFORMANCE GUARANTOR" shall mean Cendant.

      "PERMITTED ENCUMBRANCE" shall have the meaning assigned to that term in
the applicable Purchase Agreement.

      "POOL ASSETS" shall mean, with respect to any Series, any and all right,
title, and interest of the Depositor in, to and under (a) the Pool Loans from
time to time and the related Transferred

                                        3


Assets and all of the Depositor's rights under the Purchase Agreements and the
Guarantee, (b) the Pool Collections and (c) the proceeds of any of the
foregoing.

      "POOL COLLECTIONS" shall mean, for any Series, all funds that are received
on account of or otherwise in connection with the Pool Loans for such Series,
including without limitation (a) all Collections in respect of any Pool Loans,
(b) all amounts received from any Seller in respect of amounts relating to
Repurchase Prices and Substitution Adjustment Amounts under the applicable PA
Supplement or from Cendant in respect of any payments made by Cendant as
guarantor of the obligations of the Seller or the Master Servicer under the
Guarantee.

      "POOL LOAN" shall mean, for each Series, each Loan that is listed on the
applicable Pool Loan Schedule on the Closing Date for the related Series and
Additional Pool Loans that are listed from time to time on such Pool Loan
Schedule.

      "POOL LOAN CONVEYANCE DOCUMENTS" shall mean, with respect to any Pool
Loan, (a) the Assignment of Additional Pool Loans in the form of Exhibit A, if
applicable, and (b) any such other releases, documents, instruments or
agreements as may be required by the Depositor, the Issuer or the Trustee in
order to more fully effect the sale (including any prior assignments) of such
Pool Loan and any other related Pool Assets.

      "POOL LOAN PURCHASE PRICE," for the Pool Assets with respect to any
Series, shall have the meaning set forth in the applicable PPA Supplement.

      "POOL LOAN SCHEDULE" shall mean the list of Loans attached to the
applicable PPA Supplement as Schedule 1, as amended from time to time on each
Addition Date and Repurchase Date as provided in the applicable PPA Supplement
and Section 8(b) of this Agreement, which list shall set forth the same
information with respect to each Pool Loan as required in the Loan Schedules for
the applicable Purchase Agreement.

      "POOL PURCHASE PRICE," for each Series, shall have the meaning set forth
in the applicable PPA Supplement.

      "PPA SUPPLEMENT" shall have the meaning set forth in the recitals.

      "PURCHASE" shall mean, with respect to any Series, the sale of Loans and
related Transferred Assets from the Depositor to the Issuer.

      "PURCHASE AGREEMENT" shall mean each of the Master Loan Purchase Agreement
dated as of August 29, 2002 by and between FAC as seller, FRI as co-originator,
Fairfield Myrtle Beach, Inc. as co-originator, Sea Gardens Beach and Tennis
Resort, Inc., Vacation Break Resorts, Inc., Vacation Break Resorts at Star
Island, Inc., Palm Vacation Group, Ocean Ranch Vacation Group and the Depositor
as purchaser; the Master Loan Purchase Agreement dated as of August 29, 2002 by
and between EFI as Seller and the Depositor as purchaser; or the Master Loan
Purchase Agreement dated as of August 29, 2002 by and between Trendwest as
Seller and the Depositor as purchaser, in each case as such agreements may be
amended, modified or supplemented from time to time in accordance with the terms
thereof, and any other purchase agreement relating to the purchase of Loans from
a Seller by the Depositor.

                                        4


      "PURCHASE TERMINATION DATE" shall mean the date specified by the Trustee
following the occurrence of a Purchase Termination Event; PROVIDED, HOWEVER,
that if an Insolvency Event has occurred with respect to either the Depositor or
the Issuer, the Purchase Termination Date shall be deemed to have occurred
automatically without any such notice.

      "PURCHASE TERMINATION EVENT" shall have the meaning set forth in
Section 13.

      "REPURCHASE DATE," for each Series, shall have the meaning set forth in
the applicable PPA Supplement.

      "REPURCHASE PRICE," for each Series, shall have the meaning set forth in
the applicable PPA Supplement.

      "SCHEDULE 1-A POOL LOAN" shall have the meaning set forth in Section 12.

      "SCHEDULE 1-B POOL LOAN" shall have the meaning set forth in Section 12.

      "SELLER" shall have the meaning set forth in the recitals.

      "SELLER SUBSIDIARY" shall mean any Subsidiary of a Seller, other than the
Depositor or the Issuer.

      "TIMESHARE PROPERTY" shall have the meaning set forth in the applicable
Purchase Agreement.

      "TRENDWEST" shall mean Trendwest Resorts, Inc., a wholly-owned indirect
Subsidiary of Cendant.

      "TRUSTEE" shall have the meaning set forth in the recitals.

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

SECTION 2.   PURCHASE AND SALE.

      Provisions with respect to the Purchase and sale of the Pool Loans and the
related Pool Assets for each Series shall be set forth in the related PPA
Supplement.

SECTION 3.   POOL LOAN PURCHASE PRICE.

      The Pool Loan Purchase Price for the Pool Loans and the related Pool
Assets of each Series sold on each Closing Date shall be set forth in the
related PPA Supplement.

      The purchase price for any Additional Pool Loans and the related Pool
Assets (the "ADDITIONAL POOL LOAN PURCHASE PRICE") conveyed to the Issuer under
this Agreement and the related PPA Supplement on each Addition Date shall be a
dollar amount equal to the aggregate outstanding principal balance of such
Additional Pool Loans sold on such Addition Date, subject to adjustment to
reflect such factors as the Issuer and the Depositor mutually agree, and further
subject to any requirements of the related PPA Supplement.

                                        5


SECTION 4.   PAYMENT OF PURCHASE PRICE.

      (a)    CLOSING DATES. On the terms and subject to the conditions of this
Agreement and the related PPA Supplement, payment of the Pool Loan Purchase
Price for the Pool Loans and the related Pool Assets transferred on each Closing
Date shall be made by the Issuer on such Closing Date in immediately available
funds to the Depositor to such accounts at such banks as the Depositor shall
designate to the Issuer not less than one Business Day prior to such Closing
Date.

      (b)    MANNER OF PAYMENT OF ADDITIONAL POOL LOAN PURCHASE PRICE. On the
terms and subject to the conditions of this Agreement and the related PPA
Supplement, the Issuer shall pay to the Depositor, on each other Business Day on
which any Pool Assets are purchased from the Depositor by the Issuer pursuant to
the related PPA Supplement, the Additional Pool Loan Purchase Price for such
Pool Assets by paying such Additional Pool Loan Purchase Price to the Depositor
in cash.

      (c)    PAYMENT OF ADJUSTMENTS. The Depositor shall pay to the Issuer in
cash, on the date of receipt by the Depositor, any payment in respect of
Repurchase Prices or Substitution Adjustment Amounts relating to the Pool Assets
made by any Seller to the Depositor pursuant to any Purchase Agreement. The
Depositor shall instruct the Sellers to deposit all payments in respect of such
Repurchase Prices and Substitution Adjustment Amounts directly in the Collection
Account.

SECTION 5.   CONDITIONS PRECEDENT TO SALE OF POOL LOANS.

      The conditions precedent to a sale of Pool Assets shall be as specified in
the related PPA Supplement.

SECTION 6.   REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR.

      The Depositor represents and warrants as of each Closing Date and as of
each Addition Date, or as of such other date specified in such representation
and warranty, that:

             (a)    The Depositor is a limited liability company duly formed,
validly existing and in good standing under the laws of the State of Delaware
and has full limited liability company power, authority and legal right to own
its properties and conduct its business as such properties are presently owned
and as such business is presently conducted, and to execute, deliver and perform
its obligations under this Agreement and the related PPA Supplement. The
Depositor is duly qualified to do business and is in good standing as a foreign
entity, and has obtained all necessary licenses and approvals in each
jurisdiction necessary to carry on its business as presently conducted and to
perform its obligations under this Agreement and the related PPA Supplement.

             (b)    The execution, delivery and performance by the Depositor of
each of the Facility Documents to which it is a party and the consummation by
the Depositor of the transactions provided for in this Agreement, the related
PPA Supplement and each other Facility Document to which it is a party have been
duly authorized by the Depositor by all necessary limited liability company
action.

                                        6


             (c)    This Agreement, the related PPA Supplement and each other
Facility Document to which it is a party has been duly and validly executed and
delivered by the Depositor and constitutes the legal, valid and binding
obligation of the Depositor, enforceable against it in accordance with its
respective terms, except as such enforceability may be subject to or limited by
Debtor Relief Laws or by general principles of equity (whether considered in a
suit at law or in equity).

             (d)    The execution, delivery and performance by the Depositor of
this Agreement, the related PPA Supplement and each other Facility Document to
which it is a party and the consummation by the Depositor of the transactions
contemplated hereby and thereby do not contravene (i) the Depositor's limited
liability company agreement, (ii) any law, rule or regulation applicable to the
Depositor, (iii) any contractual restriction contained in any material
indenture, loan or credit agreement, lease, mortgage, deed of trust, security
agreement, bond, note, or other material agreement or instrument binding on the
Depositor or (iv) any order, writ, judgment, award, injunction or decree binding
on or affecting the Depositor or its properties (except where such contravention
would not have a Material Adverse Effect with respect to the Depositor or its
properties), and do not result in (except as provided in the Facility Documents)
or require the creation of any Lien upon or with respect to any of its
properties; and no transaction contemplated hereby requires compliance with any
bulk sales act or similar law. To the extent that this representation is being
made with respect to Title I of ERISA or Section 4975 of the Code, it is made
subject to the assumption that none of the assets being used to purchase the
Pool Loans and Pool Assets constitute assets of any Benefit Plan or Plan with
respect to which the Depositor is a party in interest or disqualified person.

             (e)    There are no proceedings or investigations pending, or to
the best knowledge of the Depositor threatened, against the Depositor before any
court, regulatory body, administrative agency or other tribunal or governmental
instrumentality (A) asserting the invalidity of this Agreement, the related PPA
Supplement or any other Facility Document to which it is a party, (B) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement, the related PPA Supplement or any other Facility Document to which it
is a party, (C) seeking any determination or ruling that would adversely affect
the validity or enforceability of this Agreement, the related PPA Supplement or
any other Facility Document to which it is a party or (D) seeking any
determination or ruling that would, if adversely determined, be reasonably
likely to have a Material Adverse Effect with respect to the Depositor.

             (f)    All approvals, authorizations, consents or orders of any
court or governmental agency or body required in connection with the execution
and delivery by the Depositor of this Agreement, the related PPA Supplement or
any other Facility Document to which it is a party, the consummation by it of
the transactions contemplated hereby or thereby and the performance by it of,
and the compliance by it with, the terms hereof or thereof, have been obtained,
except where the failure to do so would not have a Material Adverse Effect with
respect to the Depositor.

             (g)    The Depositor, both prior to and immediately after giving
effect to the sale of Pool Loans to the Issuer on such date, (A) is not
insolvent (as such term is defined in the Bankruptcy Code), (B) is able to pay
its debts as they become due and (C) does not have

                                        7


unreasonably small capital for the business in which it is engaged or for any
business or transaction in which it is about to engage.

             (h)    The Depositor has observed the applicable legal requirements
on its part for the recognition of the Depositor as a legal entity separate and
apart from each of the Seller, the Seller Subsidiaries and any of their
respective Affiliates.

             It is understood and agreed that the representations and warranties
contained in this Section 6 shall remain operative and in full force and effect,
shall survive the transfer and conveyance of the Pool Loans by the Depositor to
the Issuer and the grant of a security interest in the Pool Assets by the Issuer
to the Collateral Agent and shall inure to the benefit of the Issuer, the
Trustee, the Collateral Agent and the Noteholders and their respective
designees, successors and assigns.

SECTION 7.   AFFIRMATIVE COVENANTS OF THE DEPOSITOR.

      From and after the date hereof until the termination of this Agreement,
the Depositor shall:

             (a)    SEPARATE LEGAL ENTITY. Take such actions as shall be
required on its part in order that the identity of the Depositor as a legal
entity separate from each of the Sellers, the Seller Subsidiaries and any of
their respective Affiliates will be recognized, including:

                    (i)     The Depositor will conduct its business in office
             space allocated to it and for which it pays an appropriate rent and
             overhead allocation;

                    (ii)    The Depositor will maintain corporate records and
             books of account separate from those of the Sellers, the Seller
             Subsidiaries, their respective Affiliates and the Issuer and
             telephone numbers and stationery that are separate and distinct
             from those of the Seller, the Seller Subsidiaries, their respective
             Affiliates and the Issuer;

                    (iii)   The Depositor's assets will be maintained in a
             manner that facilitates their identification and segregation from
             those of any of the Sellers, the Seller Subsidiaries, their
             respective Affiliates and the Issuer;

                    (iv)    The Depositor will strictly observe corporate
             formalities in its dealings with the public and with the Sellers,
             the Seller Subsidiaries, their respective Affiliates and the Issuer
             and, except as contemplated by the Facility Documents, funds or
             other assets of the Depositor will not be commingled with those of
             any of the Sellers, the Seller Subsidiaries, their respective
             Affiliates and the Issuer. The Depositor will at all times, in its
             dealings with the public and with the Sellers, the Seller
             Subsidiaries, their respective Affiliates and the Issuer, hold
             itself out and conduct itself as a legal entity separate and
             distinct from the Sellers, the Seller Subsidiaries, their
             respective Affiliates and the Issuer. The Depositor will not
             maintain joint bank accounts or other depository accounts to which
             any of the Sellers, the Seller Subsidiaries or their respective
             Affiliates (other than the Master Servicer) has independent access;

                                        8


                    (v)     The duly elected board of directors of the Depositor
             and duly appointed officers of the Depositor will at all times have
             sole authority to control decisions and actions with respect to the
             daily business affairs of the Depositor;

                    (vi)    Not less than one member of the Depositor's board of
             directors will be an Independent Director. The Depositor will
             observe those provisions in its limited liability agreement that
             provide that the Depositor's board of directors will not approve,
             or take any other action to cause the filing of, a voluntary
             bankruptcy petition with respect to the Depositor unless the
             Independent Director and all other members of the Depositor's board
             of directors unanimously approve the taking of such action in
             writing prior to the taking of such action;

                    (vii)   The Depositor will compensate each of its employees,
             consultants and agents from the Depositor's own funds for services
             provided to the Depositor; and

                    (viii)  The Depositor will not hold itself out to be
             responsible for the debts of any of the Sellers, the Seller
             Subsidiaries or their respective Affiliates.

             (b)    COMPLIANCE WITH LAWS, ETC. Comply in all material respects
with all applicable laws, rules, regulations, judgments, decrees and orders
(including without limitation those relating to the Loans and related Timeshare
Properties), in each case to the extent that any such failure to comply,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect with respect to the Depositor.

             (c)    PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain
its limited liability company existence, rights, franchises and privileges in
the jurisdiction of its formation and qualify and remain qualified in good
standing as a foreign entity in each jurisdiction in which the failure to
preserve and maintain such qualification as a foreign corporation could
reasonably be expected to have a Material Adverse Effect with respect to the
Depositor.

             (d)    KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Mark its computer
files, books and records to indicate the sale of all Pool Assets to the Issuer
hereunder and under each PPA Supplement.

             (e)    PAYMENT OF TAXES. To the extent required by applicable law,
file (or cause to be filed on its behalf as a member of a consolidated group)
all tax returns and reports required by law to be filed by it and pay all taxes,
assessments and governmental charges thereby shown to be owing by it, except for
any such taxes, assessments or charges (i) that are being diligently contested
in good faith by appropriate proceedings, for which adequate reserves in
accordance with GAAP have been set aside on its books and that have not given
rise to any Liens (other than Permitted Encumbrances) or (ii) the amount of
which, either singly or in the aggregate, would not have a Material Adverse
Effect with respect to the Depositor.

             (f)    TURNOVER OF COLLECTIONS. If the Depositor or any of its
agents or representatives at any time receives any cash, checks or other
instruments constituting Pool Collections, segregate and hold such payments in
trust for, and in a manner acceptable to, the Master Servicer and promptly upon
receipt (and in any event within two Business Days

                                        9


following receipt) remit all such cash, checks and instruments, duly endorsed or
with duly executed instruments of transfer, to the applicable Collection
Account.

SECTION 8.   NEGATIVE COVENANTS OF THE DEPOSITOR.

      From and after the date hereof until the final Series Termination Date,
the Depositor agrees that it will not:

             (a)    SALES, LIENS, ETC. Sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any Lien (other
than Permitted Encumbrances) of anyone claiming by or through it on or with
respect to, any Pool Asset or any interest therein, other than sales of Pool
Assets pursuant to this Agreement.

             (b)    NO MERGERS, ETC. Consolidate with or merge with or into any
other Person or convey, transfer or sell (other than to the Issuer) all or
substantially all of its properties and assets to any Person.

             (c)    CHANGE IN NAME. Change its name or its type or jurisdiction
of organization unless the Depositor has given the Issuer and its assignees and
the rating agencies then rating any Series of Notes at least 30 days' prior
written notice thereof and taken all action necessary or reasonably requested by
the Trustee to amend its existing financing statements and file additional
financing statements in all applicable jurisdictions in order to perfect and
maintain the perfection of the ownership interest or security interest of the
Issuer in the Pool Loans and the related Pool Assets.

             (d)    INDEBTEDNESS. Create, incur or permit to exist, or give any
guarantee or indemnity in respect of, any indebtedness except for (A)
liabilities created or incurred by the Depositor pursuant to the Facility
Documents or contemplated by such Facility Documents and (B) other reasonable
and customary operating expenses; PROVIDED that the Depositor shall not incur
any indebtedness for borrowed money in excess of $9,500 unless the related
creditor shall agree in writing to a non-petition covenant substantially similar
to Section 15(h)(ii) hereof for the benefit of the Depositor.

             (e)    AMENDMENTS, ETC. Permit the validity or effectiveness of any
Facility Document to which it is a party or the rights and obligations created
thereby or pursuant thereto to be amended, terminated, postponed or discharged,
or permit any amendment to any Facility Document to which it is a party without
the consent of the Issuer and the Indenture Trustee, or permit any Person whose
obligations form part of the Pool Assets to be released from such obligations,
except in accordance with the terms of such Facility Document.

             (f)    CAPITAL EXPENDITURES. Incur or make any expenditure (by
long-term or operating lease or otherwise) for capital assets (either realty or
personalty).

             (g)    LIMITATION ON BUSINESS. Engage in any business other than
financing, purchasing, owning and selling and managing the Pool Assets in the
manner contemplated by the Facility Documents and all activities incidental
thereto, or enter into or be a party to any agreement or instrument other than
any Facility Document or documents and agreements incidental thereto.

                                       10


             (h)    CAPITAL CONTRIBUTIONS. Except as contemplated by the
Facility Documents, make any loan or advance or credit to, or guarantee
(directly or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.

SECTION 9.   REPURCHASES OR SUBSTITUTIONS OF POOL LOANS FOR BREACH OF
             REPRESENTATIONS AND WARRANTIES.

      Provisions with respect to repurchase and substitution of the Pool Loans
for each Series for breaches of representations and warranties shall be set
forth in the related PPA Supplement.

SECTION 10.  REPRESENTATIONS AND WARRANTIES OF THE ISSUER.

      The Issuer represents and warrants as of each Closing Date and as of each
Addition Date, or as of such other date specified in such representation and
warranty, that:

             (a)    The Issuer is a limited liability company duly formed,
validly existing and in good standing under the laws of the State of Delaware
and has full limited liability company power, authority, and legal right to own
its properties and conduct its business as such properties are presently owned
and as such business is presently conducted, and to execute, deliver and perform
its obligations under this Agreement and the related PPA Supplement. The Issuer
is duly qualified to do business and is in good standing as a foreign entity,
and has obtained all necessary licenses and approvals in each jurisdiction
necessary to carry on its business as presently conducted and to perform its
obligations under this Agreement.

             (b)    The execution, delivery and performance by the Issuer of
each of the Facility Documents to which it is a party and the consummation by
the Issuer of the transactions provided for in this Agreement, the related PPA
Supplement and each other Facility Document to which it is a party have been
duly authorized by the Issuer by all necessary limited liability company action.

             (c)    This Agreement, the related PPA Supplement and each other
Facility Document to which it is a party constitutes the legal, valid and
binding obligation of the Issuer, enforceable against it in accordance with its
respective terms, except as such enforceability may be subject to or limited by
Debtor Relief Laws or by general principles of equity (whether considered in a
suit at law or in equity).

             (d)    The execution, delivery and performance by the Issuer of
this Agreement, the related PPA Supplement and each other Facility Document to
which it is a party and the consummation by the Issuer of the transactions
contemplated hereby and thereby do not contravene (i) the Issuer's limited
liability company agreement, (ii) any law, rule or regulation applicable to the
Issuer, (iii) any contractual restriction contained in any material indenture,
loan or credit agreement, lease, mortgage, deed of trust, security agreement,
bond, note, or other material agreement or instrument binding on the Issuer or
(iv) any order, writ, judgment, award, injunction or decree binding on or
affecting the Issuer or its properties (except where such

                                       11


contravention would not have a Material Adverse Effect with respect to the
Issuer or its properties), and do not result in (except as provided in the
Facility Documents) or require the creation of any Lien upon or with respect to
any of its properties; and no transaction contemplated hereby requires
compliance with any bulk sales act or similar law. To the extent that this
representation is being made with respect to Title I of ERISA or Section 4975 of
the Code, it is made subject to the assumption that none of the assets being
used to purchase the Pool Loans and Pool Assets constitute assets of any Benefit
Plan or Plan with respect to which the Issuer is a party in interest or
disqualified person.

             (e)    There are no proceedings or investigations pending, or to
the best knowledge of the Issuer threatened, against the Issuer before any
court, regulatory body, administrative agency or other tribunal or governmental
instrumentality (A) asserting the invalidity of this Agreement, the related PPA
Supplement or any other Facility Document to which it is a party, (B) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement, the related PPA Supplement or any other Facility Document to which it
is a party, (C) seeking any determination or ruling that would adversely affect
the validity or enforceability of this Agreement, the related PPA Supplement or
any other Facility Document to which it is a party or (D) seeking any
determination or ruling that would, if adversely determined, be reasonably
likely to have a Material Adverse Effect with respect to the Issuer.

             (f)    All approvals, authorizations, consents or orders of any
court or governmental agency or body required in connection with the execution
and delivery by the Issuer of this Agreement, the related PPA Supplement or any
other Facility Document to which it is a party, the consummation by it of the
transactions contemplated hereby or thereby and the performance by it of, and
the compliance by it with, the terms hereof or thereof, have been obtained,
except where the failure to do so would not have a Material Adverse Effect with
respect to the Issuer.

             (g)    The Issuer (A) is not insolvent (as such term is defined in
the Bankruptcy Code), (B) is able to pay its debts as they become due and
(C) does not have unreasonably small capital for the business in which it is
engaged or for any business or transaction in which it is about to engage.

             (h)    The Issuer has observed the applicable legal requirements on
its part for the recognition of the Issuer as a legal entity separate and apart
from each of the Seller, the Seller Subsidiaries and any of their respective
Affiliates.

SECTION 11.  AFFIRMATIVE COVENANTS OF THE ISSUER.

      From and after the date hereof until the termination of this Agreement,
the Issuer shall take such actions as shall be required on its part in order
that the identity of the Issuer as a legal entity separate from the Depositor,
the Sellers, the Seller Subsidiaries and any of their respective Affiliates will
be recognized, including:

                    (i)     The Issuer will conduct its business in office space
             allocated to it and for which it pays an appropriate rent and
             overhead allocation;

                                       12


                    (ii)    The Issuer will maintain corporate records and books
             of account separate from those of the Depositor, the Sellers, the
             Seller Subsidiaries and their respective Affiliates and telephone
             numbers and stationery that are separate and distinct from those of
             the Sellers, the Seller Subsidiaries and their respective
             Affiliates;

                    (iii)   The Issuer's assets will be maintained in a manner
             that facilitates their identification and segregation from those of
             any of the Depositor, the Sellers, the Seller Subsidiaries and
             their respective Affiliates;

                    (iv)    The Issuer will strictly observe corporate
             formalities in its dealings with the public and with the Depositor,
             the Sellers, the Seller Subsidiaries and their respective
             Affiliates and, except as contemplated by the Facility Documents,
             funds or other assets of the Issuer will not be commingled with
             those of any the Depositor, the Sellers, the Seller Subsidiaries
             and their respective Affiliates. The Issuer will at all times, in
             its dealings with the public and with any of the Depositor, the
             Sellers, the Seller Subsidiaries and their respective Affiliates,
             hold itself out and conduct itself as a legal entity separate and
             distinct from the Depositor, the Sellers and their respective
             Affiliates. The Issuer will not maintain joint bank accounts or
             other depository accounts to which any of the Depositor, the
             Sellers, the Seller Subsidiaries and their respective Affiliates
             (other than the Master Servicer) has independent access;

                    (v)     The duly elected board of directors of the Issuer
             and duly appointed officers of the Issuer will at all times have
             sole authority to control decisions and actions with respect to the
             daily business affairs of the Issuer;

                    (vi)    Not less than one member of the Issuer's board of
             directors will be an Independent Director. The Issuer will observe
             those provisions in its limited liability company agreement that
             provide that the Issuer's board of directors will not approve, or
             take any other action to cause the filing of, a voluntary
             bankruptcy petition with respect to the Issuer unless the
             Independent Director and all other members of the Issuer's board of
             directors unanimously approve the taking of such action in writing
             prior to the taking of such action;

                    (vii)   The Issuer will compensate each of its employees,
             consultants and agents from the Issuer's own funds for services
             provided to the Issuer; and

                    (viii)  The Issuer will not hold itself out to be
             responsible for the debts of any of the Depositor, the Sellers, the
             Seller Subsidiaries and their respective Affiliates.

SECTION 12.  DEPOSITOR REPURCHASES.

             (a)    OPTIONAL SUBSTITUTION OF SCHEDULE 1-A POOL LOANS. On each
Closing Date and each Addition Date, the Depositor shall designate the Pool
Loans, if any, Purchased on such date that will be subject to optional
substitution in whole or in part by the Depositor (such Pool Loans, the
"SCHEDULE 1-A POOL LOANS"), and such Pool Loans shall be listed as Schedule 1-A

                                       13


Pool Loans in the Pool Loan Schedule for the applicable Series as set forth in
the related PPA Supplement. All other Pool Loans Purchased by the Issuer from
the Depositor on any Closing Date or Addition Cut-Off Date (the "SCHEDULE 1-B
POOL LOANS") shall be listed as Schedule 1-B Pool Loans in the Pool Loan
Schedule for the applicable Series and shall not be subject to optional
substitution pursuant to this Section 12. The Depositor may not change the
designation of any Pool Loan from a Schedule 1-B Pool Loan to a Schedule 1-A
Pool Loan.

             (b)    SUBSTITUTION OF OTHER POOL LOANS. The PPA Supplement for any
Series may designate additional categories of Pool Loans that will be subject to
substitution by the Depositor.

             (c)    SUBSTITUTIONS. Schedule 1-A Pool Loans and any other Pool
Loans subject to substitution pursuant to this Section 12 and any PPA Supplement
shall be removed from the Schedule 1-A Pool Loans and another Pool Loan
substituted therefore by the Depositor subject to the notice and re-conveyance
provisions applicable to Defective Loans substitution provisions of the related
PPA Supplement.

             (d)    CONDITION PRECEDENT TO SUBSTITUTION OF POOL LOANS. No
removal and substitution of any Pool Loans shall be made under Section 12 of
this Agreement or any PPA Supplement on any date unless the Depositor provides a
Pool Loan in substitution for the Pool Loan released in accordance with the
provisions applicable to substitution for Defective Loans under the related PPA
Supplement.

SECTION 13.  TERMINATION.

             (a)    PURCHASE TERMINATION EVENTS. "PURCHASE TERMINATION EVENTS"
for each Series, if any, shall be set forth in the related PPA supplement.

      If a Purchase Termination Event occurs, the Depositor shall promptly give
notice to the Issuer and its assignees of such Purchase Termination Event.

             (b)    PURCHASE TERMINATION. On the Purchase Termination Date, the
Depositor shall cease transferring Pool Assets to the Issuer. Notwithstanding
any cessation of the transfer to the Issuer of additional Pool Assets, Pool
Assets transferred to the Issuer prior to the Purchase Termination Date and Pool
Collections in respect of such Pool Assets, whenever accrued in respect of such
Pool Assets, shall continue to be property of the Issuer available for grant of
security interest pursuant to the Indenture and Servicing Agreement.

SECTION 14.  INDEMNITIES BY THE DEPOSITOR.

      Without limiting any other rights that any Depositor Indemnified Party may
have hereunder or under applicable law, the Depositor agrees to indemnify the
Issuer and each of its successors, permitted transferees and assigns (including
the Trustee for the benefit of Noteholders), and all officers, directors,
shareholders, controlling Persons, employees and agents of any of the foregoing
(each of the foregoing Persons, a "DEPOSITOR INDEMNIFIED PARTY"), from and
against any and all damages, losses, claims (whether on account of settlements
or otherwise), actions, suits, demands, judgments, liabilities (including
penalties), obligations or disbursements of any kind or nature and related costs
and expenses (including reasonable attorneys' fees and

                                       14


disbursements) awarded against or incurred by any of them, arising out of or as
a result of any of the following (all of the foregoing, collectively, "DEPOSITOR
INDEMNIFIED LOSSES"):

             (a)    any representation or warranty made by the Depositor under
any of the Facility Documents having been untrue or incorrect in any respect
when made or deemed to have been made; PROVIDED, HOWEVER, that the Depositor's
obligation to repurchase Defective Loans pursuant to Section 9 with respect to
any representation assigned to the Issuer pursuant to the related PPA Supplement
having been incorrect when made shall be the only remedy available to the Issuer
or its assignees relating to such incorrect representation;

             (b)    the failure to vest and maintain in the Issuer a first
priority perfected ownership or security interest in the Pool Assets, free and
clear of any Lien arising through the Depositor or anyone claiming through or
under the Depositor; or

             (c)    any failure of the Depositor to perform its duties or
obligations in accordance with the provisions of any Facility Documents to which
it is a party.

      Notwithstanding the foregoing, no indemnification payments shall be
payable by the Depositor pursuant to this Section 14 except to the extent of
funds available to the Depositor for such purpose.

      Notwithstanding the foregoing (and with respect to clause (ii) below,
without prejudice to the rights that the Issuer may have pursuant to the other
provisions of this Agreement or the provisions of any of the other Facility
Documents), in no event shall any Depositor Indemnified Party be indemnified for
any Depositor Indemnified Losses (i) resulting from negligence or willful
misconduct on the part of such Depositor Indemnified Party, (ii) to the extent
the same includes losses in respect of Pool Assets and reimbursement therefor
that would constitute credit recourse to the Depositor for the amount of any
Pool Asset not paid by the related Obligor or (iii) resulting from the action or
omission of the Master Servicer.

      If for any reason the indemnification provided in this Section 15 is
unavailable to a Depositor Indemnified Party or is insufficient to hold a
Depositor Indemnified Party harmless, then the Depositor shall contribute to the
maximum amount payable or paid to such Depositor Indemnified Party as a result
of such loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by such Depositor Indemnified
Party on the one hand and the Depositor on the other hand, but also the relative
fault of such Depositor Indemnified Party and the Depositor, and any other
relevant equitable considerations.

SECTION 15.  MISCELLANEOUS.

      (a)    AMENDMENT. This Agreement and any PPA Amendment may be amended from
time to time or the provisions hereof may be waived or otherwise modified by the
parties hereto or thereto by written agreement signed by the parties hereto or
thereto.

      (b)    ASSIGNMENT. The Issuer has the right to assign its interest under
this Agreement and any PPA Amendment as may be required to effect the
purposes of the Indenture and Servicing Agreement without the consent of the
Depositor, and the assignee shall succeed to the rights hereunder of the Issuer.
In addition, but only to the extent allowed by the Indenture and

                                       15


Servicing Agreement, each of the Collateral Agent and the Trustee has the right
to assign its interest hereunder and under any PPA Agreement without the written
consent of the Depositor and the assignee shall succeed to the rights hereunder
or thereunder of Collateral Agent or Trustee.

      (c)    COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.

      (d)    GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REGARD TO CONFLICT
OF LAWS PRINCIPLES.

      (e)    NOTICES. All demands and notices hereunder shall be in writing and
shall be deemed to have been duly given, if personally delivered at or mailed by
registered mail, postage prepaid, or by express delivery service, to (i) in the
case of Depositor, Sierra Deposit Company, LLC, 10750 West Charleston Blvd.,
Suite 130, Mailstop 2067, Las Vegas, Nevada 89135, Attention: President, or such
other address as may hereafter be furnished to the Issuer and (ii) in the case
of the Issuer, Sierra Receivables Funding Company, LLC, 10750 West Charleston
Blvd., Suite 130, Mailstop 2046, Las Vegas, Nevada 89135, Attention: President,
or such other address an may be furnished to the Depositor.

      (f)    SEVERABILITY OF PROVISIONS. If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.

      (g)    SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Depositor and the Issuer and their respective successors and assigns, as may be
permitted hereunder, and shall inure to the benefit of, and be enforceable by,
the Depositor and the Issuer and each of the Collateral Agent, the Trustee and
the Noteholders.

      (h)    NO PROCEEDINGS.

             (i)    The Depositor hereby agrees that it will not institute
      against the Issuer or join any other Person in instituting against the
      Issuer any proceeding under any Debtor Relief Law so long as the
      Termination Date shall not have occurred or there shall not have elapsed
      one year plus one day since the Termination Date. The foregoing shall not
      limit the right of the Depositor to file any claim in or otherwise take
      any action with respect to any proceeding under any Debtor Relief Law that
      was instituted against the Issuer by any Person other than the Depositor.

             (ii)   The Issuer hereby agrees that it will not institute against
      the Depositor or WorldMark or join any other Person in instituting against
      the Depositor or WorldMark any proceeding under any Debtor Relief Law so
      long as the Termination Date shall not have occurred or there shall not
      have elapsed one year plus one day since the Termination

                                       16


      Date. The foregoing shall not limit the right of the Issuer to file any
      claim in or otherwise take any action with respect to any proceeding under
      any Debtor Relief Law that was instituted against the Depositor or
      WorldMark by any Person other than the Issuer.

      (i)    RECOURSE TO THE DEPOSITOR. Except to the extent expressly provided
otherwise in the Facility Documents, the obligations of the Depositor under the
Facility Documents to which it is a party are solely the obligations of the
Depositor, and no recourse shall be had for payment of any fee payable by or
other obligation of or claim against the Depositor that arises out of any
Facility Document to which the Depositor is a party against any director,
officer or employee of the Depositor. The provisions of this Section 15(i) shall
survive the termination of this Agreement.

      (j)    RECOURSE TO THE ISSUER. Except to the extent expressly provided
otherwise in the Facility Documents, the obligations of the Issuer under the
Facility Documents to which it is a party (i) are solely the obligations of the
Issuer, and no recourse shall be had for payment of any fee payable by or other
obligation of or claim against the Issuer that arises out of any Facility
Document to which the Issuer is a party against any director, officer or
employee of the Issuer and (ii) are payable solely from funds available to the
Issuer under the Indenture and Servicing Agreement for such purpose. The
provisions of this Section 15(j) shall survive the termination of this
Agreement.

      (k)    CONFIDENTIALITY. The Issuer agrees to maintain the confidentiality
of any information regarding the Sellers, the Seller Subsidiaries, the Depositor
and Cendant obtained in accordance with the terms of this Agreement that is not
publicly available; PROVIDED, HOWEVER, that the Issuer may reveal such
information (i) as necessary or appropriate in connection with the
administration or enforcement of this Agreement or its funding of Purchases
under this Agreement, (ii) as required by law, government regulation, court
proceeding or subpoena and (iii) as necessary or appropriate in connection with
the financing statements filed pursuant to this Agreement or any PPA Supplement.

                                       17


      IN WITNESS WHEREOF, the parties have caused their names to be signed
hereto by their respective officers thereunto duly authorized, all as of the day
and year first above written.


                                        SIERRA DEPOSIT COMPANY, LLC
                                         as Depositor


                                        By:   /s/ Ralph E. Turner
                                           -------------------------------------
                                           Name: Ralph E. Turner
                                           Title: President and Treasurer

                                        SIERRA RECEIVABLES FUNDING COMPANY, LLC
                                         as Issuer


                                        By:   /s/ Ralph E. Turner
                                           -------------------------------------
                                           Name: Ralph E. Turner
                                           Title: President and Treasurer


                  [Signature page for Pool Purchase Agreement]




                                                                  EXHIBIT 10.70

                                                                  EXECUTION COPY


                            SERIES 2002-1 SUPPLEMENT
                           Dated as of August 29, 2002

                                       to

                         MASTER POOL PURCHASE AGREEMENT
                           Dated as of August 29, 2002

- --------------------------------------------------------------------------------

                     SIERRA RECEIVABLES FUNDING COMPANY, LLC
                                   LOAN-BACKED
                             VARIABLE FUNDING NOTES,
                                  SERIES 2002-1

- --------------------------------------------------------------------------------

                                 by and between

                           SIERRA DEPOSIT COMPANY, LLC
                                  as Depositor

                                       and

                     SIERRA RECEIVABLES FUNDING COMPANY, LLC
                                    as Issuer



                                               TABLE OF CONTENTS




                                                                                                         PAGE
                                                                                                         
Section 1.   Definitions....................................................................................1

Section 2.   Purchase and Sale..............................................................................2

       (a)   Agreement......................................................................................2

       (b)   Purchase of Series 2002-1 Additional Pool Loans................................................3

       (c)   [Reserved].....................................................................................3

       (d)   No Assumption..................................................................................4

       (e)   No Recourse....................................................................................4

       (f)   True Sales.....................................................................................4

       (g)   Servicing of Pool Assets.......................................................................4

       (h)   Financing Statements...........................................................................4

       (i)   Recharacterization.............................................................................4

       (j)   Transfer of Pool Loans.........................................................................5

Section 3.   Pool Loan Purchase Price.......................................................................5

Section 4.   Payment of Purchase Price......................................................................5

       (d)   Payment........................................................................................5

Section 5.   Conditions Precedent to Sale of Series 2002-1 Pool Loans.......................................5

Section 6.   Representations and Warranties of the Depositor................................................6

Section 7.   Affirmative Covenants of the Depositor.........................................................6

Section 8.   Negative Covenants of the Depositor............................................................6

Section 9.   Repurchases or Substitutions of Pool Loans for Breaches of Representations and Warranties......6

       (a)   Repurchase or Substitution Obligation..........................................................6

       (b)   Repurchases and Substitutions..................................................................7

       (c)   Delivery Requirements..........................................................................7

Section 10.  Representations and Warranties of the Issuer...................................................8

Section 11.  Affirmative Covenants of the Issuer............................................................8

Section 12.  Depositor Repurchases..........................................................................8

       (e)   Repurchases of Series 2002-1 Pool Loans that Become Defaulted Loans............................8

Section 13.  Termination....................................................................................8

Section 14.  Indemnities by the Depositor...................................................................8



                                       -i-


                                               TABLE OF CONTENTS
                                                  (continued)



                                                                                                         PAGE
                                                                                                         
Section 15.  Miscellaneous..................................................................................8

       (l)   Ratification of Agreement......................................................................8

       (m)   Amendment......................................................................................9

       (n)   Counterparts...................................................................................9

       (o)   Governing Law..................................................................................9

       (p)   Successors and Assigns.........................................................................9

Schedule 1 Pool Loan Schedule...............................................................................i



                                      -ii-


     THIS POOL PURCHASE AGREEMENT SUPPLEMENT (this "PPA SUPPLEMENT"), dated as
of August 29, 2002, is by and between SIERRA DEPOSIT COMPANY, LLC, a Delaware
limited liability company, as depositor (the "DEPOSITOR") and SIERRA RECEIVABLES
FUNDING COMPANY, LLC, a Delaware limited liability company, as Issuer (the
"ISSUER").

     Section 2 of the Agreement provides that the Depositor may from time to
time sell and assign to the Issuer, and the Issuer may from time to time
Purchase from the Depositor, all the Depositor's right, title and interest in,
to and under the Pool Loans listed on the Pool Loan Schedule to the related PPA
Supplement on the Closing Date for the related Series. The principal terms of
the Purchase and sale of the Pool Loans for each Series shall be set forth in
such PPA Supplement.

     Pursuant to this PPA Supplement, the Depositor sells to the Issuer, and the
Issuer Purchases from the Depositor, the Series 2002-1 Pool Loans relating to
the Series 2002-1 Notes, and the Depositor and the Issuer hereby specify the
principal terms of such sale and Purchase.

SECTION 1.  DEFINITIONS.

     All capitalized terms used herein and not otherwise defined herein have the
meanings ascribed to them in the Agreement and in the Series 2002-1 Purchase
Agreement, as applicable. Each capitalized term defined herein shall relate only
to the Series 2002-1 Pool Loans and to no other Loans Purchased by the Issuer
from the Depositor.

     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 PPA Supplement shall be controlling.

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

     "AGREEMENT" shall mean the Master Pool Purchase Agreement dated as of
August 29, 2002 by and between the Depositor and the Issuer, as the same may be
amended, supplemented or otherwise modified from time to time.

     "CUT-OFF DATE" shall mean August 27, 2002.

     "CUT-OFF DATE POOL PRINCIPAL BALANCE" shall have the meaning set forth in
Section 3.

     "DEAL AGENT" shall mean Fleet Securities Inc., as Deal Agent under the note
purchase agreement, dated as of August 29, 2002, among the Issuer, FAC, the
Purchaser, Fleet Securities Inc., the Conduits and Alternate Investors named
therein and the Class Agents named therein.

     "FACILITY DOCUMENTS," with respect to the Series 2002-1 Pool Loans, shall
mean Facility Documents as defined in the Agreement, and each Subordinated Note.



     "POOL LOAN PURCHASE PRICE" shall have the meaning set forth in Section 3.

     "REPURCHASE DATE" shall have the meaning set forth in Section 7.

     "REPURCHASE PRICE" shall have the meaning set forth in Section 7.

     "SERIES 2002-1 ADDITIONAL POOL LOAN" shall mean each Loan constituting one
of the Series 2002-1 Pool Loans Purchased from the Depositor on an Addition Date
and listed on Schedule 1 to the related Assignment.

     "SERIES 2002-1 INDENTURE SUPPLEMENT" shall mean the supplement to the
Master Indenture and Servicing Agreement executed and delivered in connection
with the original issuance of the Series 2002-1 Notes and all amendments thereof
and supplements thereto.

     "SERIES 2002-1 POOL LOAN" means each Loan listed from time to time on the
Series 2002-1 Pool Loan Schedule.

     "SERIES 2002-1 POOL LOAN SCHEDULE" shall mean the Pool Loan Schedule for
the Series 2002-1 Pool Loans.

     "SERIES 2002-1 PA SUPPLEMENT" shall mean each PA Supplement relating to the
Series 2002-1 Loans.

     "SERIES 2002-1 PURCHASE AGREEMENT" shall mean each Purchase Agreement
relating to the Series 2002-1 Loans, in each case as amended by the Series
2002-1 PA Supplement thereto.

     "SUBORDINATED NOTE" shall mean the FAC Subordinated Note, the Trendwest
Subordinated Note, the EFI Subordinated Note and any other subordinated note
delivered by a Seller to the Issuer pursuant to a Series 2002-1 PA Supplement.

     "SUBSTITUTION ADJUSTMENT AMOUNT" shall have the meaning set forth in
Section 9.

SECTION 2.  PURCHASE AND SALE.

     (a)    AGREEMENT. Upon the terms and subject to the conditions hereof, the
Issuer hereby Purchases from the Depositor, and the Depositor hereby sells and
assigns to the Issuer without recourse except as specifically set forth herein,
all of the Depositor's right, title and interest in, to and under the Initial
Pool Loans listed on the Series 2002-1 Pool Loan Schedule delivered on the
Closing Date, together with all other Pool Assets relating thereto.

     The Series 2002-1 Pool Loan Schedule sets forth a list of all Series 2002-1
Pool Loans as of the Closing Date and indicates whether each such Loan shall be
designated a Schedule 1-A Pool Loan or a Schedule 1-B Pool Loan. The Series
2002-1 Additional Pool Loans existing at the close of business on each Addition
Cut-Off Date and all other Pool Assets relating thereto shall be sold by the
Depositor and purchased by the Issuer on the related Addition Date. In
connection with the sale and conveyance hereunder, the Depositor agrees on or
prior to the Closing Date and on or prior to each Addition Date (in the case of
Series 2002-1 Additional Pool Loans) to indicate or cause to be indicated
clearly and unambiguously in its accounting,

                                        2


computer and other records that the Series 2002-1 Pool Loans and the related
Pool Assets have been sold to the Issuer pursuant to this PPA Supplement. In
addition, in connection with the sale and conveyance hereunder, the Depositor
agrees on or prior to the Closing Date and on or prior to each Addition Date (in
the case of Series 2002-1 Additional Pool Loans) to deliver to the Issuer a
Series 2002-1 Pool Loan Schedule for such Series 2002-1 Pool Loans and Series
2002-1 Additional Pool Loans.

       (b)  PURCHASE OF SERIES 2002-1 ADDITIONAL POOL LOANS.

                 (i)    [Reserved].

                 (ii)   The Depositor may agree with the Issuer that Eligible
     Loans will be sold by the Depositor to the Issuer as Series 2002-1
     Additional Pool Loans.

                 (iii)  On the Addition Date with respect to any Series 2002-1
     Additional Pool Loans, such Series 2002-1 Additional Pool Loans shall
     become Series 2002-1 Loans, and the Issuer shall Purchase the Series 2002-1
     Additional Pool Loans and the related Pool Assets as provided in the
     Assignment, subject to the satisfaction of the following conditions on such
     Addition Date:

                 (A)    The Depositor shall have delivered to the Issuer copies
          of UCC financing statements covering such Series 2002-1 Additional
          Pool Loans, if necessary to perfect the Issuer's first priority
          interest in such Series 2002-1 Additional Pool Loans and the related
          Pool Assets;

                 (B)    On each of the Addition Cut-Off Date and the Addition
          Date, the sale of such Series 2002-1 Additional Pool Loans and the
          related Pool Assets to the Issuer shall not have caused the
          Depositor's insolvency or have been made in contemplation of the
          Depositor's insolvency;

                 (C)    No selection procedure shall have been utilized by the
          Depositor that would result in a selection of such Series 2002-1
          Additional Pool Loans (from the Eligible Loans available to the
          Depositor) that would be materially adverse to the interests of the
          Issuer as of the Addition Date;

                 (D)    The Depositor shall have indicated in its accounting,
          computer and other records that the Series 2002-1 Additional Pool
          Loans and the related Pool Assets have been sold to the Issuer and
          shall have delivered to the Issuer the required Series 2002-1 Pool
          Loan Schedule;

                 (E)    The Depositor and the Issuer shall have entered into a
          duly executed, written assignment substantially in the form of Exhibit
          A to the Agreement (an "ASSIGNMENT");

                 (F)    The Depositor shall have delivered to the Issuer an
          Officer's Certificate of the Depositor dated the Addition Date,
          confirming, to the extent applicable, the items set forth in Section
          2(b)(iii) (A) through (E); and

                                        3


                 (G)    The Issuer shall have paid the Additional Pool Loan
          Purchase Price as provided in Section 3 of the Agreement and in
          Section 3 hereof.

          (iv)   On the initial Addition Date with respect to any Series 2002-1
Additional Pool Loans acquired by the Depositor from EFI or Trendwest, as a
Seller under a Purchase Agreement, the Issuer shall Purchase the Series 2002-1
Additional Pool Loans and the related Pool Assets as provided in the Agreement
only upon receipt by the Issuer of each of the following on such Addition Date
in form and substance acceptable to the Issuer and counsel to the Deal Agent:

          (A)    Copies of search reports certified by parties acceptable to the
     Issuer dated a date reasonably prior to such Addition Date (x) listing all
     effective financing statements which name the applicable Seller and the
     Depositor (under their present name and any previous names) as debtor or
     seller and which are filed with respect to the applicable Seller and the
     Depositor in each relevant jurisdiction, together with copies of such
     financing statements (none of which shall cover any portion of the Series
     2002-1 Additional Pool Loans that are being purchased from EFI or Trendwest
     and related Pool Assets except as contemplated by the Facility Documents)
     and (y) listing all effective financing statements which name the Issuer
     (under its present name and any previous names) as debtor or seller and
     which are filed with respect to the Issuer in each relevant jurisdiction,
     together with copies of such financing statements (none of which shall
     cover any portion of Series 2002-1 Additional Pool Loans that are being
     purchased from EFI or Trendwest and related Pool Assets except as
     contemplated by the Facility Documents);

          (B)    Copies of proper UCC Financing Statement Amendments
     (Form UCC3), if any, necessary to terminate all security interests and
     other rights of any Person in the Series 2002-1 Additional Pool Loans that
     are being purchased from EFI or Trendwest and related Pool Assets
     previously granted by the applicable Seller, the Depositor or the Issuer
     (except as contemplated by the Facility Documents);

          (C)    Copies of (x) proper UCC Financing Statements (Form UCC1)
     naming the Depositor as debtor or seller of the Series 2002-1 Additional
     Pool Loans that are being purchased from EFI or Trendwest and related Pool
     Assets, the Trustee as total assignee and the Issuer as assignor secured
     party, (y) proper UCC Financing Statements (Form UCC1) naming the Issuer as
     debtor or seller of the Series 2002-1 Additional Pool Loans that are being
     purchased from EFI or Trendwest and related Pool Assets and the Trustee as
     secured party or purchaser and (z) such other similar instruments or
     documents with respect to the applicable Seller as may be necessary or in
     the opinion of the Purchaser desirable under the UCC of all appropriate
     jurisdictions or any comparable law to evidence the perfection of the
     Trustee's interest in the Series 2002-1 Additional Pool Loans that are
     being purchased from EFI or Trendwest and related Pool Assets; and

          (D)    An opinion or opinions of counsel to the Depositor, in the form
     required by the Issuer, with respect to the following: (x) certain security
     interest matters, and (y) "true sale" and substantive consolidation
     matters.

     (c)  [Reserved].

                                       4


     (d)  NO ASSUMPTION. The sales and purchases of Pool Assets do not
constitute and are not intended to result in a creation or an assumption by the
Issuer or its successors and assigns of any obligation of any Seller, the
Depositor or any other Person in connection with the Pool Assets (other than
such obligations as may arise from the ownership of the Pool Assets) or under
the related Series 2002-1 Pool Loans or any other agreement or instrument
relating thereto, including without limitation any obligation to any Obligors.
None of the Issuer or the Issuer's assignees shall have any obligation or
liability to any Obligor or other customer or client of any Seller (including
without limitation any obligation to perform any of the obligations of any
Seller under any Loan or related Timeshare Property or any other agreement or
any obligation of any Seller), except such obligations as may arise from the
ownership of the Pool Assets.

     (e)  NO RECOURSE. Except as specifically provided in this Agreement, the
sale and Purchase of the Pool Assets under this Agreement shall be without
recourse to the Depositor; PROVIDED, HOWEVER, that the Depositor shall be liable
to the Issuer and its successors and assigns for all representations,
warranties, covenants and indemnities made by it pursuant to the terms of this
Agreement (IT BEING UNDERSTOOD that such obligations of the Depositor will not
arise solely on account of the credit-related inability of an Obligor to make a
required Scheduled Payment).

     (f)  TRUE SALES. The Depositor and the Issuer intend the transfers of Pool
Assets hereunder to be true sales by the Depositor to the Issuer that are
absolute and irrevocable and to provide the Issuer with the full benefits of
ownership of the Pool Assets, and neither the Depositor nor the Issuer intends
the transactions contemplated hereunder to be, or for any purpose to be
characterized as, loans from the Issuer to the Depositor secured by the Pool
Assets.

     (g)  SERVICING OF POOL ASSETS. Consistent with the Issuer's ownership of
all Pool Assets and subject to the terms of the Series 2002-1 Pool Loans, as
between the parties to this Agreement, the Issuer shall have the sole right to
service, administer and collect all Pool Assets, to assign such right and to
delegate such right to others. In consideration of the Issuer's Purchase of the
Pool Assets, the Depositor hereby acknowledges and agrees that the Issuer
intends to assign to the Collateral Agent for the benefit of the Trustee for the
benefit of the Noteholders the rights and interests conveyed by the Depositor to
the Issuer hereunder, and agrees to cooperate fully with the Issuer and its
successors and assigns in the exercise of such rights.

     (h)  FINANCING STATEMENTS. In connection with the foregoing sale, the
Depositor agrees to record and file a financing statement or statements (and
continuation statements or other amendments with respect to such financing
statements) with respect to the Pool Assets sold by the Depositor hereunder
meeting the requirements of applicable state law in such manner and in such
jurisdictions as are necessary to perfect the interests of the Issuer created
hereby under the applicable UCC and to deliver a file-stamped copy of each such
financing statement and continuation statement (or other amendment) or other
evidence of such filings to the Issuer.

     (i)  RECHARACTERIZATION. Without prejudice to the provisions of Section
2(f) providing for the absolute transfer of the Depositor's interest in the Pool
Assets and the proceeds thereof to the Issuer, in order to secure the prompt
payment and performance of all obligations of the Depositor to the Issuer and
the Issuer's assignees arising in connection with this Agreement, whether now or
hereafter existing, due or to become due, direct or indirect, or absolute or
contingent, the Depositor hereby assigns and grants to the Issuer a first
priority perfected security

                                       5


interest in all of the Depositor's right, title and interest, whether now owned
or hereafter acquired, if any, in, to and under all of the Series 2002-1 Pool
Loans and the other related Pool Assets and the proceeds thereof.

     (j)  TRANSFER OF POOL LOANS. All Series 2002-1 Pool Loans conveyed to the
Issuer hereunder shall be held by the Custodians pursuant to the terms of the
applicable Custodial Agreements.

     The Depositor acknowledges that the Issuer will grant a security interest
in the Series 2002-1 Pool Loans and other related Pool Assets to the Collateral
Agent pursuant to the Indenture and Servicing Agreement. The Depositor agrees
that, upon such grant, the Collateral Agent or the Trustee may enforce all of
Depositor's obligations hereunder and under the Pool Purchase Agreement
directly, including without limitation the repurchase obligations of the
Depositor set forth in Section 7.

SECTION 3.  POOL LOAN PURCHASE PRICE.

     The Series 2002-1 Pool Loans had an aggregate unpaid principal balance of
$280,127,904.13 at the Cut-Off Date (such aggregate unpaid principal balance at
the Cut-Off Date being referred to herein as the "CUT-OFF DATE POOL PRINCIPAL
BALANCE"). The purchase price (the "POOL LOAN PURCHASE PRICE") for the Series
2002-1 Pool Loans sold on the Closing Date shall be $280,127,904.13.

     The Depositor shall have no obligation to sell any Series 2002-1 Additional
Pool Loan to the Issuer if it has not been paid the Additional Pool Loan
Purchase Price therefor.

     The Additional Pool Loan Purchase Price for any Series 2002-1 Additional
Pool Loans and the related Pool Assets conveyed to the Issuer under this PPA
Supplement on each Addition Date shall be a dollar amount equal to the aggregate
outstanding principal balance of such Additional Pool Loans sold on such
Addition Date, adjusted to reflect the fair market value thereof.

SECTION 4.  PAYMENT OF PURCHASE PRICE.

     Sections 4(a) through (c) are set forth in the Agreement.

     (d)    PAYMENT. Payment for and delivery of the Series 2002-1 Pool Loans
being purchased by the Issuer on the Closing Date shall take place at a closing
at the offices of Orrick, Herrington & Sutcliffe LLP, Washington Harbour, 3050 K
Street, NW, Washington, D.C. 20007, at 10:00 A.M. local time on the Closing
Date, or such other time and place as shall be mutually agreed upon among the
parties hereto.

SECTION 5.  CONDITIONS PRECEDENT TO SALE OF SERIES 2002-1 POOL LOANS.

     The Issuer's obligations hereunder to purchase and pay for the Pool Assets
on the Closing Date are subject to the fulfillment of the following conditions
on or before the Closing Date:

     (a)    (i) The Issuer shall have received the Series 2002-1 Purchase
Agreement relating

                                       6


to each Series 2002-1 Pool Loan and the Indenture and Servicing Agreement
executed by all parties thereto and (ii) all conditions precedent to the sale of
the Series 2002-1 Loans under each Series 2002-1 Purchase Agreement shall have
been fulfilled to the extent they are capable of being fulfilled prior to the
performance by the Issuer of its obligations under this PPA Supplement.

     (b)    The representations and warranties of each Seller, each Seller
Subsidiary and the Depositor made in the Series 2002-1 Purchase Agreements and
the representations and warranties of the Depositor in the Agreement and herein
shall be true and correct in all material respects on the Closing Date.

SECTION 6.  REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR.

     The Depositor hereby assigns to the Issuer its rights relating to the
Series 2002-1 Pool Loans under the related Purchase Agreements, including
without limitation any rights the Depositor may have to payments 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 made under such Purchase Agreement.

SECTION 7.  AFFIRMATIVE COVENANTS OF THE DEPOSITOR.

     Section 7 is set forth in the Agreement.

SECTION 8.  NEGATIVE COVENANTS OF THE DEPOSITOR.

     Section 8 is set forth in the Agreement.

SECTION 9.  REPURCHASES  OR   SUBSTITUTIONS   OF  POOL  LOANS  FOR  BREACHES  OF
            REPRESENTATIONS AND WARRANTIES.

     (a)    REPURCHASE OR SUBSTITUTION OBLIGATION. Subject to Section 9(b), upon
discovery by the Depositor or the related Seller or upon written notice from the
Issuer or the Trustee that any Series 2002-1 Pool Loan is a Defective Loan, the
Depositor shall, or shall cause the applicable Seller to, within 90 days after
the earlier of the discovery or receipt of notice thereof, cure such Defective
Loan in all material respects or either (i) repurchase such Defective Loan from
the Issuer or its assignee at the Repurchase Price or (ii) substitute one or
more Qualified Substitute Loans for such Defective Loan. For purposes of this
Agreement, the term "REPURCHASE PRICE" shall mean an amount equal to the
outstanding Principal Balance of such Defective Loan as of the close of business
on the Due Date immediately preceding the Payment Date on which the repurchase
is to be made, plus accrued but unpaid interest thereon to the date of such
repurchase. The Issuer hereby directs the Depositor, for so long as the
Indenture and Servicing Agreement is in effect, to make such payment on its
behalf to the Collection Account pursuant to Section 9(b). The following defects
with respect to documents in any Loan File, solely to the extent they do not
impair the validity or enforceability of the subject document under applicable
law, shall not be deemed to constitute a breach of the representations and
warranties contained in Section 6(b) of the related Purchase Agreement:
misspellings of or omissions of initials in names; name changes from divorce or
marriage; discrepancies as to payment dates in a Series 2002-1 Pool Loan of no
more than 30 days; discrepancies as to

                                       7


Scheduled Payments of no more than $5.00; discrepancies as to origination dates
of not more than 30 days; inclusion of additional parties other than the primary
Obligor not listed in the Master Servicer's records or in the Series 2002-1 Pool
Loan Schedule and non-substantive typographical errors and other non-substantive
minor errors of a clerical or administrative nature.

     (b)    REPURCHASES AND SUBSTITUTIONS. The Depositor shall provide written
notice to the Issuer of any repurchase pursuant to Section 9(a) not less than
two Business Days prior to the date on which such repurchase is to be effected,
specifying the Defective Loan and the Repurchase Price therefor. Upon the
repurchase of a Defective Loan pursuant to Section 9(a), the Depositor shall
deposit, or shall cause the applicable Seller to deposit, the Repurchase Price
in the applicable Collection Account on behalf of the Issuer no later than 12:00
noon, New York time, on the Payment Date on which such repurchase is made (the
"REPURCHASE DATE").

     (c)    DELIVERY REQUIREMENTS. If the applicable Seller elects to substitute
a Qualified Substitute Loan or Loans for a Defective Loan pursuant to the
applicable PA Supplement, the Depositor shall deliver, or shall cause the
applicable Seller to deliver, such Qualified Substitute Loan in the same manner
as the other Series 2002-1 Pool Loans sold hereunder, including delivery of the
applicable Loan Documents as required pursuant to the applicable Custodial
Agreement and satisfaction of the same conditions with respect to such Qualified
Substitute Loan as to the Purchase of Additional Pool Loans set forth in Section
2(b)(iii). No Qualified Substitute Loan shall be selected in a manner adverse to
the Issuer or its assignees. Payments due with respect to Qualified Substitute
Loans prior to the last day of the Due Period next preceding the date of
substitution shall not be property of the Issuer, but will be retained by the
Master Servicer and remitted by the Master Servicer to the Depositor for payment
to the applicable Seller on the next succeeding Payment Date. Scheduled Payments
due on a Defective Loan prior to the last day of the Due Period next preceding
the date of substitution shall be property of the Issuer, and from and after
such last day of the Due Period next preceding the date of substitution all
Scheduled Payments due and other amounts received in respect of such Defective
Loan shall be the property of the Depositor or the applicable Seller. The
Depositor shall cause the Master Servicer to deliver a schedule of any Defective
Loans so removed and Qualified Substitute Loans so substituted to the Issuer.
Upon each such substitution, the Qualified Substitute Loan or Loans shall be
subject to the terms of this PPA Supplement in all respects, and the
representations and warranties of the applicable Seller under the related
Purchase Agreement and PA Supplement with respect to each Qualified Substitute
Loan shall be assigned to the Issuer hereunder. The Depositor shall be obligated
to repurchase or substitute, or to cause the applicable Seller to repurchase or
substitute, for any Qualified Substitute Loan as to which such Seller has
breached such Seller's representations and warranties in Section 6(b) of the
related Purchase Agreement or applicable PA Supplement to the same extent as for
any other Series 2002-1 Pool Loan, as provided herein or therein. In connection
with the substitution of one or more Qualified Substitute Loans for one or more
Defective Loans, the Depositor shall deposit, or shall cause the applicable
Seller to deposit, an amount equal to the related Substitution Adjustment Amount
(as defined in the related Purchase Agreement), if any (the "SUBSTITUTION
ADJUSTMENT AMOUNT"), into the applicable Collection Account on the date of
substitution, without any reimbursement therefor.

     Upon each repurchase or substitution, the Issuer shall automatically and
without further action sell, transfer, assign, set over and otherwise convey to
the Depositor or to the related

                                       8


Seller, if applicable, without recourse, representation or warranty, all of the
Issuer's right, title and interest in and to such Defective Loan, the related
Timeshare Property, the Loan File relating thereto and any other related Pool
Assets, all monies due or to become due with respect thereto and all Pool
Collections with respect thereto (including payments received from Obligors from
and including the last day of the Due Period next preceding the date of
transfer, subject to the payment of any Substitution Adjustment Amount). The
Issuer shall execute such documents, releases and instruments of transfer or
assignment and take such other actions as shall reasonably be requested by the
Depositor or the Seller to effect the conveyance of such Defective Loan, the
related Timeshare Property and related Loan File pursuant to this Section 9(c).

     Promptly after the occurrence of a Repurchase Date and after the repurchase
of or substitution for Defective Loans in respect of which the Repurchase Price
has been paid or one or more Qualified Substitute Loans has been substituted
therefor on such date, the Depositor shall direct the Master Servicer to delete
such Defective Loans from the Series 2002-1 Pool Loan Schedule.

     The obligation of the Depositor to repurchase or substitute for any
Defective Loan shall constitute the sole remedy against the Depositor, the
Sellers or their Affiliates with respect to any breach of the representations
and warranties set forth in Section 6(b) of the applicable Purchase Agreement
available hereunder to the Issuer or its successors or assigns.

SECTION 10. REPRESENTATIONS AND WARRANTIES OF THE ISSUER.

     Section 10 is set forth in the Agreement.

SECTION 11. AFFIRMATIVE COVENANTS OF THE ISSUER.

     Section 11 is set forth in the Agreement.

SECTION 12. SELLER REPURCHASES.

     Sections 12(a) through (d) are set forth in the Agreement.

     (e)  REPURCHASES OF SERIES 2002-1 POOL LOANS THAT BECOME DEFAULTED LOANS.
The Depositor hereby acknowledges the Sellers' option to repurchase certain
Defaulted Loans directly from the Issuer on the terms and subject to the terms
and conditions set forth in the applicable Series 2002-1 PA Supplements.

SECTION 13. TERMINATION.

     Section 13 is set forth in the Agreement.

SECTION 14. INDEMNITIES BY THE DEPOSITOR.

     Section 14 is set forth in the Agreement.

SECTION 15. MISCELLANEOUS.

                                       9


     Sections 15(a) through (k) are set forth in the Agreement.

     (l)  RATIFICATION OF AGREEMENT. As supplemented by this PPA Supplement, the
Agreement is in all respects ratified and confirmed and the Agreement as so
supplemented by this PPA Supplement shall be read, taken and construed as one
and the same instrument.

     (m)  AMENDMENT. This PPA Supplement may be amended from time to time or the
provisions hereof may be waived or otherwise modified by the parties hereto by
written agreement signed by the parties hereto.

     (n)  COUNTERPARTS. This PPA 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.

     (o)  GOVERNING LAW. THIS PPA SUPPLEMENT IS GOVERNED BY AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES.

     (p)  SUCCESSORS AND ASSIGNS. This PPA Supplement shall be binding upon
each of the Depositor and the Issuer and their respective permitted successors
and assigns, and shall inure to the benefit of, and be enforceable by, each of
the Depositor and the Issuer and each of the Trustee, the Collateral Agent and
the Noteholders.

                                       10


            IN WITNESS WHEREOF, the parties have caused their names to be signed
hereto by their respective officers thereunto duly authorized, all as of the day
and year first above written.

                                           SIERRA DEPOSIT COMPANY, LLC
                                             AS DEPOSITOR


                                           By:    /s/ Ralph E. Turner
                                               ---------------------------------
                                               Name: Ralph E. Turner
                                               Title: President and Treasurer

                                           SIERRA RECEIVABLES FUNDING
                                           COMPANY, LLC
                                             AS ISSUER


                                           By:    /s/ Ralph E. Turner
                                               ---------------------------------
                                               Name: Ralph E. Turner
                                               Title: President and Treasurer


                       [Signature page for PPA Supplement]




                                                                   EXHIBIT 10.71

================================================================================
                                                                  EXECUTION COPY


                       ASSET AND STOCK PURCHASE AGREEMENT

                                  BY AND AMONG

                               BUDGET GROUP, INC.

                                       AND

                          CERTAIN OF ITS SUBSIDIARIES,

                               CENDANT CORPORATION


                                       AND


                        CHEROKEE ACQUISITION CORPORATION

                           DATED AS OF AUGUST 22, 2002

================================================================================



                                TABLE OF CONTENTS




                                                                                                         Page
                                                                                                         ----
                                                                                                        
                                                   ARTICLE 1
                                                  DEFINITIONS

Section 1.1    Defined Terms................................................................................1
Section 1.2    Other Definitional and Interpretive Matters.................................................19

                                                   ARTICLE 2
                                   PURCHASE AND SALE OF THE ACQUIRED ASSETS

Section 2.1    Purchase and Sale of Acquired Assets........................................................20
Section 2.2    Consideration...............................................................................20
Section 2.3    Acquired Assets.............................................................................20
Section 2.4    Excluded Assets.............................................................................25
Section 2.5    Assumed Liabilities.........................................................................26
Section 2.6    Excluded Liabilities........................................................................27
Section 2.7    Closing.....................................................................................29
Section 2.8    Deliveries by Seller Parties................................................................29
Section 2.9    Deliveries by Buyer.........................................................................30
Section 2.10   Cure Costs..................................................................................31
Section 2.11   Transition and Support Arrangements for Retained Business...................................31

                                                   ARTICLE 3
                               REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES

Section 3.1    Organization and Qualification..............................................................32
Section 3.2    Capitalization of the Acquired Companies....................................................32
Section 3.3    Corporate Power and Authority...............................................................33
Section 3.4    Conflicts; Consents and Approvals...........................................................33
Section 3.5    Title to Property; Adequacy of Assets.......................................................34
Section 3.6    SEC Filings; Seller Financial Statements....................................................35
Section 3.7    Vehicles, Etc...............................................................................37
Section 3.8    Absence of Changes..........................................................................38
Section 3.9    No Undisclosed Liabilities..................................................................38
Section 3.10   Accounts Receivable; Accounts Payable.......................................................39
Section 3.11   Affiliate Transactions......................................................................40
Section 3.12   Compliance with Laws........................................................................40
Section 3.13   Litigation..................................................................................40
Section 3.14   Corporate Locations; Permits; Etc...........................................................41
Section 3.15   Contracts...................................................................................41
Section 3.16   Real Estate.................................................................................46
Section 3.17   Airport Concessions.........................................................................47
Section 3.18   Employee; Employee Benefit Matters..........................................................48
Section 3.19   Labor Relations and Employment..............................................................51






                                                                                                        
Section 3.20   Customers...................................................................................52
Section 3.21   Environmental Matters.......................................................................52
Section 3.22   Intellectual Property.......................................................................53
Section 3.23   Taxes.......................................................................................55
Section 3.24   Compliance with Insurance Laws..............................................................57
Section 3.25   Insurance...................................................................................58
Section 3.26   Books and Records...........................................................................59
Section 3.27   Franchisee Matters..........................................................................59
Section 3.28   Vehicle Return Pursuant to Repurchase Programs; Vehicle Orders..............................60
Section 3.29   Disclosure..................................................................................60
Section 3.30   Brokers.....................................................................................61
Section 3.31   Use of Certain Funds........................................................................61

                                                   ARTICLE 4
                              REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER

Section 4.1    Organization and Qualification..............................................................61
Section 4.2    Corporate Power and Authority; Authorization................................................61
Section 4.3    Conflicts; Consents and Approvals...........................................................62
Section 4.4    Brokers.....................................................................................62
Section 4.5    Sufficiency of Funds........................................................................63

                                                   ARTICLE 5
                                               CERTAIN COVENANTS

Section 5.1    Conduct of Business.........................................................................63
Section 5.2    Access and Information......................................................................71
Section 5.3    Efforts to Effect Transaction; Certain Filings..............................................73
Section 5.4    Bankruptcy Filings..........................................................................74
Section 5.5    Bidding Procedures..........................................................................75
Section 5.6    Intercompany Amounts; Other Agreements......................................................76
Section 5.7    Updates of Schedules........................................................................76
Section 5.8    Tax Returns; Tax Sharing Agreements.........................................................77
Section 5.9    Purchase Price Allocation...................................................................77
Section 5.10   Transfer Taxes..............................................................................78
Section 5.11   Vehicle Return Pursuant to Repurchase Programs; Disposition of Vehicles.....................79
Section 5.12   Cooperation in Connection with Refinancing..................................................79
Section 5.13   Confidentiality.............................................................................79
Section 5.14   No Solicitation of Employees................................................................80
Section 5.15   Certain Tax Reporting.......................................................................81
Section 5.16   SEC Reports.................................................................................81

                                                   ARTICLE 6
                                       ADDITIONAL POST-CLOSING COVENANTS

Section 6.1    Benefit and Employment Matters..............................................................81






                                                                                                        
Section 6.2    Books and Records; Personnel................................................................84
Section 6.3    Section 338(h)(10) Elections................................................................85
Section 6.4    Tax Cooperation.............................................................................86
Section 6.5    Use of Name.................................................................................86
Section 6.6    Remittance of Funds.........................................................................87
Section 6.7    Mail Received After the Closing.............................................................87
Section 6.8    Further Assurances..........................................................................87

                                                   ARTICLE 7
                                        CONDITIONS PRECEDENT TO CLOSING

Section 7.1    General Conditions..........................................................................88
Section 7.2    Conditions Precedent to Buyer's Obligations.................................................88
Section 7.3    Conditions Precedent to Seller Parties' Obligations.........................................90

                                                   ARTICLE 8
                                        TERMINATION; TERMINATION AMOUNT

Section 8.1    Termination by Mutual Consent...............................................................90
Section 8.2    Termination by Either Buyer or Seller Parties...............................................90
Section 8.3    Termination by Buyer........................................................................91
Section 8.4    Termination by Seller Parties...............................................................93
Section 8.5    Effect of Termination.......................................................................93
Section 8.6    Expenses; Termination Amount................................................................94

                                                   ARTICLE 9
                                           MISCELLANEOUS PROVISIONS

Section 9.1    Non-Survival of Representations, Warranties and Certain Covenants...........................96
Section 9.2    Guarantee by Parent.........................................................................96
Section 9.3    Notices.....................................................................................96
Section 9.4    Bulk Sales Laws.............................................................................97
Section 9.5    Amendment of Agreement......................................................................97
Section 9.6    Entire Agreement............................................................................97
Section 9.7    Assignment..................................................................................97
Section 9.8    Parties in Interest; No Third Party Beneficiaries...........................................98
Section 9.9    Severability................................................................................98
Section 9.10   Governing Law; Consent to Jurisdiction......................................................98
Section 9.11   Waiver of Jury Trial........................................................................98
Section 9.12   Execution in Counterparts...................................................................98
Section 9.13   Public Announcement.........................................................................98
Section 9.14   No Strict Construction......................................................................99
Section 9.15   Disclaimer of Warranties....................................................................99
Section 9.16   Effect of Investigation.....................................................................99





                                    SCHEDULES

Schedule 1.1(a)         Seller Parties
Schedule 1.1(b)         Acquired Companies
Schedule 1.1(c)         Five Months Forecast
Schedule 1.1(d)         Assumed Benefit Plans
Schedule 1.1(e)         Initial 13-Week Cash Flow Projections
Schedule 1.1(f)         Minority Investees
Schedule 1.1(g)         Operating Metric Forecast
Schedule 1.2(e)         Officers of Seller Parties for Determination of
                        Knowledge of Seller Parties
Schedule 2.4(a)         Excluded Contracts
Schedule 2.4(j)         Retained Insurance and Reinsurance Contracts
Schedule 2.5(a)(iii)    Assumed Benefit Plans Contracts
Schedule 2.11(i)        Support Services to be made Available to Retained
                        Business
Schedule 2.11(ii)       Retained Business Franchise Term Sheet
Schedule 6.1(f)         Post-Closing Benefits Matters
Schedule 8.2(j)         Form of Ford MV Lease



                                    EXHIBITS

Exhibit A      Form of Assignment and Bill of Sale
Exhibit B      Form of Assignment and Assumption Agreement
Exhibit C      Form of Lease Assignment
Exhibit D      Form of Trademark Assignment
Exhibit E      Overbid Procedures Order
Exhibit F      Bidding Procedures



                             INDEX OF DEFINED TERMS




Term                                                                      Section
- ----                                                                      -------
                                                                   
13-Week Cash Flow Projections.................................................1.1
96-60 Election............................................................5.15(a)
363 Order.....................................................................1.1
365 Order.....................................................................1.1
A.I. Credit Corporation Premium Finance Arrangement...........................1.1
Accounting Firm...............................................................1.1
Acquired Assets...............................................................2.3
Acquired Business........................................................Preamble
Acquired Companies............................................................1.1
Acquired Company Employees................................................3.18(a)
Acquired Insurance Contracts...............................................2.3(n)
Action....................................................................3.13(a)
Actuarial Valuation Report................................................3.18(d)
Additional DIP Asset-Backed Fleet Financing...................................1.1
Adjusted EBITDAR..............................................................1.1
Affected Employees.........................................................6.1(a)
Affiliate.....................................................................1.1
Agreement................................................................Preamble
Airport Concessions.......................................................3.17(a)
Alternative Procedure.....................................................5.15(a)
Alternative Transaction.......................................................1.1
Amended and Restated Credit Facility..........................................1.1
Ancillary Agreements..........................................................1.1
Applicable Waiting Period..................................................8.2(a)
Assignment and Bill of Sale...................................................1.1
Assumed Amended Benefit Plans..............................................7.2(g)
Assumed Benefit Plans Contracts.......................................2.5(a)(iii)
Assumed Contracts.............................................................1.1
Assumed Indebtedness..........................................................1.1
Assumed Leases................................................................1.1
Assumed Liabilities........................................................2.5(a)
Assumption Agreement..........................................................1.1
Australian Financial Statements............................................3.6(c)
Australian Seller Entities.................................................3.6(c)
Automotive Fleet Utilization Ratio............................................1.1
Automotive Rental Days........................................................1.1
Automotive Rental Fleet.......................................................1.1
Automotive Rental Revenue.....................................................1.1
Automotive Rental Revenue to Automotive Rental Days Ratio.....................1.1
Bankruptcy Code..........................................................Preamble
Bankruptcy Court.........................................................Preamble






                                                                  
Benefit Plan..................................................................1.1
Bidding Procedures.........................................................5.5(a)
BRACI Administrative Services Agreement.......................................1.1
BRACI License Agreement.......................................................1.1
Budget Australia...........................................................3.6(c)
Budget Pension Plan.......................................................3.18(d)
Bulk Sales Laws...............................................................1.1
Business Acquisition Agreements...............................................1.1
Business Contract.........................................................3.15(o)
Business Day..................................................................1.1
Business Records..............................................................1.1
Buyer....................................................................Preamble
Buyer Closing Deadline.....................................................8.2(a)
Buyer Plans................................................................6.1(b)
Camfox.....................................................................3.6(c)
Canadian Seller Entities...................................................3.6(d)
Cash Purchase Price...........................................................1.1
Chapter 11 Cases.........................................................Preamble
Closing.......................................................................2.7
Closing Date..................................................................2.7
Closing Deadlines..........................................................8.2(a)
Code..........................................................................1.1
Commercial Umbrella Premium Finance Arrangement...............................1.1
Competition Laws..............................................................1.1
Concessionaire............................................................3.17(a)
Confidentiality Agreement.....................................................1.1
Contract......................................................................1.1
control.......................................................................1.1
Cure Costs...................................................................2.10
Dealer........................................................................1.1
Demand Notes..................................................................1.1
Derivative Agreement..........................................................1.1
DIP Asset-Backed Fleet Financing..............................................1.1
DIP Financing.................................................................1.1
DIP L/C Rollover..............................................................1.1
Documents.....................................................................1.1
Domestic Seller Entity...............................................5.1(aa)(iii)
Election...................................................................6.3(a)
Elections..................................................................6.3(a)
Encumbrance...................................................................1.1
Environmental Claim...........................................................1.1
Environmental Law.............................................................1.1
Equity Security...............................................................1.1
ERISA.........................................................................1.1
ERISA Affiliate...............................................................1.1
Exchange Act..................................................................1.1






                                                                   
Excluded Assets...............................................................2.4
Excluded Companies............................................................1.1
Excluded Liabilities..........................................................2.6
Existing Trucks............................................................3.7(a)
Fair Market Value.............................................................1.1
Final Order...................................................................1.1
Final Order Deadline.......................................................8.3(f)
FIRPTA Certificate.........................................................2.8(e)
Five Months Forecast .........................................................1.1
Fixtures......................................................................1.1
Ford Agreements...............................................................1.1
Ford Line of Credit...........................................................1.1
Ford MV Lease.................................................................1.1
Foreign Benefit Plan..........................................................1.1
Franchisee....................................................................1.1
Full-Time Equivalents.........................................................1.1
GAAP..........................................................................1.1
Governmental Body.............................................................1.1
Governmental Consents......................................................3.4(e)
Hyperion...................................................................5.2(c)
Initial 13-Week Cash Flow Projections.........................................1.1
Insurance Laws............................................................3.24(a)
Insurance Permit..........................................................3.24(b)
Intellectual Property.....................................................3.22(a)
International Seller Entity...........................................5.1(aa)(iv)
Investment....................................................................1.1
IRS...........................................................................1.1
June 30 Balance Sheet......................................................3.6(b)
June 30 Financial Statements...............................................3.6(b)
June 30 Income Statement...................................................3.6(b)
knowledge of Seller Parties................................................1.2(e)
Law...........................................................................1.1
Lease.........................................................................1.1
Lease Assignment..............................................................1.1
Leased Premises...............................................................1.1
Liabilities...................................................................1.1
License Agreements........................................................3.22(c)
March 31 Financial Statements..............................................3.6(b)
Marks and Logos...............................................................6.5
Material Adverse Effect.......................................................1.1
Materials of Environmental Concern............................................1.1
Minority Investees............................................................1.1
Multiemployer Plans........................................................6.1(g)
New Zealand Financial Statements...........................................3.6(e)
New Zealand Seller Entities................................................3.6(e)
Nissan Facility...............................................................1.1






                                                                    
Offering Circulars........................................................3.27(a)
Operating Metric Forecast.....................................................1.1
Operations Pty. ...........................................................3.6(c)
Overbid Procedures Order...................................................5.5(a)
Owned Real Property...........................................................1.1
Owned Vehicles................................................................1.1
Parent...................................................................Preamble
Pension Plan..................................................................1.1
Permits.......................................................................1.1
Permitted Encumbrances........................................................1.1
Permitted Property Encumbrances...............................................1.1
Person........................................................................1.1
Personal Information......................................................3.22(e)
Petitions................................................................Preamble
Premises......................................................................1.1
Proprietary Software......................................................3.22(b)
Prudent Industry Practices....................................................1.1
Qualified Fees.........................................................2.5(a)(vi)
Qualified Retention Plan...................................................5.1(k)
Real Estate Deed..............................................................1.1
Regulatory Challenge.......................................................5.3(c)
Reimbursement Agreements......................................................1.1
Related Party Agreement.......................................................1.1
Rental Transaction............................................................1.1
Rental Transactions to Full-Time Equivalents Ratio............................1.1
Rental Vehicle................................................................1.1
Representation Failure.....................................................7.2(a)
Representatives............................................................5.2(a)
Repurchase Program............................................................1.1
Retained Business.............................................................1.1
Rev Proc 96-60............................................................5.15(a)
RSI........................................................................2.3(q)
Ryder License Agreement....................................................2.3(q)
SEC...........................................................................1.1
Section 338(h)(10) Allocation Statement....................................6.3(b)
Seller...................................................................Preamble
Seller Closing Deadline....................................................8.2(a)
Seller Entities...............................................................1.1
Seller Entities Employees.................................................3.18(a)
Seller Evaluation Material....................................................1.1
Seller Financial Statements................................................3.6(a)
Seller Parties...........................................................Preamble
Seller Parties Disclosure Schedule......................................Article 3
Seller Parties Employees..................................................3.18(a)
Seller SEC Documents.......................................................3.6(a)
Sixt.......................................................................2.4(f)






                                                                       
Software..................................................................3.22(a)
Subsidiaries..................................................................1.1
Support Vehicles..............................................................1.1
Tax...........................................................................1.1
Tax Package...................................................................6.4
Tax Return....................................................................1.1
Telephone Numbers.............................................................1.1
Termination Amount.........................................................8.6(b)
Testing Period.............................................................8.3(i)
TFFC..........................................................................1.1
TFFC MV Leases................................................................1.1
Third Party...................................................................1.1
Third Party Consents.......................................................3.4(d)
Title IV Plan.............................................................3.18(e)
Trade Secrets.............................................................3.22(a)
Trademark Assignments.........................................................1.1
Trademarks................................................................3.22(a)
Transfer Taxes............................................................5.10(b)
Transfer Tax Returns......................................................5.10(b)
Treasury Regulations..........................................................1.1
Truck Rental Fleet............................................................1.1
Undisclosed Joint Liability...................................................1.1
UPAC Premium Finance Arrangement..............................................1.1
U.S. Benefit Plan.............................................................1.1
Vehicle Manufactuer...........................................................1.1
WARN Act......................................................................1.1
Welfare Plan..................................................................1.1





          ASSET AND STOCK PURCHASE AGREEMENT (the "AGREEMENT"), dated as of
August 22, 2002, by and among Budget Group, Inc., a Delaware corporation
("SELLER"), the Subsidiaries of Seller listed on SCHEDULE 1.1(a) (collectively
with Seller, the "SELLER PARTIES"), Cendant Corporation, a Delaware corporation
("PARENT") and Cherokee Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Parent ("BUYER").

                              W I T N E S S E T H:

          WHEREAS, Seller and its Subsidiaries conduct automotive rental
businesses and operations throughout the United States, Canada, the Caribbean
region, Latin America and the Asia-Pacific region, directly or through various
Franchisees, Dealers, licensees and sub-licensees under the brand names Budget
and Ryder, including the rental of automobiles, trucks and other vehicles in the
daily rental market (excluding any business conducted in Europe, the Middle East
and Africa, collectively, the "ACQUIRED BUSINESS");

          WHEREAS, on July 29, 2002, all of Seller Parties filed voluntary
petitions (the "PETITIONS") for relief commencing cases (the "CHAPTER 11 CASES")
under Chapter 11 of Title 11 of the United States Code, 11 U.S.C. sections 101
ET SEQ. (as amended, the "BANKRUPTCY CODE"), in the United States Bankruptcy
Court for the District of Delaware (the "BANKRUPTCY COURT"); and

          WHEREAS, Buyer desires to purchase and assume from Seller Parties, and
Seller Parties desire to sell, convey, assign and transfer to Buyer, the assets
and properties of Seller Parties relating to the Acquired Business specified
herein, together with certain specified obligations and liabilities relating
thereto, all in the manner and subject to the terms and conditions set forth
herein and in the Ancillary Agreements and in accordance with sections 105, 363
and 365 of the Bankruptcy Code.

          NOW, THEREFORE, in consideration of the mutual agreements and
covenants herein contained and intending to be legally bound hereby, the parties
hereto hereby agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

     Section 1.1  DEFINED TERMS. For the purposes of this Agreement, the
following terms shall have the following meanings:

          "13-WEEK CASH FLOW PROJECTIONS" means, with respect to the relevant
13-week period, a projected statement of cash flow for the operations of Seller
Entities for such period in respect of the Acquired Business, detailing the
sources and uses of such cash flow, in form and scope consistent with the
Initial 13-Week Cash Flow Projections.

          "363 ORDER" means an order of the Bankruptcy Court, in substance and
form satisfactory to Buyer under this Agreement pursuant to sections 105 and 363
of the Bankruptcy Code and not inconsistent with the terms of this Agreement,
unless otherwise agreed among Buyer and Seller Parties. Subject, in the case of
clauses (a)(ii)(A) and (b) below to changes that are reasonably acceptable to
Buyer, the 363 Order shall provide, among other things: (a) that the transfer of
the Acquired Assets by Seller Parties to Buyer and the assumption of the Assumed



Liabilities by Buyer from Seller Parties: (i) is or will be a legal, valid and
effective transfer of the Acquired Assets; (ii) vests or will vest Buyer with
good title to the Acquired Assets free and clear of all Liabilities and
Encumbrances (including Liabilities and Encumbrances (A) that purport to give to
any Person a right or option to retain any rights in or to Seller Parties'
Trademarks or Marks and Logos or other Intellectual Property, (B) that purport
to give to any Person a right or option to effect any forfeiture, modification,
right of first refusal, repurchase or termination of Seller Parties' or Buyer's
interest in the Acquired Assets or any similar rights or (C) in respect of
Taxes), except those expressly assumed or permitted by Buyer hereunder; and
(iii) constitutes reasonably equivalent value and fair consideration under the
Bankruptcy Code and under the laws of the United States, any state, territory,
possession, or the District of Columbia; (b) that all Persons, including, but
not limited to, all debt security holders, equity security holders,
governmental, tax and regulatory authorities, lenders, parties to or
beneficiaries under any Benefit Plan, trade and other creditors, asserting or
having Liabilities or Encumbrances of any kind or nature whatsoever against any
of Seller Parties or the Acquired Assets (whether legal or equitable, secured or
unsecured, matured or unmatured, contingent or non-contingent, senior or
subordinated), arising under or out of, in connection with, or in any way
relating to, Seller Parties, the Acquired Assets, the operation of Seller
Parties' businesses prior to the Closing Date, or the transfer of the Acquired
Assets to Buyer, other than the Assumed Liabilities and Permitted Encumbrances,
shall be forever barred, estopped and permanently enjoined from asserting,
prosecuting or otherwise pursuing against Buyer, Parent, their Affiliates, any
of the Acquired Companies or their Subsidiaries, or any of their respective
assets, property, successors or assigns, or the Acquired Assets, Seller Parties'
Liabilities (other than Assumed Liabilities) to such Persons or such Person's
Encumbrances (other than Permitted Encumbrances) against Seller Parties or their
respective property; (c) that the Bankruptcy Court retains jurisdiction to
enforce the provisions of this Agreement in all respects, including retaining
jurisdiction to protect Buyer and its Affiliates against any of the Excluded
Liabilities; (d) that the provisions of the 363 Order are nonseverable and
mutually dependent; (e) that the transactions contemplated by this Agreement are
undertaken by Buyer in good faith, as that term is used in section 363(m) of the
Bankruptcy Code; and (f)(i) a declaration that no Acquired Company nor any of
their respective assets or properties are directly or indirectly liable for or
subject to any Undisclosed Joint Liability or Liability relating to Taxes that
has been or may be asserted against any Seller Party, their estates, or any
Affiliate of Seller Parties (other than the Acquired Companies) or of the
Acquired Companies to the extent that any such Liability is based in whole or in
part upon the fact that any such Acquired Company was at any time an Affiliate
of Seller Parties or a member of the same affiliated group (within the meaning
of section 1504 of the Code) or state combined, unitary or similar group of
Seller Parties or any of their Affiliates (other than the Acquired Companies),
and enjoin any and all holders of any such Liability from asserting, prosecuting
or otherwise pursuing any such Liability against any Acquired Company or any of
their respective assets or properties; and (ii) PROVIDED, HOWEVER, that if the
Bankruptcy Court will refuse to approve a 363 Order containing the declaration
specified above in clause (f)(i) above the 363 Order shall provide that Seller
Parties shall jointly and severally indemnify Buyer, Parent and their successors
and assigns, affiliates, employees, directors, agents and representatives from
and against and shall reimburse the same for and in respect of any and all
Liability relating to Taxes referred to in clause (f)(i) above, including,
without limitation, all penalties, interest, costs and expenses (including
attorney fees) incurred for, in connection with

                                        2


or in respect of such Taxes. The 363 Order and the 365 Order may be consolidated
in a single order of the Bankruptcy Court.

          "365 ORDER" means an order or orders of the Bankruptcy Court in
substance and form satisfactory to Buyer, approving the assumption by Seller
Parties, and assignment by Seller Parties to Buyer, of all Assumed Contracts and
Assumed Leases pursuant to sections 105 and 365 of the Bankruptcy Code and not
inconsistent with the terms of this Agreement, unless otherwise agreed among
Buyer and Seller Parties. The 365 Order shall provide: (a) that all defaults of
Seller Parties under the Assumed Contracts and Assumed Leases arising or
accruing prior to the date of the 365 Order (without giving effect to any
acceleration clauses or any default provisions in such contracts of a kind
specified in section 365(b)(2) of the Bankruptcy Code) have been cured or will
be promptly cured by Seller Parties and that Buyer shall have no liability or
obligation with respect to any default or obligation arising or accruing prior
to Closing; PROVIDED, HOWEVER, that to the extent such Assumed Contracts or
Assumed Leases are in default as a result of any failure to post, procure, or
maintain in an adequate amount performance or surety bonds or any other form of
financial assurance, including letters of credit and cash deposits, Buyer shall
post, procure, and maintain such performance or surety bonds and (b) that the
Assumed Contracts and Assumed Leases will be assumed and assigned to, and remain
in full force and effect for the benefit of, Buyer, notwithstanding any
provision in such Assumed Contracts or Assumed Leases or in applicable Law
(including those of a type described in sections 365(b)(2) and (f) of the
Bankruptcy Code) that prohibits, restricts, or conditions in any way such
assignment or transfer including, change of control, payment or Liabilities
triggered by the sale of the Acquired Assets or any portion thereof, use and
going dark restrictions. The 365 Order and the 363 Order may be consolidated in
a single order of the Bankruptcy Court.

          "A.I. CREDIT CORPORATION PREMIUM FINANCE ARRANGEMENT" means the
Premium Finance Agreement, dated June 20, 2002, between Seller Parties and A.I.
Credit Corporation.

          "ACCOUNTING FIRM" means an independent accounting firm reasonably
acceptable to Buyer and Seller Parties. If Buyer and Seller Parties cannot
mutually agree on the identity of the Accounting Firm, the Accounting Firm shall
be selected by lot from accounting firms of recognized national and
international standing, other than Ernst & Young LLP or any Affiliate thereof or
the auditor of Parent, Buyer, Seller Parties or any of their Affiliates (it
being understood that if there are no accounting firms among the New York
offices of one of the "Big Four" accounting firms that are so eligible, the
accounting firms of BDO Seidman, LLP and Grant Thornton, if not auditors of
Parent, Buyer, Seller or any of their Affiliates, shall be included among the
firms to be selected by lot). Any expenses relating to the engagement of the
Accounting Firm shall be shared equally by Buyer, on the one hand, and Seller
Parties, on the other. The Accounting Firm shall be instructed to use every
reasonable effort to perform its services as promptly as practicable after such
submission.

          "ACQUIRED COMPANIES" means each of the Persons specified on
SCHEDULE 1.1(b).

          "ADDITIONAL DIP ASSET-BACKED FLEET FINANCING" means asset-backed fleet
financing in an aggregate principal amount not exceeding $750,000,000, made
available to TFFC by one or more financial institutions or other entities on
similar terms and conditions as those contained in the DIP Asset-Backed Fleet
Financing, other than (i) the rate of interest payable

                                        3


thereon and the amount of monthly rent payments required to be made in
connection therewith and (ii) the credit enhancement required thereunder, which
shall be in the form of overcollateralization, cash or stand-by letters of
credit advanced or issued under the DIP Financing or the DIP L/C Rollover.

          "ADJUSTED EBITDAR" means the consolidated net income of the Seller and
its Subsidiaries (excluding any Subsidiaries or earnings from operations outside
the United States (including Puerto Rico) and Canada) before (i) interest
expense (other than interest expense under vehicle fleet financing programs),
(ii) interest income (other than interest income on restricted cash),
(iii) taxes, (iv) depreciation (other than depreciation of vehicles),
amortization, non recurring items and other non-cash items (including any
writedowns in the value of assets under Statement of Financial Accounting
Standards 142), (v) any reversal of reserves to income (except to the extent any
such reserve was established and reversed during the same period) in excess of
$250,000 individually or $500,000 in the aggregate in any calendar month, other
than (A) any reversal of self insurance reserves for public liability, public
damage, workers compensation and medical insurance arising from actuarial
reviews, (B) any reversal of (i) the reserve for uncollectible subrogation
receivables not exceeding $2.0 million in each of September 2002 and December
2002 and (ii) a reserve for general and administrative expenses in an amount not
exceeding $1.5 million in December 2002 (the items referred to in clauses
(i) and (ii) above are reflected in the Five Months Forecast) and (C) reversal
of vehicle reserves, (vi) all extraordinary gains or losses, (vii) any gain or
loss in respect of any sale of assets (other than sales of vehicles) or
(viii) restructuring expenses (including any legal, accounting, investment
banking, advisory, brokerage, administrative, issuance, up-front, placement,
structuring, commitment, underwriting, financing, "due diligence", rating
agencies or similar fees, commissions, disbursements and expenses (whether or
not referred to as fees, commissions, disbursements or expenses), breakage cost,
increased interest rate, prepayment penalties or fees or similar costs incurred
or agreed to be paid or reimbursed in connection with the transactions
contemplated by this Agreement or the Chapter 11 Cases or any financings or
relating to any severance, retention or other compensation expenses relating to
the transactions contemplated by this Agreement or the Chapter 11 Cases),
determined in accordance with GAAP.

          "AFFILIATE" of any Person means any Person that controls, is
controlled by, or is under common control with such Person. As used herein, the
term "CONTROL" (including the terms "CONTROLLING," "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH") means the possession, directly or indirectly, and
individually or together with any other Person, of the power to direct or to
cause the direction of the management and policies of a Person, whether through
ownership of voting securities or other interests, by contract or otherwise.

          "ALTERNATIVE TRANSACTION" means (i) the sale, lease or other
disposition (other than in connection with a liquidation of any of Seller
Parties pursuant to Chapter 7 of the Bankruptcy Code or pursuant to Chapter 11
of the Bankruptcy Code, provided that none of the assets or properties of any of
Seller Parties sold or disposed of in such liquidation is acquired to be used as
a going concern or as part of a going concern) of (x) all or substantially all
of the Acquired Business or (y) all or substantially all of the assets or
properties of the Acquired Business, (ii) the sale of an equity interest in any
of Seller Parties, (iii) any business combination of any of Seller Parties
(including, without limitation, a merger or consolidation and/or sale, lease or
other disposition of all or substantially all of its assets and properties
and/or Subsidiaries thereof) with

                                        4


one or more Persons other than Buyer or one or more of its Affiliates or
(iv) the restructuring, recapitalization, reorganization (whether on a
stand-alone basis, or otherwise) or liquidation (other than pursuant to Chapter
7 of the Bankruptcy Code or pursuant to Chapter 11 of the Bankruptcy Code,
provided that none of the assets or properties of any of Seller Parties sold or
disposed of in such liquidation is acquired to be used as a going concern or as
part of a going concern) of any of Seller Parties involving any of the Acquired
Assets or any of them; PROVIDED, HOWEVER, that any transaction contemplated by
clauses (ii) or (iii) shall not constitute an Alternative Transaction for
purposes of this Agreement unless it results, directly or indirectly, and
individually or together with any other transactions (whether related or not),
in the transfer of ownership or control of all or substantially all of the
Acquired Business or of all or substantially all of the assets or properties of
the Acquired Business.

          "AMENDED AND RESTATED CREDIT FACILITY" means the $422,000,000 Amended
and Restated Credit Agreement, dated as of June 19, 1998, among Seller, as
borrower, the lenders party thereto, Credit Suisse First Boston, as
co-syndication agent and administrative agent and NationsBanc Montgomery
Securities LLC, as co-syndication agent and documentation agent, as amended by
(i) the First Amendment to Amended and Restated Credit Agreement, dated as of
September 11, 1998, (ii) the Second Amendment to Amended and Restated Credit
Agreement, dated as of March 18, 1999, (iii) the Third Amendment to Amended and
Restated Credit Agreement, dated as of December 22, 1999, (iv) the Fourth
Amendment and Waiver to Amended and Restated Credit Agreement, dated as of
September 30, 2000, (v) the Fifth Amendment to Amended and Restated Credit
Agreement, dated as of January 10, 2001, (vi) the Sixth Amendment to Amended and
Restated Credit Agreement, dated as of February 9, 2001, (vii) the Seventh
Amendment and Consent to Amended and Restated Credit Agreement, dated as of June
19, 2001, (viii) the Eighth Amendment and Consent to Amended and Restated Credit
Agreement, dated as of July 31, 2001, (ix) the Ninth Amendment, Waiver and
Consent to Amended and Restated Credit Agreement, dated as of December 20, 2001,
(x) the Tenth Amendment, Waiver and Consent to Amended and Restated Credit
Agreement, dated as of February 7, 2002, (xi) the Eleventh Amendment, Waiver and
Consent to Amended and Restated Credit Agreement, dated as of March 7, 2002,
(xii) the Twelfth Amendment, Waiver and Consent to the Amended and Restated
Credit Agreement, dated as of April 8, 2002, (xiii) the Thirteenth Amendment,
Waiver and Consent to the Amended and Restated Credit Agreement, dated as of May
31, 2002, (xiv) the Fourteenth Amendment, Waiver and Consent to the Amended and
Restated Credit Agreement, dated as of June 28, 2002 and (xv) the Fifteenth
Amendment, Waiver and Consent to the Amended and Restated Credit Agreement,
dated as of July 15, 2002.

          "ANCILLARY AGREEMENTS" means the Assignments and Bills of Sale,
Assumption Agreements, Lease Assignments and the Trademark Assignments.

          "ASSIGNMENT AND BILL OF SALE" means each Assignment and Bill of Sale
in substantially the form set forth as EXHIBIT A.

          "ASSUMED BENEFIT PLANS" means the Benefit Plans listed on
SCHEDULE 1.1(d).

          "ASSUMED CONTRACTS" means the Contracts specified in SECTION 2.3(a)
through SECTION 2.3(r).

                                        5


          "ASSUMED INDEBTEDNESS" means, without duplication, the following
indebtedness of Seller Parties: (i) indebtedness under the Demand Notes
(including interest accrued thereon); (ii) indebtedness under the Nissan
Facility in an aggregate principal amount not exceeding $72,000,000, PLUS
ordinary interest (but not interest in excess of ordinary interest resulting
from the occurrence of a default or event of default thereunder) accrued and
unpaid thereon from (but excluding) the monthly payment date thereunder
immediately preceding the Closing Date; (iii) indebtedness under the DIP
Financing (including the related Reimbursement Agreements) in an aggregate
principal amount not exceeding $100,000,000, PLUS ordinary interest (but not
interest in excess of ordinary interest resulting from the occurrence of a
default or event of default thereunder) from (but excluding) the Interest
Payment Date (as defined in the DIP Financing) immediately preceding the Closing
Date, and the Letter of Credit Fee (as defined in Annex B to the DIP Financing)
accrued and unpaid for the calendar month in which the Closing occurs;
(iv) indebtedness under the Amended and Restated Credit Facility and the DIP L/C
Rollover (including the related Reimbursement Agreements) in an aggregate
principal amount not exceeding $422,000,000, PLUS (A) ordinary interest (but not
interest in excess of ordinary interest resulting from the occurrence of a
default or event of default thereunder) accrued and unpaid thereon from (but
excluding) (1) the Quarterly Payment Date (as defined in the Amended and
Restated Credit Agreement) immediately preceding the Closing Date (in the case
of the Amended and Restated Credit Facility) and (2) the Payment Date (as
defined in the case of the DIP L/C Rollover) immediately preceding the Closing
Date (in the case of the DIP L/C Rollover) and (B) amounts payable pursuant to
Section 3.3.4 of the Amended and Restated Credit Facility and Section 3.1.4 of
the DIP L/C Rollover in respect of the period for which such amounts and payable
commencing on the Quarterly Payment Date (in the case of the Amended and
Restated Credit Facility) or the Payment Date (in the case of the DIP L/C
Rollover) immediately preceding the Closing Date; (v) indebtedness under the
A.I. Credit Corporation Premium Finance Arrangement in an aggregate amount not
exceeding $2,311,356.88; (vi) indebtedness under the UPAC Premium Finance
Arrangement in an aggregate amount not exceeding $202,174.71; and
(vii) indebtedness under the Commercial Umbrella Premium Finance Arrangement in
an aggregate amount not exceeding $5,230,113.

          "ASSUMED LEASES" means the Leases specified in SECTION 2.3(s).

          "ASSUMPTION AGREEMENT" means each Assumption Agreement in
substantially the form set forth as EXHIBIT B.

          "AUTOMOTIVE FLEET UTILIZATION RATIO" means, for each calendar month,
the ratio of (i) Automotive Rental Days for such month to (ii) the PRODUCT of
(x) the average Automotive Rental Fleet and (y) the actual number of days in
such month, determined in a manner consistent with the Operating Metric
Forecast.

          "AUTOMOTIVE RENTAL DAYS" means, for a calendar month with respect to
the vehicles in the Automotive Rental Fleet, the aggregate number of days that
such vehicles have been subject to Rental Transactions that was closed in such
calendar month (whether such days occurred in such month or a prior period),
determined in a manner consistent with the Operating Metric Forecast.

                                        6


          "AUTOMOTIVE RENTAL FLEET" means, as of any day of determination, the
aggregate number of Rental Vehicles (including Owned Vehicles other than
Existing Trucks or Support Vehicles), used, held for use or for retail sale
(other than retail sales in Hawaii and the Seattle area) by Seller Parties in
connection with the Acquired Business in the United States (including Puerto
Rico).

          "AUTOMOTIVE RENTAL REVENUE" means, for each calendar month and with
respect to the vehicles in the Automotive Rental Fleet, the rental revenue
derived from Rental Transactions (including time and mileage charges and loss
damage-waiver insurance fees or charges) relating to such vehicles which were
closed in such calendar month (whether such revenue was earned with respect to
days in such month or a prior period), determined in a manner consistent with
the Operating Metric Forecast.

          "AUTOMOTIVE RENTAL REVENUE TO AUTOMOTIVE RENTAL DAYS RATIO" means, for
each calendar month, the ratio of (i) Automotive Rental Revenue for such month
to (ii) Automotive Rental Days for such month, determined in a manner consistent
with the Operating Metric Forecast.

          "BENEFIT PLAN" means each Pension Plan, Welfare Plan, employment,
consulting, bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock option, stock purchase, phantom stock,
performance, retirement, thrift, savings, stock bonus, excess benefit,
supplemental unemployment, paid time off, perquisite, fringe benefit, vacation,
sick leave, severance, termination, disability, death benefit, hospitalization,
medical, dental, life insurance, welfare benefit or other plan, program,
agreement or arrangement (whether written or unwritten), in each case
maintained, entered into or contributed to, or required to be maintained or
contributed to, by Seller or by any ERISA Affiliate or by any of their
respective Subsidiaries for the benefit of any present or former employee of any
Seller in connection with the Acquired Business.

          "BRACI ADMINISTRATIVE SERVICES AGREEMENT" means the Administrative
Services Agreement, dated as of January 1, 1970, between Budget Rent a Car
Corporation of America and Budget Rent a Car International, Inc.

          "BRACI LICENSE AGREEMENT" means the License Agreement, dated June 8,
1965, between Budget Rent a Car Corporation of America and Budget Rent-A-Car
International, Inc.

          "BULK SALES LAWS" means all "bulk-transfer" Laws of any and all
jurisdictions (whether in United States or foreign).

          "BUSINESS ACQUISITION AGREEMENTS" means any agreements, arrangements
or understandings pursuant to which any of the Acquired Business was acquired by
Seller or any of its Subsidiaries.

          "BUSINESS DAY" means a day, other than a Saturday or Sunday, on which
banks are open for business in New York City, New York.

          "BUSINESS RECORDS" means all books, records, ledgers and files or
other similar information used or held for use in the operation or conduct of
the Acquired Business by any

                                        7


Seller Entity, including price lists, customer lists, vendor lists, mailing
lists, warranty information, catalogs, sales promotion literature, advertising
materials, brochures, records of operation, standard forms of documents, manuals
of operations or business procedures, research materials, Tax Returns,
contracts, instruments, filings, administrative and pricing manuals, records
(including, without limitation, claim records, sales records, underwriting
records, financial records, compliance records and tax records), personnel
records, corporate minute books and other materials to the extent relating,
directly or indirectly, to the Acquired Business by any Seller Entity, whether
or not in the possession of Seller or any of its Subsidiaries or their
respective representatives, stored in hardcopy form or on magnetic, optical or
other media; PROVIDED, HOWEVER, that Business Records shall not include any Tax
Returns of any Seller Party other than Tax Returns relating to the Acquired
Assets that are of a type that will not be required to be filed by Seller
Parties with respect to such Acquired Assets for periods ending after the
Closing Date.

          "CASH PURCHASE PRICE" means an amount equal to $107,500,000, LESS the
amount of Qualified Fees in excess of $42,000,000 (or $45,000,000 in the
circumstances contemplated by the proviso of SECTION 2.5(a)(vi)) paid by or on
behalf of Seller Entities from June 30, 2002 until the Closing.

          "CODE" means the United States Internal Revenue Code of 1986, as
amended.

          "COMMERCIAL UMBRELLA PREMIUM FINANCE ARRANGEMENT" means the Premium
Finance Arrangement, dated June 28, 2002, between Seller Parties and Continental
Casualty Company.

          "COMPETITION LAWS" means the Competition Act (Canada) and the
Investment Canada Act of 1985 (Canada) and all Laws of jurisdictions other than
the United States designed or intended to prohibit, restrict or regulate
antitrust conducts or competition or Investments by foreign Persons.

          "CONFIDENTIALITY AGREEMENT" means the agreement between Seller and
Parent, dated December 21, 2001.

          "CONTRACT" means any arrangement, note, bond, commitment, franchise,
guarantee, indemnity, indenture, instrument, lease, license or other agreement,
understanding, instrument or obligation, whether written or oral, all
amendments, supplements and modifications of or for any of the foregoing and all
rights and interests arising thereunder or in connection therewith.

          "DEALER" means any dealer or agent counterparty of any Seller Entity
to a dealer or agency Contract, pursuant to which such Person operates a truck
rental business pursuant to a grant from such Seller Entity.

          "DEMAND NOTES" means: (i) the Subordinated Notes, dated April 29,
1997, by Budget Rent A Car Corporation in favor of TFFC (Series 1997-2);
(ii) the Demand Note, dated April 29, 1997, by Budget Rent A Car Corporation in
favor of TFFC (Series 1997-2); (iii) the Demand Note, dated June 19, 1998, by
Seller in favor of TFFC (Series 1998-3); (iv) the Demand Note, dated June 19,
1998, by Seller in favor of TFFC (Series 1998-4); (v) the Demand Note,

                                        8


dated June 25, 1999, by Seller in favor of TFFC (Series 1999-3); (vi) the Demand
Note, dated June 25, 1999, by Seller in favor of TFFC (Series 1999-4); (vii) the
Demand Note, dated April 18, 2001, by Seller in favor of TFFC (Series 2001-2);
(viii) the Amended and Restated Demand Note, dated July 12, 2002, by Seller in
favor of TFFC (Series 2001-3); (ix) the Demand Note dated August 6, 2002 by
Seller in favor of TFFC (Series 2002-1); and (x) the other demand notes issued
by Seller in favor of TFFC in connection with the DIP Asset-Backed Fleet
Financing and the Additional DIP Asset-Backed Fleet Financing, if any.

          "DERIVATIVE AGREEMENT" means any (i) options, warrants, convertible
securities, stock appreciation rights or similar securities with an exercise or
conversion privilege at a price related to, or derived from the value of, any
"equity security" (as defined in Rule 3a11-1 promulgated under the Securities
Exchange Act of 1934, as amended) or any debt security and (ii) any interest
rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate floor agreement, interest rate exchange agreement,
currency exchange agreement, forward contract, repurchase and reverse repurchase
contract, or any other agreement or arrangement designed to protect against
fluctuations in interest rates or currency values, including any arrangement
whereby, directly or indirectly, the party thereto has the right to receive
periodic payments calculated by applying either a fixed or floating rate of
interest on a stated notional amount in exchange for periodic payments made by
such party calculated by applying a fixed or floating rate of interest on the
same notional amount or otherwise.

          "DIP ASSET-BACKED FLEET FINANCING" means the debtor-in-possession
asset-backed fleet financing, in an aggregate principal amount of $750,000,000,
to be extended to TFFC pursuant to (i) the Series 2002-1 Supplement, dated as of
August 6, 2002, to the Amended and Restated Base Indenture, dated as of December
1, 1996, among TFFC, Seller and Deutsche Bank Trust Company Americas, as Trustee
and (ii) the Series 2002-1 Note Purchase Agreement, dated as of August 6, 2002,
among TFFC, Seller, as Servicer, DB Structured Products, Inc., as Series 2002-1
Note Purchaser and Deutsche Bank AG, New York Branch, as Agent.

          "DIP FINANCING" means the senior secured debtor-in-possession
financing, extended pursuant to the Debtor-in-Possession Credit Agreement, dated
as of August 7, 2002 among Seller, certain direct and indirect subsidiaries of
Seller, the Lenders party thereto and General Electric Capital Corporation, as
Administrative Agent.

          "DIP L/C ROLLOVER" means a senior secured debtor-in-possession letter
of credit facility extended pursuant to the Credit and Guaranty Agreement dated
as of August 19, 2002, among Seller, certain Subsidiaries of Seller, certain
financial institutions, as Lenders and Credit Suisse First Boston, as
Administrative Agent.

          "DOCUMENTS" means all agreements, statements, certificates and other
documents at any time evidencing or otherwise relating to, pertaining, or
executed in connection with, each Assumed Contract or Assumed Lease.

          "ENCUMBRANCE" means any lien (including Tax liens), charge,
encumbrance, security interest, mortgage, pledge, easement, conditional sale or
other title retention agreement, covenant or other similar restriction or right
affecting the Acquired Assets (including voting

                                        9


rights of the Equity Securities of the Acquired Companies) or the assets of the
Acquired Companies.

          "ENVIRONMENTAL CLAIM" means any Action, cause of action or notice
(written or oral) by any Person alleging potential liability (including
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from (i) the presence, or
release into the environment, of any Materials of Environmental Concern at any
location, whether or not owned or operated by any Seller Entity or the Acquired
Business or (ii) any circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law.

          "ENVIRONMENTAL LAW" means all federal, interstate, state, local and
foreign laws and regulations relating to pollution or protection of human
health, safety, or the environment (including ambient air, surface water, ground
water, land surface or subsurface strata), including laws and regulations
relating to emissions, discharges, releases or threatened releases of Materials
of Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.

          "EQUITY SECURITY" means, with respect to any Person, any and all
shares, interests, participations, options, warrants, rights in, voting trust
certificate, limited partnership interest or other equivalents (however
designated, whether voting or non-voting) in the equity or capital of such
Person, whether outstanding on the date hereof or issued hereafter.

          "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

          "ERISA AFFILIATE" means any trade or business, whether or not
incorporated, that together with any of Seller Parties would be deemed a "single
employer" within the meaning of section 4001(b) of ERISA.

          "EXCHANGE ACT" means the Securities and Exchange Act of 1934, as
amended.

          "EXCLUDED COMPANIES" means any Subsidiary of Seller that is not a
Seller Party or an Acquired Company.

          "FAIR MARKET VALUE" means, with respect to any asset, property or
service, the value that would be obtained in an arm's length transaction between
an informed and willing seller, supplier or provider, as the case may be, under
no compulsion to sell the relevant asset or property or provide the relevant
service, and an informed purchaser under no compulsion to purchase such asset,
property or service.

          "FINAL ORDER" means an order or judgment, the operation or effect of
which has not been stayed, reversed, or amended and as to which order or
judgment (or any revision, modification, or amendment thereof) the time to
appeal or to seek review or rehearing has expired and as to which no appeal or
petition for review or rehearing was filed or, if filed, remains pending.

                                       10


          "FIVE MONTHS FORECAST" means the statement of projected consolidated
results of operations of Seller and its Subsidiaries with respect to the United
States (including Puerto Rico) and Canada, for the period commencing on August
1, 2002 and ending on December 31, 2002, attached as SCHEDULE 1.1(c).

          "FIXTURES" means all furniture, furnishings, computers and other
tangible personal property owned or leased by Seller Entities and located on the
Premises, including desks, tables, chairs, file cabinets and other storage
devices.

          "FORD AGREEMENTS" means (a) the Supply Agreement, dated as of April
29, 1997, among Ford Motor Company, Team Rental Group, Inc., and Budget Rent a
Car Corporation, (b) the Advertising Agreement, dated as of April 29, 1997,
among Ford Motor Company, Budget Rent a Car Corporation and Budget Rent a Car
Systems, Inc., each as amended by the Settlement Agreement and Release, dated as
of December 22, 1999, among Ford Motor Company, Seller (formerly, Team Rental
Group, Inc.) and Budget Rent a Car Corporation, (c) the 2003 Model Daily Rental
Repurchase Program, dated as of June 14, 2002, (d) the letter, dated July 17,
2002, from Ford Motor Company to Budget Rent a Car Corporation as an agent and
servicer for TFFC and (e) the arrangements with Ford Motor Company and Ford
Motor Credit Company described in the order of the Bankruptcy Court, dated
July 31, 2002.

          "FORD LINE OF CREDIT" means the "floor plan" variable line of credit
extended from time to time by Ford Motor Company, as evidenced by (a) the
Amended and Restated Vehicle Title Nominee Agreement, dated as of June 19, 1998,
among Seller, certain of its Subsidiaries and TFFC, (b) the Vehicle Lien Nominee
Agreement, dated as of March 5, 2001, among Ford Motor Credit Company, Bankers
Trust Company and Budget Rent-A-Car Systems, Inc., as amended, (c) the Agreement
and Acknowledgment of Seller, dated March 5, 2001, with Ford Motor Credit
Company, (d) the Wholesale Financing Guaranty, dated as of May 15, 2001, made by
Seller in favor of Ford Motor Credit Company, (e) the letter agreement, dated as
of May 17, 2002, among Ford Motor Credit Company, Ford Motor Company, Seller,
Budget Rent a Car Corporation, Budget Rent-A-Car Systems, Inc. and NYRAC Inc.,
(f) the letter agreement, dated as of May 21, 2002, among Ford Motor Credit
Company, Ford Motor Company and TFFC, (g) the letter of acknowledgment, dated as
of May 22, 2002, among Ford Motor Company, Ford Motor Credit Company and Credit
Suisse First Boston and (h) the arrangements with Ford Motor Company and Ford
Motor Credit Company described in the order of the Bankruptcy Court, dated July
31, 2002.

          "FORD MV LEASE" means the motor vehicle lease agreement to be entered
into by Seller Parties and BGI Leasing, Inc. with respect to vehicles provided
by Ford Motor Company to Seller Parties and as to which Seller Parties, as of
July 29, 2002, had received notice of the posting of the purchase thereof to the
Ford Line of Credit but for which the relevant dealer has not paid the purchase
price therefor.

          "FOREIGN BENEFIT PLAN" means each Benefit Plan that is not subject to
United States Laws, including, but not limited to government-mandated individual
employment agreements with individuals earning in excess of $100,000 (or the
equivalent thereof in any other currency) per year but excluding any other
government-mandated benefit plans, programs and arrangements.

                                       11


          "FRANCHISEE" means any franchisee, licensee or sub-licensee
counterparty of any Seller Entity to a franchise, license or sub-license
Contract, pursuant to which such Person operates a vehicle rental or sales
operation pursuant to a grant from such Seller Entity.

          "FULL-TIME EQUIVALENTS" means, for each calendar month, the aggregate
number of hours as to which counter agents, service agents and rapid return
personnel of the Seller Entities in the United States (including Puerto Rico)
were paid customary salary and other compensation (including vacation and sick
time), DIVIDED by the hours that would be worked in such calendar month based on
a normal 40-hour workweek throughout such calendar month, determined in a manner
consistent with the Operating Metric Forecast.

          "GAAP" means the generally accepted accounting principles in the
United States consistently applied during the periods involved.

          "GOVERNMENTAL BODY" means any (i) legislative, executive, political,
judicial or administrative unit of any governmental entity, or
quasi-governmental agency (foreign, federal, state or local) or any department,
commission, board, agency, bureau, official or other regulatory, administrative
or judicial authority thereof, (ii) any self-regulatory organization, agency or
commission or (iii) any court or arbitral tribunal.

          "INITIAL 13-WEEK CASH FLOW PROJECTIONS" means the 13-Week Cash Flow
Projections for the period ending November 1, 2002, attached as SCHEDULE 1.1(e).

          "INVESTMENT" means, with respect to any Person, any direct or indirect
advance, loan, account receivable, deposit or other extension of credit
(including, without limitation, by means of any guarantee or similar
arrangement) or any payment or capital or other contribution to (by means of
transfers of property to others, payments for property or services for the
account or use of others, or otherwise), or any purchase or ownership of any
stocks, bonds, notes, debentures or other securities of any other Person or any
forgiveness of indebtedness of such Person or any gift to such Person, and
"INVEST" and "INVESTED" shall have correlative meanings.

          "IRS" means the United States Internal Revenue Service.

          "LAW" means any national, foreign, federal, state, provincial or local
law, statute, ordinance, rule, regulation, code, order, judgment, injunction or
decree of any jurisdiction (whether foreign or domestic).

          "LEASE" means a lease for any of the Leased Premises.

          "LEASE ASSIGNMENT" means each assignment agreement with respect to a
Lease in substantially the form set forth as EXHIBIT C.

          "LEASED PREMISES" means all the real property that is leased by any
Seller Entity from Third Parties and used or held for use by any Seller Entity
or any of their respective Franchisees or Dealers primarily in the operation or
conduct of the Acquired Business, including any concession, occupancy, use or
similar rights of any Seller Entity, Franchisee or Dealer.

                                       12


          "LIABILITIES" means any and all: (a) debts; (b) claims (including,
"claims" as that term is defined in sections 101(5)(A) and 101(5)(B) of the
Bankruptcy Code, except that a right to equitable remedy shall also be
considered a claim whether or not the breach gives rise to a right to payment);
(c) judgments, demands, guarantees, interest, penalties, fines or other charges
or assessments, whether assessed or assessable; (d) rights of setoff, offset or
recoupment held, or any other claims, rights or defenses that may be asserted,
by any Person; (e) any obligations to comply with any settlement agreements,
voluntary assurances any other similar decrees, agreements and settlements
entered with any Person; (f) any and all Environmental Claims; (g) any and all
liabilities for Taxes; (h) any and all obligations of any Person to its
employees, including obligations under any Benefit Plan; and (i) other
liabilities, commitments and obligations, whether or not fixed, contingent or
absolute, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whether imposed by agreement, understanding, Law,
equity or otherwise, including under sections 502(g), 502(h) and 502(i) of the
Bankruptcy Code, whether or not required by GAAP to be reflected in financial
statements or disclosed in the notes thereto.

          "MATERIAL ADVERSE EFFECT" means any change(s), event(s),
development(s) or circumstance(s) which, individually or in the aggregate, could
be reasonably expected (a) to have a materially adverse effect, either in the
short term or long term, on the business, results of operations, assets,
condition (financial or otherwise) or prospects of Seller Entities, taken as a
whole, (b) to materially impair the ability of any Seller Party to perform its
obligations under this Agreement or any Ancillary Agreement to which it is a
party or (c) to have a materially adverse effect on or prevent or materially
delay the consummation of any of the transactions contemplated hereby or by the
Ancillary Agreements; PROVIDED, HOWEVER, that for purposes of clause (a) above,
any adverse effect resulting primarily and directly from the following shall be
disregarded in determining whether there has been a Material Adverse Effect: (i)
the filing of the Chapter 11 Cases; (ii) the announcement of the transactions
contemplated hereby and by the Ancillary Agreements; (iii) changes in the United
States economy generally which do not disproportionately affect the Acquired
Business in any material respect; or (iv) changes in the vehicle rental industry
generally which do not disproportionately affect Seller Entities in any material
respect; PROVIDED FURTHER, HOWEVER, in the case of each of the foregoing clauses
(iii) and (iv) above, that changes resulting from (A) the commencement or
material worsening of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United States or (B)
any terrorist activities, shall not be so disregarded.

          "MATERIALS OF ENVIRONMENTAL CONCERN" means chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, radioactive
materials, asbestos, petroleum and petroleum products.

          "MINORITY INVESTEES" means each of the Persons listed on
SCHEDULE 1.1(f).

          "NISSAN FACILITY" means the Amended and Restated Nissan Motor
Acceptance Corporation 2002 Vehicle Financing and Security Agreement, dated as
of January 9, 2002, between Nissan Motor Acceptance Corporation and Budget
Rent-A-Car Systems, Inc.

          "OPERATING METRIC FORECAST" means the Operating Metric Forecast
attached as SCHEDULE 1.1(g).

                                       13


          "OWNED REAL PROPERTY" means the owned real property used in connection
with the Acquired Business and specified in SECTION 3.16(b) OF THE SELLER
PARTIES DISCLOSURE SCHEDULE.

          "OWNED VEHICLES" means all Rental Vehicles subject to a TFFC MV Leases
and Ford MV Leases which are deemed pursuant to state law to be a finance leases
and all Support Vehicles owned by Seller Parties.

          "PENSION PLAN" means each "employee pension benefit plan" within the
meaning of section 3(2) of ERISA.

          "PERMITS" means all permits, licenses, certificates, franchises and
other authorizations, consents, registrations, waivers and approvals of any
Governmental Body.

          "PERMITTED ENCUMBRANCES" means: (a) other than in respect of any
Premises, any (i) Encumbrances imposed pursuant to the DIP Asset-Backed Fleet
Financing and DIP Financing, (ii) Encumbrances imposed post-Petition pursuant to
Bankruptcy Court order consented to by Buyer, (iii) Encumbrances existing on the
date hereof pursuant to the Amended and Restated Credit Facility and the
documents and instruments related thereto, (iv) Encumbrances pursuant to the
Collateral Agreement, dated as of April 29, 1997, among Budget Funding
Corporation, Credit Suisse First Boston, as Liquidity Agent, Credit Enhancer and
Collateral Agent, Credit Suisse First Boston Corporation, as Dealer, and
Deutsche Bank Trust Company Americas, as Depositary, (v) Encumbrances existing
on the date hereof pursuant to the Amended and Restated Base Indenture, dated as
of December 1, 1996, among TFFC, as Issuer, Budget Group, Inc. (formerly known
as Team Rental Group, Inc.), as Servicer, Budget Group, Inc. (formerly known as
Tem Rental Group, Inc.), as Budget Interestholder (formerly known as Team
Interestholder), and a Deutsche Bank Trust Company Americas and the various
Series Supplements thereto, (vi) Encumbrances pursuant to the Ford Line of
Credit, (vii) Encumbrances existing on the date hereof pursuant to the Nissan
Facility, (viii) Encumbrances on deposits made by one or more Seller Entities to
secure obligations under insurance contracts or Airport Concessions or pursuant
to the Surety Bond Collateral Agreement, dated as of February 14, 2002, between
Gulf Insurance Company, Seller and certain other Persons, the Cash Collateral
Pledge Agreement, dated as of February 14, 2002, between Seller and Gulf
Insurance Company and the Security Agreement, dated October 1, 1997, between
Seller, Continental Casualty Company, Transportation Insurance Company, Columbia
Casualty Insurance Company and Transcontinental Technical Services, Inc.,
(ix) Encumbrances contained in any Assumed Contract or Assumed Lease; and
(x) Encumbrances for current Taxes not yet due and payable; PROVIDED, that any
such Encumbrance pursuant to this clause (x) does not, and would not reasonably
be expected to, materially impair the continued use, operation or value of the
asset to which it relates; and (b) in respect of any Premises, any Permitted
Property Encumbrance.

          "PERMITTED PROPERTY ENCUMBRANCES" means each of the following: (i)
statutory liens for current Taxes not yet due and payable; (ii) mechanics',
carriers', workers', materialmen's, warehousemen's and similar Encumbrances
against a Premises arising or incurred in the ordinary course of the business
consistent with past practice for sums not due and payable or payments which are
being contested in good faith by appropriate proceedings and which would not,
and would not reasonably be expected to, individually or in the aggregate,
materially detract from the use, operation or value of such Premises; (iii) with
respect to any Leased

                                       14


Premises, the Encumbrances contained in the corresponding Lease and any
Encumbrance on the title of the fee owner; (iv) local, state and federal laws,
ordinances or governmental regulations including but not limited to, building
and zoning laws, ordinances and regulations now or hereafter in effect relating
to the Premises; (v) zoning restrictions, easements, rights-of-way,
encroachments and other similar restrictions on use that do not materially
detract from the value of, or interfere with the ordinary conduct of the
business conducted or proposed to be conducted at, the property affected by such
Encumbrances; and (vi) Encumbrances disclosed in SECTION 3.16(a) OF SELLER
PARTIES DISCLOSURE SCHEDULE.

          "PERSON" means any individual, corporation, partnership, limited
liability company, firm, association, joint venture, joint stock company, trust,
unincorporated organization or other entity or any Governmental Body.

          "PREMISES" means the Leased Premises and the Owned Real Property.

          "PRUDENT INDUSTRY PRACTICES" means those practices, methods,
equipment, specifications and standards of and performance, as the same may
change from time to time, as are commonly used by companies engaged in the
vehicle rental business of the type and size similar or comparable to the
Acquired Business. Prudent Industry Practices are not intended to be limited to
the optimum practice or method to the exclusion of all others, but rather to
include reasonable and prudent practices and methods (other than the filing of
the Petition).

          "REAL ESTATE DEED" means each deed with respect to the Owned Real
Property.

          "REIMBURSEMENT AGREEMENTS" means: (i) the Letter of Credit
Reimbursement Agreement, dated as of April 29, 1997, among Budget Rent-A-Car
Systems, Inc., those Subsidiaries, Affiliates and Non-Affiliates of Budget
Group, Inc. identified on the signature pages thereto, Team Fleet Financing
Corporation, Budget Rent a Car Corporation, as Guarantor, and Credit Suisse
First Boston, as Credit Enhancer (Series 1997-1); (ii) the Letter of Credit
Reimbursement Agreement, dated as of April 29, 1997, among Budget Funding
Corporation, Budget Rent-A-Car Systems, Inc., those Subsidiaries, Affiliates and
Non-Affiliates of Budget Group, Inc. identified on the signature pages thereto,
Team Fleet Financing Corporation, Budget Rent a Car Corporation, as Guarantor,
and Credit Suisse First Boston, as Credit Enhancer (Series 1997-2); (iii) the
Enhancement Letter of Credit Application and Agreement, dated as of February 10,
2000, among Budget Rent-A-Car Systems, Inc., those Subsidiaries, Affiliates and
Non-Affiliates of Budget Group, Inc. identified on the signature pages thereto,
Team Fleet Financing Corporation, Budget Group, Inc., as Guarantor, and Credit
Suisse First Boston, as Credit Enhancer (Series 1998-3); (iv) the Enhancement
Letter of Credit Application and Agreement, dated as of February 10, 2000, among
Budget Rent-A-Car Systems, Inc., those Subsidiaries, Affiliates and
Non-Affiliates of Budget Group, Inc. identified on the signature pages thereto,
Team Fleet Financing Corporation, Budget Group, Inc., as Guarantor, and Credit
Suisse First Boston, as Credit Enhancer (Series 1998-4); (v) the Enhancement
Letter of Credit Application and Agreement, dated as of February 10, 2000, among
Budget Rent-A-Car Systems, Inc., those Subsidiaries, Affiliates and
Non-Affiliates of Budget Group, Inc. identified on the signature pages thereto,
Team Fleet Financing Corporation, Budget Group, Inc., as Guarantor, and Credit
Suisse First Boston, as Credit Enhancer (Series 1999-3); (vi) the Enhancement
Letter of Credit Application and Agreement, dated as of February 10, 2000, among
Budget Rent-A-Car Systems,

                                       15


Inc., those Subsidiaries, Affiliates and Non-Affiliates of Budget Group, Inc.
identified on the signature pages thereto, Team Fleet Financing Corporation,
Budget Group, Inc., as Guarantor, and Credit Suisse First Boston, as Credit
Enhancer (Series 1999-4); (vii) the Enhancement Letter of Credit Application and
Agreement, dated as of April 18, 2001, among Budget Rent-A-Car Systems, Inc.,
those Subsidiaries, Affiliates and Non-Affiliates of Budget Group, Inc.
identified on the signature pages thereto, Team Fleet Financing Corporation,
Budget Group, Inc., as Guarantor, and Credit Suisse First Boston, as Credit
Enhancer (Series 2001-2); (viii) the Enhancement Letter of Credit Application
and Agreement, dated as of November 29, 2001, among Budget Rent-A-Car Systems,
Inc., those Subsidiaries, Affiliates and Non-Affiliates of Budget Group, Inc.
identified on the signature pages thereto, Team Fleet Financing Corporation,
Budget Group, Inc., as Guarantor, and Credit Suisse First Boston, as Credit
Enhancer (Series 2001-3); and (ix) the reimbursement arrangements in respect of
letters of credit, executed by Seller Parties in connection with the DIP
Financing and the DIP L/C Rollover.

          "RELATED PARTY AGREEMENT" means any Contract between any one or more
of Seller Entities, on the one hand, and any one or more of their respective
current or former directors, officers or other employees, any of their
respective relatives or any Affiliate thereof (other than a Seller Entity),
including, without limitation, the related party transactions disclosed in the
Seller SEC Documents.

          "RENTAL TRANSACTION" means a rental transaction relating to a vehicle
in the Automotive Rental Fleet or the Truck Rental Fleet which is closed during
such calendar month, determined in a manner consistent with the Operating Metric
Forecast. For purposes of this Agreement, a "RENTAL TRANSACTION" is deemed
closed (i) except as set forth in clauses (ii) and (iii) below, at the time the
vehicle is returned by the relevant customer to Seller Party that rented such
vehicle to such customer, (ii) with respect to the rental of vehicles for a
period exceeding thirty consecutive calendar days, on the last day of each
thirty-day rental period and (iii) with respect to one-way vehicle rentals, the
first day on which the relevant vehicle is rented.

          "RENTAL TRANSACTIONS TO FULL-TIME EQUIVALENTS RATIO" means with
respect to a calendar month, the ratio of (i) the aggregate number of Rental
Transactions in such calendar month to (ii) the Full-Time Equivalents for such
calendar month.

          "RENTAL VEHICLE" means any vehicle owned, leased or operated by any
Seller Entity (including the Owned Vehicles) for purposes of renting such
vehicle to customers of the Acquired Business.

          "REPURCHASE PROGRAM" means a program pursuant to which a Vehicle
Manufacturer or an Affiliate thereof has agreed with any of Seller Entities to
repurchase or guarantee the auction sale price of vehicles manufactured by such
Vehicle Manufacturer or any of its Affiliates.

          "RETAINED BUSINESS" means the businesses of Seller and its
Subsidiaries (other than the Acquired Business) and shall include the Excluded
Assets and Excluded Liabilities.

          "SEC" means the United States Securities and Exchange Commission.

          "SELLER ENTITIES" means Seller Parties and the Acquired Companies.

                                       16


          "SELLER EVALUATION MATERIAL" means all information, data, reports,
interpretations, forecasts, contracts, agreements and records, whether in oral
or written form, electronically stored or otherwise (including any such
information furnished prior to the execution of this Agreement), concerning
Seller Entities or their Subsidiaries furnished to Buyer, Parent or their
Representatives by Seller Entities, their Subsidiaries or any of their
Representatives, and all notes, reports, analyses, compilations, studies and
other materials prepared by Buyer or Parent or any of their Representatives (in
whatever form maintained, whether documentary, electronically stored or
otherwise), containing or based upon, in whole or in part, any such information;
PROVIDED, that the term "SELLER EVALUATION MATERIAL" shall not include
information which (i) is or becomes available to the public other than as a
result of a disclosure by Parent, Buyer or any of their Representatives, or
anyone to whom Parent, Buyer or any of their Representatives, transmits any
Seller Evaluation Materials, (ii) is or becomes known or available to any party
on a non-confidential basis from a source (other than the other parties to this
Agreement or any of their Representatives) who, insofar as is actually known by
Buyer or Parent, is not prohibited from transmitting the information by a
contractual, legal, fiduciary or other obligation or (iii) is independently
developed by Buyer, Parent or any of their Representatives without the use of
any information that would itself be deemed Seller Evaluation Material.

          "SUBSIDIARIES" of any entity means, at any date, any Person: (i) the
accounts of which would be consolidated with those of the applicable entity in
such entity's consolidated financial statements if such financial statements
were prepared in accordance with GAAP as of such date; or (ii) of which
securities, membership interests or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests or
more than 50% of the profits or losses of which are, as of such date, owned,
controlled or held by the applicable entity or one or more direct or indirect
subsidiaries of such entity.

          "SUPPORT VEHICLES" means all trucks, vans, buses, dollies and other
vehicles (including those held for employees' benefit and marketing purposes)
owned, leased or operated by any Seller Entity and not constituting Rental
Vehicles but utilized by Seller Parties in support of or in connection with the
Acquired Business.

          "TAX" means: (i) any and all taxes, assessments, customs, duties,
levies, fees, tariffs, imposts, deficiencies and other governmental charges of
any kind whatsoever (including taxes on or with respect to net or gross income,
franchise, profits, gross receipts, capital, sales, use, ad valorem, value
added, transfer, real property transfer, transfer gains, inventory, capital
stock, license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, real or personal property, estimated
taxes, rent, excise, occupancy, recordation, bulk transfer, intangibles, gross
receipt, personal property, alternative minimum, real property, doing business,
withholding, payroll, stamp and capital), together with any interest thereon,
penalties, fines, additions to tax or additional amounts with respect thereto,
imposed by the United States (federal, state or local) or other governmental
authority or applicable jurisdiction; and (ii) any liability for the payment of
any amounts described in (i) as a result of being a member of an affiliated,
consolidated, combined, unitary or similar group or as a result of transferor or
successor liability.

                                       17


          "TAX RETURN" means any return (including any information return),
declaration, report, statement, schedule, attachment, notice, form, or other
document or information (including any amendment to any of the foregoing) filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax (whether or not such Tax is imposed on the filer thereof)
or in connection with the administration, implementation, or enforcement of or
compliance with any law relating to any Tax.

          "TELEPHONE NUMBERS" means all operating telephone numbers for the
Premises and all other telephone numbers relating to the Acquired Business and
controlled (by agreement, lease or otherwise) by any Seller Entity on the date
hereof and which under existing agreements, regulations and law, may be
transferred to Buyer on the Closing Date.

          "TFFC" means Team Fleet Financing Corporation, a Delaware corporation
and a wholly-owned Subsidiary of Seller.

          "TFFC MV LEASES" means any one of the following: (i) Amended and
Restated Master Motor Vehicle Lease Agreement Group I, dated as of June 19,
1998, by and among TFFC, as lessor, those direct and indirect subsidiaries of
Seller, that are listed on Schedule 1 thereto, as lessees, and Seller, as
guarantor, as amended by Amendment No. 1 thereto; (ii) Motor Vehicle Lease
Agreement Series 1996-1, dated as of December 1, 1996, by and among TFFC, as
lessor, direct and indirect subsidiaries of Seller, as lessees, and Seller, as
guarantor; (iii) Motor Vehicle Lease Agreement Series 1997-1, dated as of April
1, 1997, by and among TFFC, as lessor, direct and indirect subsidiaries of
Seller, as lessees, and Seller, as guarantor; (iv) Master Motor Vehicle Lease
Agreement Group V, dated as of April 18, 2001, among TFFC, as lessor, Seller, as
guarantor, Budget Rent-A-Car Systems, Inc. and those companies listed on
schedule I thereto, as lessees; and (v) Motor Vehicle Lease Agreement Series
1997-2, dated as of April 29, 1997, among TFFC, as lessor, Seller, as guarantor,
Budget Rent-A-Car Systems, Inc. and those companies listed on schedule I
thereto, as lessees; (vi) the motor vehicle leases entered into in connection
with the DIP Asset-Backed Fleet Financing and (vii) the motor vehicle leases
entered into in connection with the Additional DIP Asset-Backed Fleet Financing.

          "THIRD PARTY" means with respect to any Person, another Person that is
not an Affiliate of such Person.

          "TRADEMARK ASSIGNMENTS" means the Trademark Assignments substantially
in the form attached hereto as EXHIBIT D.

          "TREASURY REGULATIONS" means the United States Income Tax Regulations
including Temporary Regulations, promulgated under the Code, as such regulations
may be amended, modified or supplemented from time to time (including
corresponding provisions of succeeding regulations).

          "TRUCK RENTAL FLEET" means, as of any day of determination, the
aggregate number of trucks and cargo vans (excluding pickup trucks other than
pickup trucks that are Existing Trucks), used, held for use or for sale by
Seller Parties in connection with the conduct of the Acquired Business in the
United States (including Puerto Rico).

                                       18


          "UNDISCLOSED JOINT LIABILITY" means any Liability evidenced by a proof
of claim filed in the Chapter 11 Cases that asserts a Liability that is a joint
and several liability of any Acquired Company, and such Liability was
undisclosed on the date hereof.

          "UPAC PREMIUM FINANCE ARRANGEMENT" means the Premium Finance
Arrangement, dated as of April 24, 2002, between Seller Parties and Universal
Premium Acceptance Corp.

          "U.S. BENEFIT PLAN" means each Benefit Plan that is subject to United
States Law.

          "VEHICLE MANUFACTURER" means any manufacturer of vehicles used by
Seller Entities in connection with the Acquired Business.

          "WARN ACT" means the Worker Adjustment Retraining Notification Act.

          "WELFARE PLAN" means each "employee welfare benefit plan" (within the
meaning of section 3(1) of ERISA).

     Section 1.2  OTHER DEFINITIONAL AND INTERPRETIVE MATTERS.

          (a)     GENDER AND NUMBER. Any reference in this Agreement to gender
shall include all genders, and words imparting the singular number only shall
include the plural and vice versa.

          (b)     HEADINGS. The provisions of the Table of Contents, the
division of this Agreement into Articles, Sections and other subdivisions and
the insertion of headings are for convenience of reference only and shall not
affect or be utilized in construing or interpreting this Agreement. All
references in this Agreement to any "Article," "Section," "Schedule" or
"Exhibit" are to the corresponding Article, Section, Schedule or Exhibit, as
applicable, of this Agreement unless otherwise specified.

          (c)     HEREIN. The words "herein," "hereinafter," "hereof," and
"hereunder" refer to this Agreement as a whole and not merely to a subdivision
in which such words appear unless the context otherwise requires.

          (d)     INCLUDING. The word "including" or any variation thereof means
"including, without limitation" and shall not be construed to limit any general
statement that it follows to the specific or similar items or matters
immediately following it.

          (e)     KNOWLEDGE. The phrase "knowledge of Seller Parties" (or words
of similar import) means the actual or constructive knowledge of the officers at
the vice president level or above of any of Seller Parties listed on
SCHEDULE 1.2(e), after due investigation.

          (f)     SCHEDULES AND EXHIBITS. The Schedules and Exhibits attached to
this Agreement shall be construed with and as an integral part of this Agreement
to the same extent as if the same had been set forth verbatim herein.

                                       19


                                    ARTICLE 2
                    PURCHASE AND SALE OF THE ACQUIRED ASSETS

     Section 2.1  PURCHASE AND SALE OF ACQUIRED ASSETS. Upon the terms and
subject to the conditions of this Agreement, at the Closing, Seller Parties
shall sell, transfer, assign, convey and deliver to Buyer, and Buyer shall
purchase, acquire and accept from Seller Parties, all right, title and interest
of Seller Parties in, to and under the Acquired Assets free and clear of all
Liabilities (other than Assumed Liabilities) and Encumbrances (other than
Permitted Encumbrances).

     Section 2.2  CONSIDERATION. In consideration of the sale, transfer,
assignment, conveyance and delivery by Seller Parties of the Acquired Assets to
Buyer, Buyer shall (and Parent shall cause Buyer to), at the Closing, (i) pay to
Seller Parties the Cash Purchase Price and (ii) assume, or to the extent
required by SECTION 2.9(f), pay the Assumed Liabilities, it being understood
that Parent shall not assume any of the Assumed Liabilities. The Cash Purchase
Price payable pursuant to clause (i) above shall be paid by Buyer to Seller
Parties at Closing, as allocated for the accounts of such Seller Parties by wire
transfer of immediately available funds to accounts designated by Seller's
written instructions to Buyer. Seller shall provide such account information to
Buyer at least five Business Days prior to the Closing.

     Section 2.3  ACQUIRED ASSETS. For purposes of this Agreement and subject to
SECTION 2.5(b), the term "ACQUIRED ASSETS" means (i) the Equity Securities of
the Acquired Companies (other than the Subsidiaries of the Acquired Companies)
and in the Minority Investees and (ii) all the assets, properties, rights, title
and other interests of Seller Parties primarily used or held for use in
connection with the Acquired Business, whether tangible or intangible, real,
personal or mixed, set forth or described in paragraphs (a) through (ll) below
(including Contracts and Leases entered into by Seller Parties following the
date hereof which constitute Assumed Contracts or Assumed Leases) whether or not
any of such assets, properties or rights have any value for accounting purposes
or are carried or reflected on or specifically referred to in Seller's financial
statements (PROVIDED, that the Acquired Assets shall not include the Excluded
Assets):

          (a)     all franchise, prime license, license, sublicense, agency and
dealer Contracts to which any of Seller Parties is a party listed in
SECTION 3.15(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE and the franchise,
prime license, license, sublicense, agency and dealer Contracts relating to the
Acquired Business entered into by Seller Parties following the date hereof in
compliance with SECTION 5.1(dd);

          (b)     all marketing and barter Contracts to which any of Seller
Parties is a party listed in SECTIONS 3.15(b) and 3.15(u) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, respectively, and such other written marketing Contracts
relating to the Acquired Business entered into by any of Seller Parties in the
ordinary course of business consistent with past practice and which may be
terminated by Seller Parties by giving 90 days' (or such shorter period
specified therein) notice to the other party thereof, without (i) any penalty or
other payment by any Seller Party, (ii) imposing any requirement that Seller
Parties sell or dispose of any assets or properties and (iii) imposing any
limitations on the conduct of business by any Seller Party;

          (c)     all CorpRate Contracts to which any of Seller Parties is a
party listed in SECTION 3.15(c) OF THE SELLER PARTIES DISCLOSURE SCHEDULE or not
required to be listed therein

                                       20


pursuant to SECTION 3.15(c), and such other written CorpRate Contracts relating
to the Acquired Business entered into by any of Seller Parties in the ordinary
course of business consistent with past practice and which may be terminated by
Seller Parties by giving 90 days' (or such shorter period specified therein)
notice to the other party thereof, without (i) any penalty or other payment by
any Seller Party, (ii) imposing any requirement that Seller Parties sell or
dispose of any assets or properties and (iii) imposing any limitations on the
conduct of business by any Seller Party;

          (d)     all association Contracts to which any of Seller Parties is a
party listed in SECTION 3.15(d) OF THE SELLER PARTIES DISCLOSURE SCHEDULE or not
required to be listed therein pursuant to SECTION 3.15(d), and such other
written association Contracts relating to the Acquired Business entered into by
any of Seller Parties in the ordinary course of business consistent with past
practice and which may be terminated by Seller Parties by giving 90 days' (or
such shorter period specified therein) notice to the other party thereof,
without (i) any penalty or other payment by any Seller Party, (ii) imposing any
requirement that Seller Parties sell or dispose of any assets or properties and
(iii) imposing any limitations on the conduct of business by any Seller Party;

          (e)     all joint venture, limited liability company and partnership
Contracts to which any of Seller Parties is a party listed in SECTION 3.15(e) OF
THE SELLER PARTIES DISCLOSURE SCHEDULE;

          (f)     all affiliation Contracts to which any of Seller Parties is a
party listed in SECTION 3.15(f) OF THE SELLER PARTIES DISCLOSURE SCHEDULE and
such other written affiliation Contracts relating to the Acquired Business
entered into by any of Seller Parties in the ordinary course of business
consistent with past practice and which may be terminated by Seller Parties by
giving 90 days' (or such shorter period specified therein) notice to the other
party thereof, without (i) any penalty or other payment by any Seller Party,
(ii) imposing any requirement that Seller Parties sell or dispose of any assets
or properties and (iii) imposing any limitations on the conduct of business by
any Seller Party;

          (g)     all general sales agency, travel agency and tour operator
Contracts to which any of Seller Parties is a party listed in SECTION 3.15(g) OF
THE SELLER PARTIES DISCLOSURE SCHEDULE, and such other written general sales
agency, travel agency and tour operator Contracts relating to the Acquired
Business entered into by any of Seller Parties in the ordinary course of
business consistent with past practice and which may be terminated by Seller
Parties by giving 90 days' (or such shorter period specified therein) notice to
the other party thereof, without (i) any penalty or other payment by any Seller
Party, (ii) imposing any requirement that Seller Parties sell or dispose of any
assets or properties and (iii) imposing any limitations on the conduct of
business by any Seller Party;

          (h)     all Contracts with Vehicles Manufacturers and Repurchase
Programs to which any of Seller Parties is a party listed in SECTIONS 3.15(h)
AND 3.28(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE (including the Ford
Agreements);

          (i)     all bus and truck lease Contracts to which any of Seller
Parties is a party listed in SECTION 3.15(i) OF THE SELLER PARTIES DISCLOSURE
SCHEDULE, and such other written bus and

                                       21


truck lease Contracts relating to the Acquired Business entered into by any of
Seller Parties in the ordinary course of business consistent with past practice
solely for purposes of replacing service buses and trucks which are Support
Vehicles on the date of this Agreement and up to four service buses and trucks
which are not replacements of such service buses and trucks;

          (j)     all fuel supply Contracts to which any of Seller Parties is a
party listed in SECTION 3.15(j) OF THE SELLER PARTIES DISCLOSURE SCHEDULE and
such other written fuel supply Contracts relating to the Acquired Business
entered into by any of Seller Parties in the ordinary course of business
consistent with past practice and which may be terminated by Seller Parties by
giving 90 days' (or such shorter period specified therein) notice to the other
party thereof, without (i) any penalty or other payment by any Seller Party,
(ii) imposing any requirement that Seller Parties sell or dispose of any assets
or properties and (iii) imposing any limitations on the conduct of business by
any Seller Party;

          (k)     (i) all vendor Contracts to which any of Seller Parties is a
party listed in SECTIONS 3.15(k) OF THE SELLER PARTIES DISCLOSURE SCHEDULE or
not required to be listed therein pursuant to SECTIONS 3.15(k) (other than
vendor Contracts not required to be listed in SECTION 3.15(k) OF THE SELLER
PARTIES DISCLOSURE SCHEDULE with any Affiliate of Seller Parties or any
director, officer, agent or any relative thereof), (ii) such other written
vendor Contracts relating to the Acquired Business entered into by any of Seller
Parties in the ordinary course of business consistent with past practice (x)
solely for purposes of replacing vendor Contracts listed in SECTION 3.15(k) OF
THE SELLER PARTIES DISCLOSURE SCHEDULE or not required to be listed therein upon
the termination thereof, to the extent each such replacement vendor Contract (A)
has a term not exceeding one year from the date of execution thereof and (B)
does not require any of Seller Parties to make payments thereunder in amounts
exceeding the amounts payable by Seller Parties under the vendor Contract so
replaced (other than normal immaterial ordinary course increases) and (y) not
contemplated by clause (x) above, which provide for payments thereunder not
exceeding $25,000 for any individual Contract or $250,000 for all such Contracts
in the aggregate, in each case in any calendar year and (iii) all other
Contracts to which any of Seller Parties is a party listed in SECTION 3.15(m) OF
THE DISCLOSURE SCHEDULE, other than those Contracts specified therein (i) that
are not transferred and assumed by Buyer pursuant to the Agreements and (ii)
that shall be terminated prior to Closing;

          (l)     all Contracts relating to Assumed Indebtedness;

          (m)     the TFFC MV Leases and the Ford MV Lease (including, in each
case, the guaranties of any Seller Party in respect of lease payments due
thereunder) and the TEAM Interest and the Budget Interest (each as defined in
the Amended and Restated Base Indenture, dated as of December 1, 1996, among
TFFC, Seller and Deutsche Bank Trust Company Americas, as Trustee, and the
various supplements thereto);

          (n)     all insurance or reinsurance Contracts and/or policies and
similar arrangements under which any Seller Party is an insured party listed in
SECTION 3.25(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE (the "ACQUIRED
INSURANCE CONTRACTS");

          (o)     all collective bargaining Contracts to which any of Seller
Parties is a party listed in SECTION 3.15(l) OF THE SELLER PARTIES DISCLOSURE
SCHEDULE, and any collective bargaining

                                       22


Contracts relating to the Acquired Business entered into by any of Seller
Parties following the date hereof in compliance with SECTION 5.1(r);

          (p)     all Assumed Benefit Plans (including the Assumed Benefit Plans
Contracts) and all assets associated therewith (including, without limitation,
all assets held in trust);

          (q)     all License Agreements to which any of Seller Parties is a
party and relating to the Acquired Business listed in SECTION 3.22(c) OF THE
SELLER PARTIES DISCLOSURE SCHEDULE; PROVIDED, HOWEVER, that with respect to the
rights, title and interest of Seller Parties in, to and under the License
Agreement between Ryder Systems, Inc. ("RSI") and Ryder TRS, Inc., dated as of
October 17, 1996, as amended (the "RYDER LICENSE AGREEMENT"), subject to the
limitations, if any, imposed by a Final Order or pursuant to a settlement
agreement reasonably acceptable to Buyer, between Seller Parties and RSI
resulting from the dispute between Seller Parties and RSI described in
SECTION 3.13(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE;

          (r)     all Airport Concessions to which any of Seller Parties is a
party listed in SECTION 3.17(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, and
such other Airport Concessions relating to the Acquired Business to which any of
Seller Parties becomes a party in the ordinary course of business consistent
with past practice;

          (s)     (i) all Leases to which any of Seller Parties is a party
listed in SECTION 3.16(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE and not
excluded from the transactions contemplated hereby pursuant to SECTION 2.4(a),
and the Fixtures and appurtenances at the Premises subject thereto owned by any
Seller Party and (ii) the Leases relating to the Acquired Business entered into
by Seller Parties following the date hereof in compliance with SECTION 5.1(dd);

          (t)     fee simple title to all Owned Real Property owned by any
Seller Party listed in SECTION 3.16(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
and the Fixtures and appurtenances thereat owned by any Seller Party;

          (u)     all Rental Vehicles and Support Vehicles owned by Seller
Parties (in each case, including Owned Vehicles);

          (v)     all tools, machinery, replacement and spare parts and supplies
relating to the Acquired Business;

          (w)     all Intellectual Property (other than the License Agreements
referred to in SECTION 2.3(q), which shall be subject to the provisions
thereof);

          (x)     the Permits held by or in connection with the Acquired
Business, to the extent such Permits are assignable to Buyer;

          (y)     the Business Records and the Documents;

          (z)     all accounts receivable relating to the Acquired Business,
including, without limitation, (i) credit card receivables, direct bill
receivables, tour receivables, Vehicle

                                       23


Manufacturer receivables, Franchisee receivables and subrogation receivables,
excluding the receivables referred to in SECTION 2.4(h) and (ii) customer,
Franchisee and Dealer deposits, security or collateral;

          (aa)    all credits, prepaid expenses (including garage and gas
inventory), deferred charges, advance payments, security deposits and prepaid
items (and, in each case, security interests or liens from Third Parties
relating thereto) related to any Acquired Asset or the Acquired Business;

          (bb)    all vendor allowances, including volume and promotional
incentive allowances and any other credits of Seller Entities received by or
accruing to such Persons related to vendor Contracts that are being assumed by
Buyer or vendor Contracts with respect to which Buyer is assuming liabilities;

          (cc)    all claims, judgments or causes of action of Seller Entities
to the extent relating to any of the Acquired Assets or the Acquired Business,
including claims for manufacturer's or vendor's warranties with respect to the
Acquired Assets or products liability related to the Acquired Assets, and claims
related to the value, condition or title to the Acquired Assets;

          (dd)    counterclaims, set-offs, recoupment rights or defenses with
respect to the Assumed Liabilities;

          (ee)    insurance claims and proceeds payable in respect of any
casualty event related to any Acquired Asset or the Acquired Business;

          (ff)    any and all rights of Seller Parties under the Business
Acquisition Agreements (except for indemnification with respect to third-party
claims, which shall be retained by Seller Parties to the extent of any
third-party claims against Seller Parties made at any time);

          (gg)    all confidentiality and similar agreements entered into by any
Seller Party or any of their respective representatives in connection with a
sale of the Acquired Business;

          (hh)    all right, title and interest in and to the Telephone Numbers
and all rights and interests in and to the Telephone Numbers used by any Seller
Party;

          (ii)    all bank accounts and lock-box accounts relating to the
Acquired Business or held by any Acquired Company;

          (jj)    all cash, cash deposits, surety, security and similar
deposits, and negotiable and non-negotiable instruments of Seller Parties (other
than the Cash Purchase Price and other amounts payable by Buyer to Seller
Parties pursuant to this Agreement);

          (kk)    all goodwill relating to the Acquired Business; and

                                       24


          (ll)    avoidance actions (if any) under Chapter 5 of the Bankruptcy
Code (including Actions under section 544, 545, 547, 548, 549 or 550 thereof)
against (i) the Acquired Companies or (ii) Buyer, Parent or their Affiliates.

     Section 2.4 EXCLUDED ASSETS. It is hereby expressly acknowledged and agreed
that the Acquired Assets shall not include, and no Seller Party is selling,
transferring, assigning, conveying or delivering to Buyer, and Buyer is not
purchasing, acquiring or accepting from any Seller Party, any of the rights,
properties or assets set forth or described in paragraphs (a) through (k) below
(the rights, properties and assets expressly excluded by this SECTION 2.4 from
the Acquired Assets being referred to herein as the "EXCLUDED ASSETS"):

          (a)     Contracts and Leases to which any Seller Party is a party or
by which its assets or properties are bound not transferred hereunder to Buyer
pursuant to SECTIONS 2.3(a) through 2.3(s), including those listed on
SCHEDULE 2.4(a) and all Contracts relating to the Retained Business;

          (b)     all owned real property not listed in SECTION 3.16(b) OF THE
SELLER PARTIES DISCLOSURE SCHEDULE and the Fixtures and appurtenances thereat;

          (c)     all cash or other property delivered by Buyer to Seller
Parties, and all rights of Seller Parties under this Agreement and the Ancillary
Agreements;

          (d)     the Equity Securities of any Person other than the Acquired
Companies and the Minority Investees;

          (e)     all minute books, stock transfer and similar records and
corporate seals of all Seller Parties;

          (f)     the rights of Budget Rent a Car International Inc. in respect
of the Actions instituted by Budget Rent a Car International Inc. against Sixt
AG and Sixt GmbH and Co. Autovermietung KG (collectively, "SIXT"), including (i)
pursuant to the judgment, dated April 15, 1999, by the Higher Regional Court of
Munich (Case No. 29 U 4446/98 4 HKO 8409/97 LG Munich) and (ii) under Case No. 6
U 6232/96 9 HKO-19905/96, for breach of contract based on the allegedly improper
passing of reservations by Sixt;

          (g)     all Tax refunds attributable to Taxes imposed on any Seller
Party;

          (h)     all intercompany accounts receivable due from any Seller Party
or Excluded Company to another Seller Party or Excluded Company;

          (i)     all assets, properties, rights and other interests to the
extent used or held for use by Seller Parties solely in connection with the
Retained Business, whether tangible or intangible, real, personal or mixed,
whether or not any of such assets, properties or rights have any value for
accounting purposes or are carried or reflected on or specifically referred to
in Seller's financial statements;

          (j)     the insurance or reinsurance Contracts and/or policies and
similar arrangements under which any Seller Entity is an insured party listed on
SCHEDULE 2.4(j); and

                                       25


          (k)     avoidance actions under Chapter 5 of the Bankruptcy Code
(including Actions under section 544, 545, 547, 548, 549 or 550 thereof) brought
or that could be brought against any Person other than (i) the Acquired
Companies or (ii) Buyer, Parent or their Affiliates.

     Section 2.5  ASSUMED LIABILITIES.

          (a)     For purposes of this Agreement, the term "ASSUMED LIABILITIES"
means all Liabilities of Seller Parties set forth or described in paragraphs (i)
through (vi) below (provided that, notwithstanding anything to the contrary
contained in this Agreement, the Assumed Liabilities shall not include any of
the Excluded Liabilities):

          (i)     under the Assumed Indebtedness;

         (ii)     expressly contained in any Assumed Contract or Assumed Lease,
     or portion thereof, that first arise after the Closing Date;

        (iii)     with respect to (A) the Assumed Benefit Plans that are Pension
     Plans, obligations for the benefit obligations accrued as of the Closing
     Date, (B) the Assumed Benefit Plans that are Welfare Plans, obligations for
     benefits arising from events or circumstances occurring on or before the
     Closing Date, (C) the Assumed Benefit Plans that are Pension Plans or
     Welfare Plans, obligations for administrative expenses for the current plan
     year, as provided under the administrative contracts set forth on SCHEDULE
     2.5(a)(iii) (the "ASSUMED BENEFIT PLANS CONTRACTS") and (D) the Assumed
     Benefit Plans that are not Pension Plans or Welfare Plans, all obligations
     thereunder;

         (iv)     such Actions to which any Seller Party is a party and
     disclosed in SECTION 3.13(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, or
     not meeting the threshold for disclosure therein and such Actions arising
     after the date hereof in the ordinary course consistent with past practice;

          (v)     such operating Liabilities (including Liabilities relating to
     accidents involving vehicles of the Acquired Business) (A) reflected on or
     of a category reserved against on the June 30 Balance Sheet and outstanding
     on the Closing Date and (B) incurred on or after July 1, 2002 relating
     exclusively to the operation or conduct of the Acquired Business in the
     ordinary course consistent with past practice (including accrued and unpaid
     payroll in the ordinary course of business) outstanding on the Closing Date
     and not excluded from the transactions contemplated hereby pursuant to
     SECTION 2.6; and

         (vi)     Liabilities in respect of legal, accounting, investment
     banking, advisory, brokerage, administrative, issuance, up-front,
     placement, structuring, commitment, underwriting, financing, "due
     diligence", rating agencies or similar fees, commissions, disbursements and
     expenses (whether or not referred to as fees, commissions, disbursements or
     expenses), breakage cost, increased interest rate as a result of an event
     of default, amortization event or payment prior to stated maturity (based
     on the original amortization or repayment schedule of the relevant
     indebtedness), prepayment penalties or fees and similar costs incurred or
     agreed to be paid or reimbursed by Seller Entities in connection with the
     transactions contemplated by this Agreement, the DIP Asset-Backed Fleet
     Financing, the DIP Financing, the DIP L/C Rollover, the Additional DIP
     Asset-

                                       26


     Backed Fleet Financing, any other post-Petition financing or extension of
     credit or the Chapter 11 Cases or otherwise payable in connection with the
     prepayment of any of the Assumed Indebtedness, the DIP Asset-Backed Fleet
     Financing or the Additional DIP Asset-Backed Fleet Financing ("QUALIFIED
     FEES"), not to exceed $42,000,000 LESS an amount equal to the aggregate
     amount of Qualified Fees paid by or on behalf of Seller Entities from June
     30, 2002 until the Closing; PROVIDED, HOWEVER, that if subsequent to
     November 9, 2002 (A) all the conditions set forth in SECTIONS 7.1 and 7.2
     have been satisfied, other than the condition set forth in SECTION 7.2(h),
     (B) the condition set forth in SECTION 7.2(h) is not waived by Buyer, (C)
     Seller Parties have notified Buyer in writing that Seller Parties intend to
     incur or caused to be incurred indebtedness under the Additional DIP
     Asset-Backed Fleet Financing and (D) definitive agreements relating to the
     Additional DIP Asset-Backed Fleet Financing have been executed and
     delivered and the Bankruptcy Court has entered an order approving such
     definitive agreements, then the Liabilities in respect of Qualified Fees to
     be assumed by Buyer shall not exceed $45,000,000 LESS an amount equal to
     the aggregate amount of Qualified Fees paid by or on behalf of Seller
     Entities from June 30, 2002 until the Closing.

          (b)     Buyer and Seller Parties shall seek to reject Contracts and
Leases identified by Buyer on or before 30 days prior to the Sale Hearing (as
defined in the Bidding Procedures) included in the Acquired Assets which would
otherwise have been Assumed Contracts or Assumed Leases; PROVIDED, HOWEVER,
nothing contained herein shall obligate Seller Parties to seek such rejection
unless and until such time as they have agreed with Buyer on the additional
amount of cash or other consideration to be paid by Buyer in exchange for such
rejection.

     Section 2.6  EXCLUDED LIABILITIES. Buyer shall not assume or be obligated
(and Seller Parties and their Subsidiaries shall retain their respective
obligations) to pay, perform or otherwise assume or discharge any Liabilities of
Seller or any Subsidiary of Seller, which constitute Excluded Liabilities, for
which Seller or such Subsidiary of Seller shall remain and be solely and
exclusively liable. For purposes of this Agreement, the term "EXCLUDED
LIABILITIES" means all Liabilities that are not expressly included in the
definition of Assumed Liabilities, including those set forth in paragraphs (a)
through (p) below, whether or not any such Liability has a value for accounting
purposes or is carried or reflected on or specifically referred to in Seller's
(or any of its Subsidiaries') financial statements:

          (a)     all Liabilities related or attributable to Taxes of, imposed
on, related or attributable to any Seller Party or any Excluded Company;

          (b)     all Liabilities arising out of, relating to or in connection
with, the Retained Business and the Excluded Assets;

          (c)     all Liabilities arising out of, secured by or related to, or
Encumbrance on, any Acquired Asset, other than Liabilities secured by Permitted
Encumbrances;

          (d)     all Liabilities or Encumbrances caused by or resulting from
violations, conflicts, breaches or defaults by any Seller Entity of, or under,
any Assumed Contract or Assumed Lease prior to the Closing, or any Liability of
any Seller Party that constitutes, may

                                       27


constitute or is alleged to constitute a tort or violation of requirement of any
Law (including any penalties or fines imposed or related thereto (whether civil
or criminal)), other than (i) those relating to Actions assumed pursuant to
SECTION 2.5(a)(iv) or (ii) torts or violations of Law arising in the ordinary
course of the Acquired Business (including matters arising from vehicle
accidents);

          (e)     all Liabilities of Seller Parties and their Affiliates to
current or former employees of Seller Parties and their Affiliates relating to
or arising out of any period ending prior to the Closing arising out of unlawful
discrimination, wrongful termination, violations of Law, breach of the terms of
any Assumed Benefit Plan or failure to pay or discharge such employees' wages or
benefits when due;

          (f)     all Liabilities arising under or relating to the Assumed
Benefit Plans, other than Liabilities expressly assumed by Buyer under
SECTION 2.5(a)(iii);

          (g)     all Liabilities under Benefit Plans that are not Assumed
Benefit Plans;

          (h)     any Liabilities arising from or relating to equity-based
incentive compensation awards (including but not limited to stock options and
grants of restricted stock) granted by Seller or any of its Affiliates to Seller
Entities Employees;

          (i)     any Liabilities (w) relating to indebtedness for borrowed
money, (x) evidenced by bonds, debentures, notes or similar instruments, (y)
relating to indebtedness of others guaranteed by any Seller Entity and (z) in
respect of letters of credit acceptance facilities, letters of guaranty or
similar instruments, in each case, other than Assumed Indebtedness, Assumed
Contracts or Assumed Leases;

          (j)     any obligation or commitment of any Seller Party to any Person
relating to any obligation or requirement to use any investment or commercial
bank or other financial institution as an advisor, arranger, manager, agent,
placement agent or underwriter in connection with the refinancing or
restructuring of any Assumed Indebtedness or any indebtedness of TFFC or any
other Seller Entity with such Person;

          (k)     all Liabilities for (i) fees, commissions or expenses (whether
or not referred to as fees, commissions or expenses) to the extent not assumed
by Buyer pursuant to SECTION 2.5(a)(vi) and (ii) any transaction relating to the
Excluded Assets or the Retained Business;

          (l)     all Liabilities of any Seller Parties or any Affiliate of any
Seller Parties related to the issuance or sale of any Equity Security of any
Seller Party, and any Liabilities arising directly or indirectly from the
rescission of a purchase or sale of a "security" (as that term is defined in
section 101(4) of the Bankruptcy Code) of a Seller Party or any Affiliate of a
Seller Party for damages arising from the purchase or sale of such security, or
from the reimbursement or contribution of such a Liability;

          (m)     all Liabilities of Seller Parties resulting from the arbitral
award rendered on January 24, 2002 and February 8, 2002 by the National and
International Arbitration Chamber

                                       28


of Milan in favor of Francesco Dragotto and Giuseppe Dragotto (Arbitration
proceeding No. 5100), and any attorney fees, interest and other amounts payable
in connection therewith;

          (n)     any and all Liabilities relating to, in connection with or
arising out of: (i) the Action entitled Ryder Systems, Inc. v. Budget Group,
Inc. and Ryder TRS, Inc. 02 Civ. 1598 (BSJ) filed on or about March 1, 2002, and
pending in the United States District Court for the Southern District of New
York and any and all other Liabilities of any Seller Party to Ryder Systems,
Inc. concerning any unapproved use of the "Ryder TRS" trademark in marketing
activities; and (ii) the Action entitled Gerina Woods-McCoy v. Budget Rent A Car
Systems, Inc., Civ. Action No. 02-S-735-N, filed on or about June 28, 2002, and
pending in the United States District Court for the Middle District of Alabama,
Northern Division;

          (o)     all Liabilities of any of Seller Parties to Sixt AG, Sixt GmbH
and Co. Autovermietung KG or any Affiliate thereof; and

          (p)     any Liability of Seller Parties with respect to
indemnification of any officer, director, employee or other agent or
representative of any Seller Entity.

     The listing of any specific item or matter as an Excluded Liability shall
in no respect (i) limit the generality of the first paragraph of SECTION 2.6 or
(ii) create any implication that any item or matter not so listed is an Assumed
Liability.

     Section 2.7  CLOSING. The closing of the transactions contemplated in this
Agreement (the "CLOSING") shall take place at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, Four Times Square, New York, New York 10036 at 10:00
a.m. on the second Business Day after the satisfaction or waiver of the last
unsatisfied or unwaived condition set forth in ARTICLE 7 (other than those
conditions contemplated to be satisfied at the Closing), or at such other time
and place as is mutually agreed in writing by Seller and Buyer. The date of the
Closing is referred to herein as the "CLOSING DATE."

     Section 2.8  DELIVERIES BY SELLER PARTIES. At the Closing, Seller Parties
shall deliver (or, in the case of clause (c), make available) to Buyer the
following:

          (a)     the Ancillary Agreements duly executed by the applicable
Seller Entities (in the case of the real estate deeds, the Lease Assignments and
the Trademark Assignments such documents shall also be duly acknowledged and in
proper form for recording);

          (b)     stock certificates together with duly executed stock powers
(affixed with all required stamps evidencing payment of transfer duties)
evidencing the Equity Securities of the Acquired Companies and the Minority
Investees, except that stock powers shall not be required in respect of Equity
Securities of Acquired Companies and Minority Investees which are held by other
Acquired Companies and, in the case of unincorporated entities, other applicable
evidence of, and transfer documents for, the Equity Securities therein;

          (c)     the Business Records and the Documents;

          (d)     the Governmental Consents and the Third Party Consents
procured by Seller Parties or their Affiliates;

                                       29


          (e)     a duly executed certificate ("FIRPTA CERTIFICATE") of
non-foreign status from each Seller Party in the form and manner that complies
with section 1445 of the Code and the Treasury Regulations promulgated
thereunder (notwithstanding anything to the contrary contained herein, if any
Seller Party fails to provide to Buyer a FIRPTA Certificate and Buyer elects to
proceed with the Closing, Buyer shall be entitled to withhold from the Cash
Purchase Price, the amount required to be withheld pursuant to section 1445 of
the Code), unless and until such FIRPTA certificate is provided;

          (f)     a duly executed IRS Form 8023 from Seller with respect to each
applicable Acquired Company (that Buyer has instructed Seller to make an
Election for pursuant to SECTION 6.3);

          (g)     certified copies of the 363 Order and the 365 Order;

          (h)     a certificate of the chief executive officer or president of
each Seller Party, dated the Closing Date, certifying the fulfillment of the
conditions set forth in SECTION 7.2(a) and SECTION 7.2(b);

          (i)     the resignations (effective as of or prior to the Closing
Date) of all directors (or in the case of unincorporated entities, managing
partners, members or persons of similar role and responsibility), of each
Acquired Company, in terms satisfactory in substance and form to Buyer;

          (j)     all such other bills of sale, assignments and other
instruments of sale, assignment, transfer or conveyance (including vehicle
registrations) as Buyer may reasonably request or as may be otherwise necessary
to evidence and effect the sale, transfer, assignment, conveyance and delivery
of the Acquired Assets to Buyer and to put Buyer in actual possession or control
of the Acquired Assets; and

          (k)     a pay-off letter executed by each administrative agent on
behalf of the lenders under each of the Amended and Restated Credit Agreement,
the DIP Financing and the DIP L/C Rollover to the effect that all obligations of
Seller Parties thereunder will be satisfied in full upon receipt of the
deliveries contemplated by SECTION 2.9(f) (other than those obligations,
including indemnification and expense reimbursement obligations which are not
Assumed Liabilities and which by their express terms survive the termination of
the Contracts evidencing any of the foregoing), together with appropriate
evidence that (i) all liens and encumbrances on any asset and property
constituting security therefor have been released and (ii) all letters of credit
issued under the Amended and Restated Credit Agreement, the DIP Financing and
the DIP L/C Rollover shall be released and returned concurrently with Buyer
taking the actions contemplated by SECTION 2.9(f).

     Section 2.9  DELIVERIES BY BUYER. At the Closing, Buyer shall deliver to
the applicable Seller Party or, in the case of clause (f) below, to the Person
entitled thereto, the following:

          (a)     the Cash Purchase Price due at Closing as provided in
SECTION 2.2, by wire transfer of immediately available funds to an account or
accounts designated by Seller for it, and on behalf of and as agent for the
other Seller Parties and as approved by the Bankruptcy Court;

                                       30


          (b)     the Ancillary Agreements duly executed by Buyer or one of its
Affiliates, as the case may be;

          (c)     a certificate of a senior executive officer of Buyer, dated
the Closing Date, certifying the fulfillment of the conditions set forth in
SECTION 7.3(a) and SECTION 7.3(b);

          (d)     all such other documents and instruments as Seller Parties may
reasonably request or as may be otherwise necessary or desirable to evidence and
effect the assumption by Buyer of the Assumed Liabilities;

          (e)     evidence of the obtaining of or the filing with respect to,
any Governmental Consents procured by Buyer; and

          (f)     replacement letters of credit, cash or such other instruments
as may be necessary to effect the cash payment of the then outstanding
indebtedness of Seller Parties under the Amended and Restated Credit Agreement,
the DIP Financing and the DIP L/C Rollover (in each case, to the extent such
indebtedness constitutes Assumed Indebtedness), including the release and return
to the issuers thereof of all letters of credit issued thereunder and then
outstanding.

     Section 2.10 CURE COSTS. Notwithstanding any other provision of this
Agreement (other than as set forth in SECTION 2.3(q), Seller Parties shall pay
or otherwise discharge on or before Closing all necessary costs to cure then
existing breaches or defaults under, and take such actions as are necessary to
achieve assumption by Seller Parties of, and assignment by Seller Parties to
Buyer of, the Assumed Contracts and the Assumed Leases (the "CURE COSTS"). All
Cure Costs will be agreed upon by Seller Parties and each party entitled to
receipt of a cure payment, or will be determined by the Bankruptcy Court, in
accordance with the 365 Order. To the extent any Cure Costs actually paid by
Seller Parties constitute payment in respect of amounts accrued following the
Closing Date, Buyer shall reimburse Seller Parties for such portion of Cure
Costs.

     Section 2.11 TRANSITION AND SUPPORT ARRANGEMENTS FOR RETAINED BUSINESS.
Each of Seller Parties and Buyer shall negotiate in good faith and enter into
mutually satisfactory arrangements (i) based on the terms set forth on
SCHEDULE 2.11(i), pursuant to which Buyer shall provide reasonable support
services to the Retained Business and (ii) based on the terms set forth on
SCHEDULE 2.11(ii), pursuant to which Buyer shall license the use of certain
Marks and Logos in connection with the operations of the Retained Business.

                                    ARTICLE 3
                REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES

     Except as specifically set forth in the Seller Parties Disclosure Schedule
prepared and signed by each Seller Party and attached hereto (the "SELLER
PARTIES DISCLOSURE SCHEDULE"), Seller Parties, jointly and severally, represent
and warrant to Buyer that all of the statements contained in this ARTICLE 3 are
true and complete as of the date of this Agreement (or, if made as of a
specified date, as of such date). Each exception set forth in the Seller Parties
Disclosure Schedule is identified by reference to a specific Section of this
Agreement. Any matter disclosed by Seller Parties in any particular Section of
the Seller Parties Disclosure Schedule shall not be deemed disclosed for
purposes of any other Section of the Seller Parties Disclosure Schedule.

                                       31


     Section 3.1  ORGANIZATION AND QUALIFICATION. Each Seller Entity is a legal
entity duly organized, validly existing and in good standing under the Laws of
the state or jurisdiction of its organization and has all requisite corporate or
other organizational power and authority to own, lease and operate its assets
and to conduct its business. Each Seller Entity is duly qualified to do business
and is in good standing in each other jurisdiction where the ownership, lease or
operation of its assets or the nature of the business conducted by it requires
such qualification, except where the failure to be so qualified would not be
reasonably likely to have a Material Adverse Effect. Seller Parties have made
available to Buyer true, complete and correct copies of the certificate of
incorporation and by-laws (or other comparable organizational documents) for
each Seller Entity, each as currently in effect.

     Section 3.2  CAPITALIZATION OF THE ACQUIRED COMPANIES.

          (a)     A complete and accurate list of the authorized and outstanding
Equity Securities of each of the Acquired Companies is set forth in SECTION
3.2(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, together with the identity of
each holder of such Equity Securities. The authorized Equity Securities of each
of the Acquired Companies is held either by one or more Seller Parties or one or
more Acquired Companies. Such Person owns all of the outstanding Equity
Securities beneficially and of record and free and clear of any Encumbrances
(other than Encumbrances pursuant to the Assumed Indebtedness). Upon delivery to
Buyer of the certificates (or other appropriate evidence thereof ) representing
the outstanding Equity Securities of the Acquired Companies and of the Minority
Investees owned by Seller Parties, at the Closing, Buyer will acquire good and
valid title to such Equity Securities, free and clear of any Liabilities or
Encumbrances.

          (b)     All of the outstanding Equity Securities of each Acquired
Company are duly authorized, validly issued, fully paid and nonassessable, and
not issued in violation of any preemptive or similar rights. Seller Parties have
the sole, absolute and unrestricted right, power and capacity to sell, assign
and transfer all of the outstanding Equity Securities of each Acquired Company
to Buyer free and clear of any Liabilities or Encumbrances.

          (c)     Other than pursuant to this Agreement, there are no
outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type or other
securities (i) requiring the issuance, sale, transfer, repurchase, redemption or
other acquisition of any Equity Securities of any of the Acquired Companies,
(ii) restricting the transfer of any of the Equity Securities of any of the
Acquired Companies or (iii) relating to the voting of any of the Equity
Securities of any of the Acquired Companies. There are no issued or outstanding
bonds, debentures, notes or other indebtedness of any Acquired Company having
the right to vote (or convertible into, or exchangeable for, securities having
the right to vote), upon the happening of a certain event or otherwise, on any
matters on which the equity holders of any Acquired Company may vote.

          (d)     Except as set forth in SECTION 3.2(d) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, none of the Seller Entities owns any equity interest, or
any interest convertible or exchangeable into an equity interest, in any Person
(other than an Acquired Company or an Excluded Company).

                                       32


     Section 3.3  CORPORATE POWER AND AUTHORITY. Each Seller Party has all
requisite corporate or other organizational power and authority to enter into
and deliver this Agreement, the Ancillary Agreements to which it is a party and
any agreements, documents or instruments to be executed and delivered in
connection herewith and therewith and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement, the Ancillary Agreements to which it is a party and any agreements,
documents or instruments to be executed and delivered in connection herewith and
therewith by each Seller Party and the consummation by each Seller Party of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate or other organizational action on the part of such Seller
Party and no other corporate or other organizational proceedings on the part of
any of Seller Parties is necessary to authorize this Agreement and the Ancillary
Agreements or to consummate the transactions contemplated hereby and thereby.
This Agreement, the Ancillary Agreements to which it is a party and any
agreements, documents or instruments to be executed and delivered in connection
herewith and therewith have been duly executed and delivered by each Seller
Party and, assuming the entry of the 363 Order and the 365 Order, constitute the
legal, valid and binding obligation of each Seller Party, enforceable against
such Seller Party in accordance with its terms.

     Section 3.4  CONFLICTS; CONSENTS AND APPROVALS. Neither the execution and
delivery of this Agreement, the Ancillary Agreements and any other agreements,
documents and instruments to be executed and delivered in connection with this
Agreement or any of the Ancillary Agreements, nor, upon the entry of the 363
Order and the 365 Order, the consummation of the transactions contemplated
hereby and thereby, will:

          (a)     conflict with, or result in a breach of any provision of, the
organizational documents of (i) any Seller Entity or (ii) any other Subsidiary
of Seller which is a party to the Ancillary Agreements or any other agreements,
documents and instruments to be executed and delivered in connection with this
Agreement or the Ancillary Agreements;

          (b)     violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event that, with the giving of
notice, the passage of time or otherwise, would constitute a default) under, or
entitle any Person (with the giving of notice, the passage of time or otherwise)
to terminate, accelerate, modify or declare a default under, or result in the
creation of any Liability in respect of, or cause an Encumbrance upon, any of
the properties or assets of the Acquired Companies or upon any Acquired Assets,
including, under any of the terms, conditions or provisions of (i) any Contract
to which any Seller Entity is a party or by which any of their respective
properties or assets (including the Acquired Assets) is bound or (ii) any Permit
(other than Permits that are not material to the operation of the Acquired
Business or the use, holding or ownership of any of the Acquired Assets and
which are readily obtainable by any Person without undue burden, expense or
delay) or filing to which any Seller Entity or any Subsidiary of any Seller
Entity is subject or by which any of their respective properties or assets
(including the Acquired Assets) is bound, except in the case of Acquired Assets
and assets of Acquired Companies, those violations, breaches, defaults,
terminations, cancellations, accelerations, creations, impositions, suspensions,
or revocations that are excused by or unenforceable as a result of Seller
Parties' filing of the Petition(s) or the applicability of the Bankruptcy Code
(but only to the extent such excuse, lack of enforceability or application of
the

                                       33


Bankruptcy Code will continue to apply in favor of Buyer and its successors and
assigns following the Closing);

          (c)     violate any Law applicable to any Seller Entity or Acquired
Company or any of their respective properties or assets (including the Acquired
Assets) or to the Acquired Business;

          (d)     require any action, consent or approval of any
non-governmental third party, other than consents and approvals of any
non-governmental third party (i) set forth in SECTION 3.4(d) OF THE SELLER
PARTIES DISCLOSURE SCHEDULE or (ii) excused by or rendered unnecessary as a
result of Sellers Parties' filing of the Petition(s) or the applicability of the
Bankruptcy Code (but only to the extent such excuse, rendering or application of
the Bankruptcy Code will continue to apply in favor of Buyer and its successors
and assigns following the Closing) (the "THIRD PARTY CONSENTS"); or

          (e)     require any action, consent or approval of, or review by, or
registration or filing by Seller Parties or the Acquired Companies with any
Governmental Body, other than consents, approvals, or authorizations of, or
declarations or filings (i) set forth in SECTION 3.4(e) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE or (ii) excused by or rendered unnecessary as a result of
Sellers Parties' filing of the Petition(s) or the applicability of the
Bankruptcy Code (but only to the extent such excuse, rendering or application of
the Bankruptcy Code will continue to apply in favor of Buyer and its successors
and assigns following the Closing) (the "GOVERNMENTAL CONSENTS").

     Section 3.5  TITLE TO PROPERTY; ADEQUACY OF ASSETS.

          (a)     Except as set forth in SECTION 3.5(a) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, Seller Entities have (and immediately prior to the Closing
will have) good and valid title to (and, in the case of Owned Real Property,
marketable title to), or a valid and binding leasehold interest or license in,
all assets comprising the Acquired Assets and all other assets or properties of
the Acquired Companies and their Subsidiaries, and possession thereof, in each
case, free and clear of any Liabilities or Encumbrances (other than Permitted
Encumbrances). Except as set forth in SECTION 3.5(a) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, no options or rights of first offer or rights of first
refusal or similar rights or options have been granted by any Seller Entity to
any Person (other than Buyer) to (i) purchase, lease or otherwise acquire any
interest in any of the Acquired Assets or in any asset or property of any of the
Acquired Companies, except for such Acquired Assets which are not material to
the conduct of the Acquired Business, (ii) become a Franchisee or Dealer (or
operate the automotive rental business as Franchisee or Dealer in any territory
other than the Territory for which such Franchisee or Dealer is currently
licensed by Seller) or (iii) use any of the Intellectual Property.

          (b)     Upon entry of the 363 Order and the 365 Order and payment of
the Cash Purchase Price at the Closing, Buyer or the Acquired Companies will
have good and valid title (and, in the case of Owned Real Property, marketable
title to), or a valid and binding leasehold interest, concession or license in
(i) all assets comprising the Acquired Assets free and clear of all Liabilities
(other than Assumed Liabilities) and Encumbrances (other than Permitted
Encumbrances, including for this purpose Encumbrances under Contracts of
Acquired

                                       34


Companies) and (ii) all assets of Acquired Companies and their Subsidiaries free
and clear of all Encumbrances (other than Permitted Encumbrances).

          (c)     The assets to be transferred to Buyer pursuant to this
Agreement are all the properties and assets (i) owned by Seller Parties (other
than the Excluded Assets) and (ii) necessary for the Acquired Business to be
conducted as currently conducted and as contemplated to be conducted.

          (d)     Subject to the entry of the 365 Order, all Contracts and
Leases to be transferred pursuant to this Agreement are assumable by Seller
Parties and assignable by Seller Parties to Buyer.

          (e)     BRAC (Bermuda) Holdings Limited and BRAC Reinsurance Company,
Ltd. are wholly-owned Subsidiaries of Seller and do not own, directly or
indirectly, any right, title or interest in, to and under any of the Acquired
Assets or the Acquired Business, or any other assets or properties (except for
amounts due from Seller Parties which do not constitute Assumed Liabilities).

     Section 3.6  SEC FILINGS; SELLER FINANCIAL STATEMENTS.

          (a)     Except as set forth in SECTION 3.6(a) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, since December 31, 1999, each Seller Entity has filed in a
timely manner all required reports, schedules, forms, statements and other
documents (including exhibits and all other information incorporated therein)
that it was required to file with the SEC (the "SELLER SEC DOCUMENTS"). As of
their respective filing dates, (i) the Seller SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable to
such Seller SEC Documents and (ii) no Seller SEC Document when filed (or when
amended and restated or as supplemented by a subsequently filed Seller SEC
Document) contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of Seller and its Subsidiaries (the
"SELLER FINANCIAL STATEMENTS") included in the Seller SEC Documents complied as
to form, as of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of Seller
and its Subsidiaries as of the dates thereof and the consolidated results of
their operations, cash flows and changes in their financial position for the
periods then ended (subject, in the case of unaudited interim statements, to
normal year-end audit adjustments that are not material). As of its filing date,
each Seller SEC Document did not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading.

                                       35


          (b)     SECTION 3.6(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains the unaudited consolidating statements of income of Seller and its
Subsidiaries for the quarterly period ending on March 31, 2002, and the related
consolidating balance sheet of Seller and its Subsidiaries as at the end of such
quarterly period (the "MARCH 31 FINANCIAL STATEMENTS"), and the unaudited
consolidating statements of income of Seller and its Subsidiaries for the
six-month period ending on June 30, 2002 (the "JUNE 30 INCOME STATEMENT"), and
the related consolidating balance sheet of Seller and its Subsidiaries as of the
end of such six-month period (the "JUNE 30 BALANCE SHEET," and together with the
June 30 Income Statement, the "JUNE 30 FINANCIAL STATEMENTS"). Except as set
forth in SECTION 3.6(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, the March 31
Financial Statements and the June 30 Financial Statements have been prepared in
accordance with GAAP and fairly present in all material respects the financial
position of Seller and its Subsidiaries and the consolidating results of
operations as of March 31, 2002 and June 30, 2002, respectively.

          (c)     SECTION 3.6(c) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains the audited statement of income of Budget Rent a Car Australia Pty.
Ltd. ("BUDGET AUSTRALIA") and the audited consolidated statement of income of
Budget Rent a Car Operations Pty. Ltd. ("OPERATIONS PTY.") and Camfox Pty. Ltd.
("CAMFOX" and together with Budget Australia and Operations Pty., the
"AUSTRALIAN SELLER ENTITIES") for the year ended on December 31, 2001, and the
related balance sheet of Budget Australia and the consolidated balance sheet of
Operations Pty. and Camfox as at the end of such annual period (the "AUSTRALIAN
FINANCIAL STATEMENTS"). The Australian Financial Statements have been prepared
in accordance with generally accepted accounting principles in Australia
consistently applied during the periods involved and fairly present in all
material respects the financial position of Budget Australia and the
consolidated financial position of Operations Pty. and Camfox and their results
of operations as of December 31, 2001.

          (d)     SECTION 3.6(d) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains the statement of income of each of Budget Rent-A-Car of Canada Limited
and the audited statement of income of Compact Rent-A-Car Limited (the "CANADIAN
SELLER ENTITIES") in each case for the year ended on December 31, 2001, and the
related balance sheet of each Canadian Seller Entity as at the end of such
annual period. Such financial statements of (i) Compact Rent-A-Car Limited have
been prepared in accordance with generally accepted accounting principles in
Canada consistently applied during the periods involved and fairly present in
all material respects the financial position of Compact Rent-A-Car Limited and
its results of operations as of December 31, 2001 and (ii) Budget Rent-A-Car of
Canada Limited, have been prepared in accordance with GAAP and fairly present in
all material respects the financial position of Budget Rent-A-Car of Canada
Limited and its results of operations as of December 31, 2001.

          (e)     SECTION 3.6(e) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains the audited consolidated statement of income of Budget Rent a Car
Limited and its subsidiaries (the "NEW ZEALAND SELLER ENTITIES") for the year
ended on December 31, 2001, and the related consolidated balance sheet of the
New Zealand Seller Entities as at the end of such annual period (the "NEW
ZEALAND FINANCIAL STATEMENTS"). The New Zealand Financial Statements have been
prepared in accordance with generally accepted accounting principles in New
Zealand consistently applied during the periods involved and fairly present in
all material respects the

                                       36


consolidated financial position of the New Zealand Seller Entities and their
results of operations as of December 31, 2001.

          (f)     Except as set forth in SECTION 3.6(f) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, since June 30, 2002, Seller Entities have not (i) made (or
committed to make) any payments or distributions to any of its Affiliates or to
any directors, officers or any of their respective relatives or any Affiliate
thereof (other than a Seller Entity), other than pursuant to the Related Party
Agreements listed in SECTION 3.11 OF THE SELLER PARTIES DISCLOSURE SCHEDULE,
director fees, salaries, bonuses, payment of benefits or reimbursement of
expenses in the ordinary course of business consistent with past practice or
under the Assumed Benefit Plans, (ii) made (or committed to make) any payment in
respect of Qualified Fees or similar fees or expenses and (iii) made or
(committed to make) any Investment in the Retained Business, any Excluded
Company or in any Person (other than a Seller Entity or a wholly-owned
Subsidiary thereof).

     Section 3.7  VEHICLES, ETC.

          (a)     SECTION 3.7(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains the following information which is substantially correct in all
material respects (except that no information need to be provided under clauses
(C), (D) or (E) with respect to leased Existing Trucks): (i) a list of all
trucks and cargo vans (other than pick-up trucks, except for the pick-up trucks
so listed) used as Rental Vehicles (the "EXISTING TRUCKS") as of June 30, 2002
or as of a date after June 30, 2002; and (ii) for each Existing Truck, (A) the
Seller Entity owner or lessee thereof, (B) whether such Existing Truck is owned
or leased, (C) the original purchase price thereof, (D) the current net book
value thereof, (E) the current monthly depreciation charges in respect thereof
(expressed as a percentage of the original purchase price), (F) the respective
VIN number or equivalent thereof, (G) the manufacturer and model year, (H) the
mileage thereof or, if such Existing Truck is subject to a Rental Transaction on
June 30, 2002 or such later date, the mileage thereof immediately prior to the
relevant Seller Entity entering into such Rental Transaction, (I) except for
Existing Trucks used in connection with the Acquired Business in Australia, the
box size thereof and (J) the location thereof or, if such Existing Truck is
subject to a Rental Transaction on June 30, 2002 or such later date, the
location thereof immediately prior to the relevant Seller Entity entering into
such Rental Transaction.

          (b)     SECTION 3.7(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains the following information which is substantially correct in all
material respects (except that no information need to be provided under clauses
(B), (C), (D), (E) or (F) with respect to leased Rental Vehicles or leased
Support Vehicles): (i) a list of all Rental Vehicles (other than Existing
Trucks) and Support Vehicles (in each case, including Owned Vehicles) used or
held for use by any Seller Entity in connection with the Acquired Business or
otherwise (other than in connection with the Retained Business) as of June 30,
2002 or as of a date after June 30, 2002; and (ii) for each such Rental Vehicle,
Support Vehicle and Owned Vehicle (A) whether such vehicle is owned or leased,
(B) the original purchase price thereof, (C) the date such vehicle was delivered
to the purchaser thereof, (D) the then current net book value thereof, (E) the
current monthly depreciation charges in respect thereof (expressed as a
percentage of the original purchase price), (F) the respective VIN number or
equivalent thereof, (G) the manufacturer, and model year (except in the case of
leased vehicles operated in Australia) and (H) except for

                                       37


Support Vehicles, vehicles used in connection with the Acquired Business in
Australia and dollies, the mileage or kilometers thereof or, if such vehicle is
a Rental Vehicle and is subject to a Rental Transaction on June 30, 2002 or such
later date, the mileage or kilometers of such Rental Vehicle immediately prior
to the relevant Seller Entity entering into such Rental Transaction. All
vehicles listed on SECTION 3.7(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE are
owned by a Seller Entity and all vehicles used or held for use in connection
with the Acquired Business in the United States (including Puerto Rico) are
owned by TFFC or BGI Leasing Inc., except for not more than 5,000 vehicles.

          (c)     As of June 30, 2002 (or if the Rental Vehicle is subject to a
Rental Transaction on June 30, 2002, then as of the date which is immediately
prior to the date on which the relevant Seller Entity entered into such Rental
Transaction), none of the Existing Trucks listed on SECTION 3.7(a) OF THE SELLER
PARTIES DISCLOSURE SCHEDULE nor the Rental Vehicles and the Support Vehicles (in
each case, including the Owned Vehicles) listed on SECTION 3.7(b) OF THE SELLER
PARTIES DISCLOSURE SCHEDULE have been the subject of theft, loss, casualty, or
destruction, have not been sold or otherwise disposed of (except for such
thefts, losses, casualties, destruction, sales or dispositions which are
immaterial in amount and within the range customarily experienced by Seller
Parties). Except as set forth in the immediately preceding sentence, each Rental
Vehicle and Support Vehicle (in each case, including each Owned Vehicle) is
readily available to Seller Entities for use in connection with the Acquired
Business.

          (d)     Seller Parties have adequate information systems consistent
with Prudent Industry Practices to determine the location (or, if rented, the
location to which it is assigned) of each Rental Vehicle and Support Vehicle (in
each case, including each Owned Vehicle) used or held for use by any Seller
Entity in connection with the Acquired Business.

     Section 3.8  ABSENCE OF CHANGES. Since December 31, 2001, (i) except for
the filing of the Petitions, the Acquired Business has been conducted and
operated in the ordinary course consistent with past practice and Prudent
Industry Practices, (ii) there has not been any Material Adverse Effect, (iii)
the Acquired Business has not experienced any material damage (whether or not
physical), destruction or loss (whether or not covered by insurance) to its
tangible property, software or electronic systems, in each case owned by Seller
Entities and used in connection with the Acquired Business and (iv) there has
been no material change in the accounting principles, practices, methods or
policies of Seller Entities.

     Section 3.9  NO UNDISCLOSED LIABILITIES.

          (a)     Except (i) as and to the extent reflected on the June 30
Balance Sheet or (ii) as incurred on or after July 1, 2002 in the ordinary
course of the Acquired Business consistent with past practice, neither the
Acquired Business nor the Acquired Companies are subject to, and the Acquired
Assets are not subject to, any Liabilities or Encumbrances (other than Assumed
Liabilities and Permitted Encumbrances). SECTION 3.9(a) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE contains true, accurate and correct copies of all Contracts
(except for such Contracts so indicated therein) evidencing indebtedness for
borrowed money of each Acquired Company as of June 30, 2002 or as of a date
after June 30, 2002 and the respective amounts outstanding thereunder as of such
date. The proceeds from each such borrowing have been used

                                       38


solely in the Acquired Business conducted by the Acquired Company that has
incurred such indebtedness or any of its Subsidiaries.

          (b)     Except as set forth in SECTION 3.9(b) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, no Acquired Company is under any obligation (whether
pursuant to a writing, oral statement, course of dealing or otherwise) to fund,
underwrite, provide vehicles or financing therefor, or guarantee or otherwise
support, in whole or in part, any obligations of Franchisees, Dealers, agents or
other Third Parties. Except as set forth SECTION 3.9(b) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, no Contract with any Franchisee, Dealer or agent relating
to the Acquired Business has any guarantee of income or volume, and no such
agreement provides for any financial recourse to any Seller Entity in the event
that income or volume goals are not met or for any other reason.

          (c)     SECTION 3.9(c) OF THE SELLER PARTIES DISCLOSURE SCHEDULE sets
forth the amounts due by Seller Entities to each Vehicle Manufacturer or any
Affiliates thereof as of June 30, 2002, the maturity date(s) thereof and any
Encumbrances created or purported to be created as collateral therefor.

          (d)     Except as set forth in SECTION 3.9(d) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, Seller Entities have made payments in full, when due, of
all amounts payable under the TFFC MV Leases, and prior to the date of this
Agreement none of such payments has been made with proceeds from draws under
letters of credit issued pursuant to the Amended and Restated Credit Agreement.

          (e)     SECTION 3.9(e) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true, complete and accurate list of all letters of credit issued
under the Amended and Restated Credit Agreement or pursuant to the DIP Financing
as of the date hereof, including, with respect to each such letter of credit (i)
the date of issuance, (ii) the expiration date, (iii) the amount, (iv) the
amount of any draws thereunder and (v) the purpose for which such letter of
credit was issued.

     Section 3.10 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE.

          (a)     Except as set forth in SECTION 3.10(a) OF THE SELLER PARTY
DISCLOSURE SCHEDULE, all accounts receivable of the Acquired Business arising
after January 1, 2002 and prior to the Closing are shown in the Business
Records, represent BONA FIDE transactions and arose and will arise in the
ordinary course of business. No such accounts receivable has been assigned or
otherwise sold to any Person and no Seller Entity has discharged or agreed to
discharge the obligor thereunder other than (i) upon such obligor making payment
in full of all amounts due under each such account receivable or (ii) for a
valid and legitimate business reason. For purposes of this SECTION 3.10(a), a
valid and legitimate business reason shall not include addressing the cash or
liquidity needs of Seller Entities.

          (b)     SECTION 3.10(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a list of accounts payable of the Acquired Business which are past due
by at least one day as of July 1, 2002 based on their current terms or which
contain payment terms that exceed 60 days. For each such account payable,
SECTION 3.10(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE sets forth: (i) the
payor and payee thereof; (ii) the amount outstanding thereunder; and (iii) the
approximate

                                       39


number of days such account is past due. Seller Entities have not made any
payments under any such accounts payable of the Acquired Business prior to the
stated maturity thereof, other than for a valid and legitimate business reason.

     Section 3.11 AFFILIATE TRANSACTIONS. Except as set forth in SECTION 3.11 OF
THE SELLER PARTIES DISCLOSURE SCHEDULE, the Acquired Companies are not a party
to, nor are their properties or assets bound by, and none of the Acquired Assets
or Assumed Liabilities will be comprised of, any Related Party Agreement. All
Related Party Agreements have been effected, or provide for, as applicable,
assets, property or services to be provided at Fair Market Value, at the date of
the applicable Related Party Agreement. None of Seller Entities is party to any
Contract with Ritz Services, Inc. which may not be terminated upon Closing with
no cost to Buyer.

     Section 3.12 COMPLIANCE WITH LAWS.

          (a)     Except as set forth in SECTION 3.12(a) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, (i) each Seller Entity has complied in all material
respects with all Laws applicable to the Acquired Business or the Acquired
Assets and (ii) no material investigation or review by any Governmental Body
with respect to the Acquired Business or the Acquired Assets (including the
Acquired Companies) or the Assumed Liabilities is or was pending, or, to the
knowledge of Seller Parties, threatened, against any Seller Entity, nor has any
Governmental Body indicated in writing an intention to conduct the same.

          (b)     Except as set forth in SECTION 3.12(b) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, none of Seller Entities has any unresolved regulatory
complaints or investigations (whether initiated by one or more Franchisees,
Dealers or a customer of Seller, its Subsidiaries or a Governmental Body)
relating to the Acquired Business, except for unresolved complaints or
investigations which could not reasonably be expected to result in Liability to
any Seller Party of $10,000 or more, individually, or $500,000 or more, in the
aggregate.

     Section 3.13 LITIGATION.

          (a)     Except as set forth in SECTION 3.13(a) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, there is no action, suit, proceeding, investigation,
pleading, charge, complaint, claim or demand ("ACTION") pending or, to the
knowledge of Seller Parties, threatened, against any Seller Entity or any
executive, officer or director thereof that relates to the Acquired Business,
the Acquired Assets or the Assumed Liabilities or in respect of which an
Acquired Company is a defendant, except for Actions pending or threatened which
could not reasonably be expected to result in Liability to any Seller Party of
$10,000 or more, individually or $750,000 or more, in the aggregate.

          (b)     Except as set forth in SECTION 3.13(b) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, none of Seller Entities, the Acquired Business, the
Acquired Assets or the Assumed Liabilities or the assets or Liabilities of any
Acquired Company is subject to any material outstanding order, writ, injunction,
judgment or decree relating to methods of doing business or relationships with
past, existing or future users or purchasers of services or assets of the
Acquired Business. Seller Parties are in compliance in all material respects
with all orders, writs,

                                       40


injunctions, judgments and decrees set forth in SECTION 3.13(b) OF THE SELLER
PARTIES DISCLOSURE SCHEDULE.

     Section 3.14 CORPORATE LOCATIONS; PERMITS; ETC.

          (a)     SECTION 3.14(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true and correct list of all corporate locations at which Seller
Entities conduct the business of the Acquired Business.

          (b)     Except as set forth in SECTION 3.14(b) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE: (i) all of the business of the Acquired Business in
Australia is conducted exclusively through the Australian Seller Entities;
(ii) all of the business of the Acquired Business in Canada is conducted
exclusively through the Canadian Seller Entities and through Franchisees which,
together with Budget Rent a Car, are parties to franchise Contracts to be
transferred to Buyer hereunder; and (iii) all of the business of the Acquired
Business in New Zealand is conducted exclusively through the New Zealand Seller
Entities.

          (c)     SECTION 3.14(c) OF THE SELLER PARTIES DISCLOSURE SCHEDULE sets
forth a true and correct list of all Permits and applications for such Permits
with respect to the operation of the Acquired Business or the use, holding or
ownership of any of the Acquired Assets, other than Permits that are not
material to the operation of the Acquired Business or the use, holding or
ownership of any of the Acquired Assets and which are readily obtainable by any
Person without undue burden, expense or delay. Such Permits have been duly
obtained from the appropriate Governmental Body in each applicable jurisdiction
and are in full force and effect.

          (d)     Each holder of a Permit has operated in all material respects
in compliance with all terms thereof. No event has occurred which permits the
revocation or termination of any of the Permits or the imposition of any
restriction thereon, or that would prevent any of the Permits from being renewed
on a routine basis or in the ordinary course. Except as set forth in
SECTION 3.14(d) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, no Seller Party or
Acquired Company is in default (either with the giving of notice or lapse of
time or the occurrence of any other condition, event or circumstance) under any
such Permit in any material respect.

          (e)     There are no Actions pending nor, to the knowledge of Seller
Parties, threatened, that seek the revocation, cancellation, suspension,
modification or refusal to renew of any such Permit and the transactions
contemplated by this Agreement and the Ancillary Agreements shall not cause any
such revocation, cancellation, suspension, modification or refusal to renew any
such Permits. All required filings with respect to such Permits have been timely
made and all required applications for renewal thereof have been timely filed.
There is not now issued, outstanding or, to the knowledge of Seller Parties,
threatened, any notice by any Governmental Body of violation or complaint, or
any application or proceeding (other than applications, proceedings, or
complaints that generally affect Seller Parties' industry as a whole) relating
to the Acquired Business or the Acquired Assets.

     Section 3.15 CONTRACTS.

          (a)     SECTION 3.15(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true, complete and accurate list of all franchise, prime license,
license, dealer or agency Contracts to

                                       41


which any Seller Entity is a party and which relate to the Acquired Business.
SECTION 3.15(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE provides: (i) for each
franchise, prime license and license Contract the date (including the date of
any amendments thereof), (ii) for each franchise, prime license, license and
Dealer Contract the names of the Franchisee or Dealer and Seller Entity party
thereto, (iii) for each franchise, prime license, license and Dealer Contract
the applicable fee and royalty arrangement (whether flat, royalty free, or flat
and royalty component), (iv) for each such Contract an indication of whether
such Franchisee or Dealer (that conducts business under the Budget brand name)
participates in the association and CorpRate programs of the Acquired Business
and (v) for each such Contract whether such agreement applies to cars, trucks,
or both. Except as set forth in SECTION 3.15(a) OF THE SELLER PARTIES DISCLOSURE
SCHEDULE, all dealer or agency Contracts listed therein entered into in
connection with Seller Entities' truck rental business, (i) may be terminated by
Seller Entities by giving 90 days' (or such shorter period specified therein)
notice to the relevant Dealer, without (A) any penalty or other payment by any
of Seller Entities, (B) imposing any requirement that Seller Entities sell or
dispose of any assets or properties and (C) imposing any limitations on the
conduct of business by any Seller Entity and (ii) do not require any Dealer or
agent thereunder to make payments to Seller Parties in connection with any
services other than certain information services or support provided by Seller
Parties to such Dealer or agent in connection therewith.

          (b)     SECTION 3.15(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true, complete and accurate list of all marketing Contracts to which
any Seller Entity is a party and which relate to the Acquired Business. For each
such Contract, SECTION 3.15(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
provides: (i) the date (including the date of any amendments thereof), (ii) the
names of the parties thereto and (iii) the type of service provided. Except as
set forth in SECTION 3.15(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, all
marketing Contracts listed therein may be terminated by Seller Entities by
giving 90 days' (or such shorter period specified therein) notice to the other
party thereof, without (i) any penalty or other payment on any of Seller
Entities, (ii) imposing any requirement that Seller Entities sell or dispose of
any assets or properties and (iii) imposing any limitations on the conduct of
business by any Seller Entity.

          (c)     SECTION 3.15(c) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true, complete and accurate list of all CorpRate Contracts to which
any Seller Entity is a party and which relate to the Acquired Business as
conducted by such Persons, in which the receipts thereunder exceeded in the most
recently concluded calendar year, or are reasonably expected to exceed during
the calendar year ending on December 31, 2002, $50,000. Except as set forth in
SECTION 3.15(c) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, all CorpRate
Contracts listed therein may be terminated by Seller Entities by giving 90 days'
(or such shorter period specified therein) notice to the other party thereof,
without (i) any penalty or other payment on any of Seller Entities, (ii)
imposing any requirement that Seller Entities sell or dispose of any assets or
properties and (iii) imposing any limitations on the conduct of business by any
Seller Entity.

          (d)     SECTION 3.15(d) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true, complete and accurate list of all association Contracts to
which any Seller Entity is a party and which relate to the Acquired Business, in
which the receipts thereunder exceeded in the most recently concluded calendar
year, or are reasonably expected to exceed during the calendar year ending on
December 31, 2002, $50,000. Except as set forth in SECTION 3.15(d) OF THE SELLER
PARTIES DISCLOSURE SCHEDULE, all association Contracts listed therein may be
terminated by Seller

                                       42


Entities by giving 90 days' (or such shorter period specified therein) notice to
the other party thereof, without (i) any penalty or other payment on any of
Seller Entities, (ii) imposing any requirement that Seller Entities sell or
dispose of any assets or properties and (iii) imposing any limitations on the
conduct of business by any Seller Entity.

          (e)     SECTION 3.15(e) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true, complete and accurate list of all joint venture, limited
liability company and partnership Contracts to which any Seller Entity is a
party and which relate to the Acquired Business.

          (f)     SECTION 3.15(f) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true, complete and accurate list of all affiliation Contracts
(including airline loyalty or similar programs) to which any Seller Entity is a
party and which relate to the Acquired Business. Except as set forth in
SECTION 3.15(f) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, all affiliation
Contracts listed therein may be terminated by Seller Entities by giving 90 days'
(or such shorter period specified therein) notice to the other party thereof,
without (i) any penalty or other payment on any of Seller Entities, (ii)
imposing any requirement that Seller Entities sell or dispose of any assets or
properties and (iii) imposing any limitations on the conduct of business by any
Seller Entity.

          (g)     SECTION 3.15(g) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true, complete and accurate list of all general sales agency, travel
agency and tour operator Contracts, to which any Seller Entity is a party and
which relate to the Acquired Business. Except as set forth in SECTION 3.15(g) OF
THE SELLER PARTIES DISCLOSURE SCHEDULE, all general sales agency, travel agency
and tour operator Contracts listed therein may be terminated by Seller Entities
by giving 90 days' (or such shorter period specified therein) notice to the
other party thereof, without (i) any penalty or other payment on any of Seller
Entities, (ii) imposing any requirement that Seller Entities sell or dispose of
any assets or properties and (iii) imposing any limitations on the conduct of
business by any Seller Entity.

          (h)     SECTION 3.15(h) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true, complete and accurate list of all Contracts with Vehicle
Manufacturers, including Repurchase Programs, which relate to the Acquired
Business.

          (i)     SECTION 3.15(i) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true, complete and accurate list of all bus and truck lease Contracts
(other than the TFFC MV Leases and the Ford MV Lease) to which any Seller Entity
is a party.

          (j)     SECTION 3.15(j) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true, complete and accurate list of all fuel supply Contracts to
which any Seller Entity is a party and which relate to the Acquired Business.
Except as set forth in SECTION 3.15(j) OF THE SELLER PARTIES DISCLOSURE
SCHEDULE, all fuel supply Contracts listed therein may be terminated by Seller
Entities by giving 90 days' (or such shorter period specified therein) notice to
the other party thereof, without (i) any penalty or other payment on any of
Seller Entities, (ii) imposing any requirement that Seller Entities sell or
dispose of any assets or properties and (iii) imposing any limitations on the
conduct of business by any Seller Entity.

                                       43


          (k)     SECTION 3.15(k) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true, complete and accurate list of all vendor (including reservation
services, and benefit service providers) Contracts to which any Seller Entity is
a party and which relate to the Acquired Business, in which the aggregate
payments thereunder exceeded in the most recently concluded calendar year, or
are reasonably expected to exceed during the calendar year ending on December
31, 2002, $100,000 or which is not in the ordinary course of business. Except as
set forth in SECTION 3.15(k) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, all
vendor Contracts listed therein may be terminated by Seller Entities by giving
90 days' (or such shorter period specified therein) notice to the other party
thereof, without (i) any penalty or other payment on any of Seller Entities,
(ii) imposing any requirement that Seller Entities sell or dispose of any assets
or properties and (iii) imposing any limitations on the conduct of business by
any Seller Entity.

          (l)     SECTION 3.15(l) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true, complete and accurate list of all collective bargaining
Contracts to which any Seller Entity is a party and which relate to the Acquired
Business.

          (m)     To the extent not disclosed or not required to be disclosed in
SECTIONS 3.9, 3.15(a) through 3.15(l), 3.15(n), 3.15(u), 3.16(a) through
3.16(h), 3.17(a), 3.18(b), 3.18(c), 3.19(a), 3.22, 3.25 and 3.28(b),
SECTION 3.15(m) OF THE SELLER PARTIES DISCLOSURE SCHEDULE contains a true,
complete and accurate list of all Contracts relating to the Acquired Business
(x) which involve (or could reasonably be expected to involve) the receipt or
payment in any calendar year of more than $100,000 or which is not terminable
without Liability, penalty or premium (whether imposed by contract, Law,
regulation or otherwise) on 30 or fewer days' notice, (y) with customers which
accounts for 0.5% or more of the revenues of the Acquired Business in the last
fiscal year or (z) which was not entered into in the usual and ordinary course
of business consistent with past practice.

          (n)     SECTION 3.15(n) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true, correct and complete copy of all Contracts (except for such
Contracts so indicated therein) to which any Seller Entity is a party which
evidence the obligations of Seller Entities under or with respect to the Assumed
Indebtedness to which Seller Parties are a party as of the date of this
Agreement.

          (o)     Except as specifically set forth in SECTION 3.15(o) OF THE
SELLER PARTIES DISCLOSURE SCHEDULE, Seller Parties have made available to Buyer
or its representatives true, correct and complete copies of all Contracts listed
on or required to be disclosed pursuant to SECTION 3.15(a) through SECTION
3.15(n) and SECTION 3.15(u) each a "BUSINESS CONTRACT." None of the Contracts
set forth in SECTION 3.15(o) OF THE SELLER PARTIES DISCLOSURE SCHEDULE is
required to be disclosed in SECTIONS 3.15(a) (other than the agency agreements
listed on SECTION 3.15(o) OF THE SELLER PARTIES DISCLOSURE SCHEDULE) or is
otherwise material to the Acquired Business, individually or together with any
other Contracts listed in SECTION 3.15(o) OF THE SELLER PARTIES DISCLOSURE
SCHEDULE.

          (p)     Each Business Contract complies with all applicable Laws and
is valid, binding and enforceable against each Seller Entity that is a party
thereto and the Third Parties party thereto in accordance with its terms. Except
as set forth in SECTION 3.15(p) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, each
Seller Entity and, to the knowledge of Seller Parties, each

                                       44


counterparty to any Business Contract is performing its obligations thereunder,
and is not in violation, conflict with, or breach of any provision of, or has
lost any benefit under, or acted in a manner that would constitute a default (or
allowed to occur an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Encumbrance upon any of the Acquired Assets or the
respective properties or assets of the Acquired Companies, except that Seller
Parties have not made certain payments under certain Business Contracts (other
than the TFFC MV Leases) in connection with or in anticipation of the Chapter 11
Cases. No Assumed Contract has been originated, or is subject to, the Laws of
any jurisdiction which would make the transfer and assignment of such Assumed
Contract unlawful.

          (q)     Except as described in SECTION 3.15(q) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, with respect to each Business Contract, none of the rights
or remedies under such Contracts in favor of Seller or any of its Subsidiaries
have been amended, modified, waived, supplemented, subordinated or otherwise
altered other than in good faith and in the ordinary course of business and all
the terms of each Business Contract (including any such amendment, modification,
waiver, supplement, subordination or other alteration of any Business Contract)
are included among the Documents made available to Buyer or its representatives
prior to the date hereof and to be transferred to Buyer pursuant to
SECTION 2.8(c).

          (r)     Except as set forth in SECTION 3.15(r) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, each franchise, license and dealer Contract was issued on a
standard form, generally used by Seller Entities to enter into such type of
Contract at such time in connection with the Acquired Business.

          (s)     Except as set forth in SECTION 3.15(s) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, none of Seller Entities is a party to any Contract in
connection with the Acquired Business that purports to (x) restrict the freedom
of any Seller Entity or any of its Affiliates to compete or engage in any line
of business or with any Person or in any geographical area or territory, in each
case, for any length of time or under any brand name, trademarks or tradenames
or (y) require any Seller Entity or any of its Affiliates to conduct business
exclusively with one or more Persons in a specified territory or geographical
area.

          (t)     None of the Seller Entities is a party to any Contract, except
for (i) the Contracts set forth in SECTIONS 3.9, 3.15(a) through 3.15(s),
3.15(u), 3.16(a) through (h), 3.17(a), 3.18(b), 3.18(c), 3.19(a), 3.22(c), 3.25,
and 3.28(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, (ii) such other Contracts
to which any of the Seller Entities is a party but are not required to be
disclosed therein and (iii) in the case of Seller Parties, Contracts that
constitute Excluded Assets.

          (u)     Except as set forth in SECTION 3.15(u) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, none of Seller Entities is a party to any "barter"
agreements with respect to the Acquired Business, nor is any Seller Entity
liable for any outstanding barter obligations nor the owner of any outstanding
barter receivables with respect to the Acquired Business.

                                       45


     Section 3.16 REAL ESTATE.

          (a)     SECTION 3.16(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a complete and correct list of all Leases. Prior to the date hereof,
true, correct and complete copies of all Leases relating to the Leased Premises
and all amendments thereto have been made available by Seller Parties to Buyer,
except for the leases under which Seller Parties are required to make monthly
lease payments of not more than $2,500 individually and which are set forth in
SECTION 3.16(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE. All such Leases are
valid, binding and in full force and effect and are enforceable by the lessee
thereunder and, except as set forth in SECTION 3.16(a) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, grant such lessee the exclusive right to use and occupy the
Leased Premises. Each applicable Seller Entity, as applicable, has, and shall
have as of the Closing, good and valid leasehold title to each of the Leased
Premises. Except as set forth in SECTION 3.16(a) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, all material covenants to be performed by the applicable
Seller Entity, as applicable, and, to the knowledge of Seller Parties, all
material covenants to be performed by the lessor or sublessor under each Lease,
have been performed in all material respects, and no event has occurred or
circumstance exists which, with the delivery of notice or the passage of time or
both, would constitute such a breach or default by the applicable Seller Entity,
or the lessor or sublessor, or which would permit the termination, modification
or acceleration of performance of the obligations of the applicable Seller
Entity, or the lessor or sublessor, under any Lease, except for such violations,
breaches, defaults, terminations, cancellations, accelerations, creations,
impositions, suspensions, or revocations that are excused by or unenforceable as
a result of Seller Parties' filing of the Petition(s), and except that Seller
Parties have not made certain payments under certain Leases in connection with
or in anticipation of the Chapter 11 Cases.

          (b)     SECTION 3.16(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true, correct and complete list of all Owned Real Property, including
the address of each parcel of Owned Real Property, the Seller Entity which owns
such Owned Real Property and the current use (or uses) of such Owned Real
Property. The applicable Seller Entities have, and shall have as of the Closing,
good, valid and marketable title in fee simple to each of the Owned Real
Property and to all buildings, structures and other improvements thereon and all
fixtures thereto (other than leased equipment), in each case, free and clear of
any Encumbrances (other than Permitted Property Encumbrances) and except as set
forth in SECTION 3.16(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE.

          (c)     Except as set forth in SECTION 3.16(c) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, no Seller Entity has received any written notice that (i)
any condemnation proceeding is pending or threatened with respect to the
Premises or (ii) any material zoning, building or similar law, code, ordinance,
order or regulation is or will be violated by the continued maintenance,
operation or use of any buildings or other improvements on any of the Premises.

          (d)     No certificate, permit or license from any Governmental Body
having jurisdiction over any of the Premises or any agreement, easement or other
right which is necessary to permit the lawful use and operation of the buildings
and improvements on any of the Premises or which is necessary to permit the
lawful use and operation of all driveways, roads and other means of egress and
ingress to and from any of the Premises has not been obtained or

                                       46


is not in full force and effect, and, to the knowledge of Seller Parties, there
is no pending threat of modification or cancellation of any of the same.

          (e)     Except as set forth in SECTION 3.16(e) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, all buildings, structures and other improvements on any of
the Premises and all fixtures thereto are structurally sound with no known
material defects and are in good operating condition and repair and are adequate
for the use and operation of the Premises to which they relate in the conduct of
the Acquired Business as presently conducted and require no maintenance, repairs
or replacements, except for ordinary routine maintenance, repairs or
replacements, which are not material in nature or cost.

          (f)     Except as set forth in SECTION 3.16(f) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, no Seller Entity is a party to, or is obligated under any
option, right of first refusal or other contractual right to sell, dispose of or
lease any of the Premises or any portion thereof or interest therein to any
Person or entity other than Buyer.

          (g)     Subject to the entry of the 365 Order, except as set forth in
SECTION 3.16(g) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, no consent is
required for the assignment of any Lease contemplated hereby.

          (h)     Prior to the date hereof, except as set forth in
SECTION 3.16(h) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, Seller Parties have
made available to Buyer for review true, correct and complete copies of all
deeds, mortgages, surveys, licenses, leases, title insurance policies (including
any underlying documents relating to Encumbrances), if any, or equivalent
documentation with respect to the Premises and other material documents relating
to or affecting the title to the Premises. The agreements, instruments and
documents listed in SECTION 3.16(h) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
are not, individually or together with any other agreements, instruments or
documents listed therein, material to the Acquired Business.

     Section 3.17 AIRPORT CONCESSIONS.

          (a)     SECTION 3.17(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a complete and correct list of all airport concessions or licenses
(whether evidenced in the form of a Contract or otherwise) entered into by,
granted to or applicable to any Seller Entity and which relate to the Acquired
Business (collectively, "AIRPORT CONCESSIONS"). Prior to the date hereof true,
correct and complete copies of all Airport Concessions have been made available
by Seller Parties to Buyer. Except as set forth in SECTION 3.17(a) OF THE SELLER
PARTIES DISCLOSURE SCHEDULE, all Airport Concessions are valid, binding and in
full force and effect and are enforceable by Seller Entity as concessionaire (or
licensee, however designated, the "CONCESSIONAIRE") thereunder.

          (b)     Except as set forth in SECTION 3.17(b) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, each Airport Concession grants the applicable
Concessionaire (a) the right to use and occupy the counter areas in the
terminals on an exclusive basis and the right to use and occupy the rental
operations area and related parking areas designated therein and (b)
non-exclusive right to use and occupy such other areas of the applicable airport
as may be necessary or convenient for the operation of the Acquired Business at
such airport. Except as set forth in

                                       47


SECTION 3.17(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, all material
covenants to be performed by the applicable Seller Entity and, to the knowledge
of Seller Entities, all material covenants to be performed by (x) the applicable
airport authority or airport operator or (y) the applicable Franchisee under
each Airport Concession, have been performed in all material respects, and no
event has occurred or circumstance exists which, with the delivery of notice or
the passage of time or both, would constitute a breach or default under the
applicable Airport Concession, or which would permit the termination,
modification or revocation of such Airport Concession, except that Seller
Parties have not made certain payments under certain Airport Concessions in
connection with or in anticipation of the Chapter 11 Cases.

          (c)     Subject to the entry of the 365 Order, except as set forth in
SECTION 3.17(c) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, no consent is
required for the assignment of any Airport Concession contemplated hereby.

     Section 3.18 EMPLOYEE; EMPLOYEE BENEFIT MATTERS.

          (a)     SECTION 3.18(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE sets
forth a true, complete and correct list, as of June 23, 2002, of each employee
of Seller Parties in connection with the Acquired Business ("SELLER PARTIES
EMPLOYEES") and of each Acquired Company, ("ACQUIRED COMPANY EMPLOYEES", and
together with the Seller Parties Employees, the "SELLER ENTITIES EMPLOYEES"),
together with each such employee's (i) starting date of employment, (ii) job
title, (iii) present hourly or, if salaried, annual compensation rate and
(iv) status of employment (i.e., active, inactive, leave of absence, short or
long-term disability, etc.).

          (b)     Except as set forth in SECTION 3.18(b) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, there are no employment contracts or severance agreements
with any Seller Entity Employees, and no Seller Entities Employee is a party to
(or otherwise the beneficiary of) any agreement or arrangement which could give
rise to any such employee becoming entitled to any severance, termination or
other comparable payments or benefits. Except as set forth in SECTION 3.18(b) OF
THE SELLER PARTIES DISCLOSURE SCHEDULE, there are no consulting or similar
agreements with any Person providing for the rendering of consulting or similar
services to any Seller Entity in connection with the Acquired Business and the
payment by any Seller Entity of compensation of any kind in consideration of any
such services.

          (c)     SECTION 3.18(c) OF THE SELLER PARTIES DISCLOSURE SCHEDULE sets
forth a true and complete list of all Benefit Plans. With respect to each
Benefit Plan, where applicable, Seller Parties have delivered or made available
to Buyer: (i) except as set forth in SECTION 3.18(c) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, true and complete copies of the Benefit Plan and any
amendments thereto (or if the Benefit Plan is not a written Benefit Plan, a
written description thereof), (ii) any related trust or other funding vehicle,
(iii) any reports or summaries required under applicable Law, (iv) the most
recent determination letter received from the IRS with respect to each Benefit
Plan intended to qualify under section 401 of the Code and (v) any material
communications to employees. Each Benefit Plan has been established, operated
and administered in all material respects in accordance with its terms and all
applicable Laws, including ERISA and the Code and any analogous Law of the
relevant jurisdictions to the extent applicable. Each Pension Plan which is
intended to be qualified under section 401(a) of the Code has received a
favorable determination letter from the IRS that it is so qualified, and, to the

                                       48


knowledge of Seller Parties, no circumstances exist that could reasonably be
expected to result in revocation of any such favorable determination letter. The
Seller Parties have caused to be timely filed with the Pension Benefit Guaranty
Corporation any required notice of a "reportable event" (as defined in Section
4043 of ERISA) that has occurred with respect to each Pension Plan that is
intended to be qualified under section 401(a) of the Code.

          (d)     No liability under Title IV or section 302 of ERISA has been
incurred by any Seller Entity or any ERISA Affiliate that has not been satisfied
in full, and no condition exists that presents a material risk to Buyer of
incurring any liability under Title IV or section 302 of ERISA in respect of
Seller or any ERISA Affiliate, other than liability for premiums due the Pension
Benefit Guaranty Corporation (which premiums have been paid when due). Insofar
as the representation made in this SECTION 3.18(d) applies to sections 4064,
4069 or 4204 of Title IV of ERISA, it is made with respect to any employee
benefit plan, program, agreement or arrangement subject to Title IV of ERISA to
which Seller or any ERISA Affiliate made, or was required to make, contributions
during the five-year period ending on the last day of the most recent plan year
ended prior to the Closing Date. No Benefit Plan is a single-employer plan (as
defined in section 3(41) of ERISA) subject to Title IV or section 302 of ERISA
except the Budget Group, Inc. Employees' Pension Plan (the " BUDGET PENSION
PLAN"). With respect to the Budget Pension Plan, as reported in the January 2002
Actuarial Valuation Report as of January 1, 2001 for the Plan Year and Taxable
Year Ending December 31, 2001 (the "ACTUARIAL VALUATION REPORT"), as of January
1, 2001 the market value of assets held in trust with respect to the Budget
Pension Plan exceeds the actuarial accrued liability thereunder, based on the
actuarial assumptions used for ongoing plan funding purposes in the Actuarial
Valuation Report.

          (e)     The PBGC has not instituted proceedings to terminate any
Benefit Plan that is subject to Title IV or section 302 of ERISA (each, a "TITLE
IV PLAN"), and no condition exists that presents a material risk that such
proceedings will be instituted.

          (f)     Except as set forth in SECTION 3.18(f) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements will not, either alone or in combination
with another event, (i) entitle any current or former employee or officer of any
Seller Entity to sale or retention bonuses, severance pay, unemployment
compensation or any other payment, (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due, any such employee or
officer or (iii) require the immediate funding or financing of any compensation
or benefits which, in each case, could reasonably become a Liability of Buyer.
Except as set forth in SECTION 3.18(f) OF THE SELLER PARTIES DISCLOSURE
SCHEDULE, no amounts payable under the Benefit Plans will fail to be deductible
for federal income tax purposes by virtue of section 162(m) or section 280G of
the Code.

          (g)     SECTION 3.18(g) OF THE SELLER PARTIES DISCLOSURE SCHEDULE sets
forth each Title IV Plan covering current or former employees of any Seller
Entity that is a "multiemployer plan," as defined in section 3(37) of ERISA.
With respect to each such Title IV Plan that is a "multiemployer pension plan":
(i) no Seller Party nor any ERISA Affiliate has made or suffered a "complete
withdrawal" or a "partial withdrawal," as such terms are respectively defined in
sections 4203 and 4205 of ERISA (or any liability resulting therefrom has been
satisfied in full), (ii) no event has occurred that presents a material risk of
a partial withdrawal, (iii) no Seller Party

                                       49


nor any ERISA Affiliate has any contingent liability under section 4204 of ERISA
and (iv) to the knowledge of Seller Parties, no circumstances exist that present
a material risk that any such plan will go into reorganization.

          (h)     Except as set forth in SECTION 3.18(h) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, no Benefit Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for any
present or former employees of any Seller Entity for periods extending beyond
their retirement or other termination of service, other than (i) coverage
mandated by applicable Law, (ii) death benefits under any "pension plan" or
(iii) benefits the full cost of which is borne by such employee of any Seller
Entity (or his or her beneficiary). Except as set forth in SECTION 3.18(h) OF
THE SELLER PARTIES DISCLOSURE SCHEDULE, no Seller Entity has ever represented,
promised or contracted (whether in oral or written form) to any employee(s) that
such employee(s) would be provided with retiree health or life benefits which
could reasonably be expected to result in Liability to Buyer.

          (i)     No Seller Entity, any ERISA Affiliate, or any Benefit Plan,
any trust created thereunder nor any trustee or administrator thereof has
engaged in a transaction or has taken or failed to take any action in connection
with which any such Person or any party dealing with the Benefit Plans or any
such trust could be subject to either a civil penalty assessed pursuant to
section 409 or 502(i) of ERISA or a tax imposed pursuant to section 4975 or 4976
of the Code which could reasonably become a Liability of Buyer.

          (j)     With respect to each Foreign Benefit Plan: (i) all employer
and employee contributions to each Foreign Benefit Plan required by Law or by
the terms of such Foreign Benefit Plan have been made, or if applicable, accrued
in accordance with GAAP, (ii) the fair market value of the assets of each funded
Foreign Benefit Plan, the liability of each insurer for any Foreign Benefit Plan
funded through insurance or the book reserve established for any Foreign Benefit
Plan, together with any accrued contributions, is sufficient to procure or
provide for the accrued benefit obligations, as of the Closing Date, with
respect to all current and former participants in such plan according to the
actuarial assumptions and valuations most recently used to determine employer
contributions to such Foreign Benefit Plan and no transaction contemplated by
this Agreement shall cause such assets or insurance obligations to be less than
such benefit obligations and (iii) each Foreign Benefit Plan required to be
registered has been registered and has been maintained in good standing with
applicable Governmental Bodies.

          (k)     There has been no material failure of a U.S. Benefit Plan that
is a group health plan (as defined in section 5000(b)(1) of the Code) to meet
the requirements of section 4980B(f) of the Code with respect to a qualified
beneficiary (as defined in section 4980B(g) of the Code). No Seller Party nor
any ERISA Affiliate has contributed to a nonconforming group health plan (as
defined in section 5000(c) of the Code) and no ERISA Affiliate of any Seller
Party has incurred a tax under section 5000(a) of the Code which could
reasonably become a liability of Buyer or any of its Subsidiaries.

          (l)     Except as set forth in SECTION 3.18(f) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, there are no pending or, to the knowledge of Seller
Parties, threatened or anticipated claims by or on behalf of any Benefit Plan,
by any employee or beneficiary under any Benefit

                                       50


Plan or otherwise involving any Benefit Plan (other than routine and immaterial
claims for benefits).

     Section 3.19 LABOR RELATIONS AND EMPLOYMENT.

          (a)     Except to the extent set forth in SECTION 3.19(a) OF THE
SELLER PARTIES DISCLOSURE SCHEDULE: (i) there is no labor strike, dispute,
slowdown, stoppage or lockout actually pending, or to the knowledge of Seller
Parties, threatened against or affecting any material portion of the Acquired
Business, (ii) no union or similar labor organization or employee association
claims to represent the employees of any Seller Entity other than under the
collective bargaining agreements listed in SECTION 3.19(a) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, (iii) no Seller Entity is a party to or bound by any
collective bargaining or similar agreement with any labor organization, or work
rules, works councils, or practices agreed to with any labor organization or
employee association applicable to employees of any Seller Entity, (iv) to the
knowledge of Seller Parties, there are no current union organizing activities,
nor has there been any union organizing activity within the past two years among
the employees of any Seller Entity, (v) there are no written personnel policies,
handbooks, manuals rules or procedures applicable to employees of any Seller
Entity, other than those set forth in SECTION 3.19(a) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, true and correct copies of which have heretofore been
delivered or made available to Buyer, (vi) each Seller Entity has at all times
been in material compliance with all applicable Laws respecting employment and
employment practices, terms and conditions of employment, wages, hours of work
and occupational safety and health with respect to employees of Seller Entities,
and are not engaged in any unfair labor practices as defined in the National
Labor Relations Act or other applicable Law, with respect to employees of any
Seller Entity, (vii) there is no unfair labor practice charge or complaint
against any of Seller Entities pending or, to the knowledge of Seller Parties,
threatened before the National Labor Relations Board or any similar state, local
or foreign agency with respect to employees of any Seller Entity, (viii) there
is no grievance arising out of any collective bargaining agreement or other
grievance procedure with respect to employees of any Seller Entity pending or,
to the knowledge of Seller Parties, threatened against any of Seller Entities,
(ix) no charges with respect to or relating to any employees of any Seller
Entity or against any Acquired Company are pending or, to the knowledge of
Seller Parties, threatened before the Equal Employment Opportunity Commission or
any other agency responsible for the prevention of unlawful employment
practices, (x) no Seller Entity has received notice of the intent of any
Governmental Body responsible for the enforcement of labor or employment laws to
conduct an investigation with respect to or relating to the Acquired Business or
the Acquired Companies and no such investigation is in progress and (xi) there
are no Actions pending or, to the knowledge of Seller Parties, threatened in any
forum by or on behalf of any present or former employee of any Seller Entity or
any applicant for employment or classes of the foregoing alleging that any
Seller Entity engaged in any conduct that constitutes, or could reasonably be
expected to constitute a breach of any express or implied contract or
employment, any Law governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the employment
relationship.

          (b)     During the past two years, Seller Entities (with respect to
the Acquired Business) have not effectuated: (i) a "plant closing" (as defined
in the WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or

                                       51


facility of any Seller Entity (with respect to the Acquired Business); or (ii) a
"mass layoff" (as defined in the WARN Act) affecting any site of employment or
facility of Seller (with respect to the Acquired Business)); nor has any Seller
Entity been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar state,
local or foreign Law.

     Section 3.20 CUSTOMERS. Except as set forth in SECTION 3.20 OF THE SELLER
PARTIES DISCLOSURE SCHEDULE, Seller Entities and, to the knowledge of Seller
Parties, each Person acting as an agent (including all Franchisees and Dealers)
of the Acquired Business, is in compliance in all material respects with all
Laws having the purpose or effect of prohibiting unlawful discrimination against
customers or potential customers.

     Section 3.21 ENVIRONMENTAL MATTERS. Except as set forth in SECTION 3.21 OF
THE SELLER PARTIES DISCLOSURE SCHEDULE:

          (a)     The Acquired Business and Seller Entities are in compliance in
all material respects with all applicable Environmental Laws, which compliance
includes, but is not limited to, the possession by the Acquired Business, Seller
Entities of all Permits required under applicable Environmental Laws, and
compliance with the terms and conditions thereof. None of the Acquired Business
or Seller Entities has received any communication (written or oral), whether
from a Governmental Body, citizens group, employee or otherwise, that alleges
that any Seller Entity or the Acquired Business is not in such compliance, and,
to the knowledge of Seller Parties, there are no circumstances that may prevent
or interfere with such compliance in the future. All Permits currently held by
the Acquired Business or Seller Entities pursuant to the Environmental Laws are
identified in SECTION 3.21(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE.

          (b)     Except as set forth in SECTION 3.21(b) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, there is no Environmental Claim pending or, to the
knowledge of Seller Parties, threatened against the Acquired Business, any
Seller Entity or Acquired Asset or, to the knowledge of Seller Parties, against
any Person whose Liability for any Environmental Claim any Seller Entity has or
may have retained or assumed either contractually or by operation of Law.

          (c)     Except as set forth in SECTION 3.21(c) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including the release, emission,
discharge, presence or disposal of any Material of Environmental Concern that
could form the basis of any Environmental Claim against any Seller Entity, the
Acquired Business, or Acquired Assets or, to the knowledge of Seller Parties,
against any Person whose Liability for any Environmental Claim the Acquired
Business or any Seller Entity has or may have retained or assumed either
contractually or by operation of Law.

          (d)     Without limiting the generality of the foregoing, (i) all
on-site locations where any Seller Entity, or the Acquired Business has stored
or disposed of Materials of Environmental Concern are identified in
SECTION 3.21(d) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, (ii) all underground
storage tanks, and the capacity and contents of such tanks, located at any
Acquired Asset or property owned, operated, or leased by any Seller Entity, or
the Acquired Business are identified in SECTION 3.21(d) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE,

                                       52


(iii) except as set forth in SECTION 3.21(d) OF THE SELLER PARTIES DISCLOSURE
SCHEDULE, there is no asbestos contained in or forming part of any building,
building component, structure or office space at any Acquired Asset or property
owned, operated, or leased by any Seller Entity, or the Acquired Business, (iv)
except as set forth in SECTION 3.21(d) OF THE SELLER PARTIES DISCLOSURE
SCHEDULE, no polychlorinated biphenyls (PCB's) are used or stored by any Seller
Entity, or to the knowledge of Seller Parties, by any other Person, at any
Acquired Asset or property owned, operated, or leased by any Seller Entity, or
the Acquired Business and (v) except as set forth in SECTION 3.21(d) OF THE
SELLER PARTIES DISCLOSURE SCHEDULE, all underground storage tanks owned,
operated, or leased by any Seller Entity, or the Acquired Business, and which
are subject to regulation under the federal Resource Conservation and Recovery
Act (or equivalent state or local law regulating underground storage tanks) meet
the technical standards prescribed at Title 40 Code of Federal Regulations Part
280 which became effective December 22, 1998 (or any applicable state or local
law requirements which are more stringent than such technical standards or which
became effective before such date).

     Section 3.22 INTELLECTUAL PROPERTY.

          (a)     As used herein, the term "INTELLECTUAL PROPERTY" means all of
the following used or held for use in the Acquired Business and any applications
or registrations therefor: trademarks, service marks, trade names, Internet
domain names, designs, logos, slogans and general intangibles of like nature,
together with all goodwill (collectively, "TRADEMARKS"); patents, copyrights;
computer programs, including any and all software implementations of algorithms,
models and methodologies whether in source code or object code form, databases
and compilations, including any and all data and collections of data, all
documentation, including user manuals and training materials, related to any of
the foregoing and the content and information contained on any Web site
(collectively, "SOFTWARE"); and confidential or proprietary information,
technology, know-how, customer lists, Personal Information, inventions,
processes, models and methodologies (collectively, "TRADE SECRETS").

          (b)     SECTION 3.22(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE sets
forth, for all Intellectual Property owned by any Seller Entity, a complete and
accurate list, of all United States domestic and foreign: (i) patents and patent
applications, (ii) Trademark registrations (including Internet domain name
registrations) and applications and material unregistered Trademarks, (iii)
copyright registrations, copyright applications and material unregistered
copyrights and (iv) Software which is owned by any Seller Party or any Acquired
Company ("PROPRIETARY SOFTWARE").

          (c)     SECTION 3.22(c) OF THE SELLER PARTIES DISCLOSURE SCHEDULE sets
forth a complete and accurate list of all Contracts granting, obtaining, or
restricting any right to use or practice any rights under any Intellectual
Property other than, with respect to Software, readily available off-the-shelf
Software subject to shrink wrap or click-through licenses, to which any Seller
Entity is a party, including license agreements, settlement agreements and
covenants not to sue (collectively, the "LICENSE AGREEMENTS"), and identifies
which License Agreements (i) grant to a Third Party any Intellectual Property
rights, (ii) grant to a Seller Entity any Intellectual Property rights, (iii)
restrict the use by any Seller Entity of Intellectual Property owned by any
Seller Entity and (iv) relate to the Acquired Business.

                                       53


          (d)     Except as set forth in SECTION 3.22(d) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE: (i) Seller Entities own or have the right to use all
Intellectual Property, free and clear of all Encumbrances; (ii) all Intellectual
Property owned or used by any Seller Entity has been duly maintained, is valid
and subsisting, in full force and effect and has not been cancelled, expired or
abandoned; (iii) there are no actions that must be taken by any Seller Entity
within 120 days from the date hereof, including filings or payments with the
United States Patent and Trademark Office or such other appropriate United
States domestic or foreign Governmental Body for purposes of obtaining,
maintaining, perfecting, preserving, or renewing any rights in the Intellectual
Property owned by any Seller Entity; (iv) no Seller Entity is infringing or
otherwise violating the intellectual property or other proprietary rights of any
Third Party, nor has any Seller Entity received written notice from any Third
Party within the last six years regarding any actual or potential infringement
or other violation by Seller or any Subsidiary of any intellectual property or
other proprietary right of such Third Party or challenging the validity of any
Intellectual Property; (v) no Third Party is infringing or otherwise violating
any Intellectual Property owned by any Seller Entity; (vi) no Seller Entity has
licensed or sublicensed its rights in any Intellectual Property, or received or
been granted any such rights, other than pursuant to the License Agreements;
(vii) the License Agreements are valid and binding obligations of each Seller
Entity party thereto, enforceable in accordance with their terms, and there
exists no event or condition which will result in a violation or breach of, or
constitute a default by the applicable Seller Entity (except (A) for such
violations, breaches, defaults, terminations, cancellations, accelerations,
creations, impositions, suspensions, or revocations that are excused by or
unenforceable as a result of Seller Parties' filing of the Petition(s) and (B)
that Seller Parties have not made certain payments under certain License
Agreements in connection with or in anticipation of the Chapter 11 Cases) or, to
the knowledge of Seller Parties, the Third Parties thereto, under any such
License Agreement; (viii) each of Seller Entities takes all measures necessary
to protect the confidentiality of Trade Secrets; (ix) no Trade Secret of any
Seller Entity has been disclosed or authorized to be disclosed to any Third
Party other than pursuant to a written nondisclosure agreement that adequately
protects the applicable Seller Entity's proprietary interests in and to such
Trade Secrets; (x) all Proprietary Software set forth in SECTION 3.22(b) OF THE
SELLER PARTIES DISCLOSURE SCHEDULE was either developed (A) by employees of
Seller or any of its Subsidiaries within the scope of their employment or (B) by
independent contractors who have assigned all of their rights to Seller or any
of its Subsidiaries pursuant to written agreement; and (xi) none of Seller
Entities share ownership of any Intellectual Property with any Third Party.

          (e)     Seller Entities have complied in all material respects with
applicable data protection or privacy laws governing the use of personal
information, including obtaining from customers express consent to use, store,
display, distribute, and transfer, electronically or otherwise, such personal
information. Seller Entities are in compliance in all material respects with any
privacy policies or related policies, programs or other notices that concern the
personal information collected by Seller Entities or through the Internet Web
sites operated by or on behalf of the Company (the "PERSONAL INFORMATION").

          (f)     Neither this Agreement nor the transactions contemplated by
this Agreement or the Ancillary Agreements, will result in (i) the loss or
impairment (except for such losses or impairments that are excused by or
unenforceable as a result of Seller's or Seller Parties' filing of the
Petition(s)) of any rights of any Seller Entity to own, use, or to bring any
action for

                                       54


the infringement or other violation of, any of the Intellectual Property, nor
will such consummation require the consent of any Third Party with respect of
any Intellectual Property, (ii) any Third Party being granted rights or access
to, or the placement in or release from escrow of, any Intellectual Property,
(iii) Buyer or any Seller Entity granting to any Third Party rights to
Intellectual Property greater than the rights granted by Seller Entities
pursuant to any License Agreement prior to the Closing, (iv) Buyer or any Seller
Entity being bound by, or subject to, any non-compete or other restriction on
the operation or scope of its businesses greater than the restrictions to which
Seller Entities are bound prior to the Closing or (v) Buyer or any Seller Entity
being obligated to pay any royalties or other amounts to any Third Party in
excess of the amounts payable by Seller Entities prior to the Closing pursuant
to any License Agreement.

     Section 3.23 TAXES.

          (a)     Except as set forth in SECTION 3.23(a)(i) THROUGH (iii) OF THE
SELLER PARTIES DISCLOSURE SCHEDULE:

          (i)     Each Seller Party has (A) duly and timely filed (or there has
     been filed on its behalf) with the appropriate Tax authority all income,
     sales and other material Tax Returns required to be filed by it, and all
     such Tax Returns are true, correct and complete and (B) timely paid in full
     (or there has been paid on its behalf) all Taxes due and payable or claimed
     to be due and payable from it by any Tax authority;

         (ii)     no United States federal, state, local or foreign audits or
     other administrative proceedings have formally commenced or are presently
     pending with regard to any income, sales or other material Taxes or Tax
     Returns of or including any Seller Party, and no notification has been
     received that such an audit or other proceeding is pending or threatened
     with respect to any such Taxes or any Tax Return; and

        (iii)     there are no Encumbrances for Taxes upon the Acquired Assets
     except for statutory liens for Taxes not yet due and payable.

          (b)     Except as set forth in SECTION 3.23(b)(i) through (xiv) OF THE
SELLER PARTIES DISCLOSURE SCHEDULE:

          (i)     each Acquired Company has (x) duly and timely filed (or there
     has been filed on its behalf) with the appropriate Tax authority all Tax
     Returns required to be filed by it, and all such Tax Returns are true,
     correct and complete, (y) timely paid (or there has been paid on its
     behalf) in full all Taxes due and payable and (z) established in the
     financial statements reserves that, as of the date thereof, were adequate
     for the payment of any Taxes not yet due and payable. Since the date of the
     most recent financial statements of each Acquired Company, none of the
     Acquired Companies has incurred any Liability for Taxes other than in the
     ordinary course of business consistent with past practice;

         (ii)     each Acquired Company has complied in all respects with all
     applicable Laws relating to the payment and withholding of Taxes and has,
     within the time and manner prescribed by Law, withheld and paid over to the
     proper Tax authority all amounts required to be withheld and paid over for
     all periods under all applicable Laws

                                       55


     including withholding in connection with payments to employees, independent
     contractors, creditors, partners, stockholders or other Third Parties;

        (iii)     no waiver, extension or comparable consent given by any
     Acquired Company regarding the application of the statute of limitations
     with respect to any Taxes or Tax Return is outstanding nor is any request
     for any such waiver or consent pending. No deficiency for Taxes has been
     proposed or asserted against any Acquired Company that has not been
     resolved or paid in full;

         (iv)     no power of attorney which is currently in force has been
     granted by or with respect to any Acquired Company with respect to any Tax
     Return or matter relating to Taxes;

          (v)     no Acquired Company has been a member of any federal, state,
     local or foreign consolidated, unitary, combined, affiliated or similar
     group of corporations other than the group in which Seller is the common
     parent;

         (vi)     no United States federal, state, local or foreign audits or
     Actions have formally commenced or are presently pending with regard to any
     Taxes or Tax Returns of or including any Acquired Company, and no
     notification has been received that such an audit or Action is pending or
     threatened with respect to any Taxes due from or with respect to any
     Acquired Company or any Tax Return filed by or with respect to any Acquired
     Company;

        (vii)     no Acquired Company has agreed to, or is required to include
     in income any adjustment pursuant to section 481(a) of the Code (or any
     similar provision of state, local and foreign Law) by reason of a change in
     accounting method or otherwise (nor has any Tax authority proposed in
     writing any such adjustment or change of accounting method);

       (viii)     no Acquired Company has filed a consent pursuant to section
     341(f) of the Code (or any predecessor provision) or agreed to have section
     341(f)(2) of the Code apply to any disposition of a subsection (f) asset
     (as such term is defined in section 341(f)(4) of the Code);

         (ix)     there are no Encumbrances for Taxes upon the assets or
     properties of any Acquired Company except for statutory liens for Taxes not
     yet due and payable;

          (x)     no jurisdiction where any Acquired Company does not file a Tax
     Return has made a claim that such Acquired Company is required to file a
     Tax Return for such jurisdiction;

         (xi)     no Acquired Company has entered into any agreement (whether
     written or oral) with respect to the performance of services for which
     payment thereunder would result in a non-deductible expense to such
     Acquired Company pursuant to sections 162 or 280G of the Code. No Person is
     entitled to receive any gross-up payment from any Acquired Company in the
     event that the excise Tax of section 4999(a) of the Code is imposed on such
     Person;

                                       56


        (xii)     no Acquired Company is a party to, is bound by, or has an
     obligation under, any Tax sharing agreement, Tax indemnification agreement
     (other than (x) a customary commercial agreement to indemnify for Taxes
     contained in any Lease or (y) an employment agreement for which a gross-up
     payment (described in SECTION 3.23(b)(xi)) is required to be made) or
     similar Contract and no Acquired Company has a potential liability or
     obligation to any Person as a result of, or pursuant to, any such Contract;

       (xiii)     no Acquired Company has received a ruling from any Tax
     authority. No closing agreement pursuant to section 7121 of the Code (or
     any predecessor provision) or any similar provision of any state, local or
     foreign Law has been entered into by or with respect to any Acquired
     Company; and

        (xiv)     no Acquired Company has engaged or participated directly or
     indirectly, in any "listed transaction" (within the meaning of sections
     6011 and 6111 of the Code and the Treasury Regulations thereunder).

          (c)     Each Acquired Company has previously delivered or made
available to Buyer complete and accurate copies of (i) all audit reports, letter
rulings, technical advice memoranda relating to United States federal, state,
local and foreign Taxes due from or with respect to such Acquired Company, (ii)
United States federal Tax Returns, and those state, local or foreign Tax Returns
filed by such Acquired Company and (iii) any closing agreements entered into by
such Acquired Company with any Tax authority. Each Acquired Company will
immediately deliver to Buyer all materials with respect to the foregoing for all
matters arising after the date hereof.

     Section 3.24 COMPLIANCE WITH INSURANCE LAWS.

          (a)     The business and operations of Seller Entities have been
conducted in compliance in all material respects with all applicable insurance
statutes, regulations, orders, decrees, rules, pronouncements, ordinances,
bulletins, market conduct recommendations, licensing requirements, writs,
injunctions, directives, judgments, settlement agreements, principles of common
law, constitutions and treaties enacted, promulgated, issued, enforced or
entered by any Governmental Body regulating the business, activities or
operations of Seller Entities (collectively, "INSURANCE LAWS"). Notwithstanding
the generality of the foregoing, each Seller Entity, its Affiliates, Franchisees
and Dealers has marketed, sold and issued their respective products in
compliance with Insurance Laws applicable to the Acquired Business and in the
respective jurisdictions in which such products have been sold, including,
without limitation in compliance with (i) all applicable prohibitions against
"redlining" or withdrawal of business lines, (ii) all applicable requirements
relating to disclosures to customers and insured and (iii) all applicable
requirements relating to insurance product projections and illustrations. In
addition, except as set forth in SECTION 3.24(a) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE (x) there is no pending or, to the knowledge of Seller
Parties, threatened charge by any Governmental Body that any Seller Entity has
violated, nor any pending or, to the knowledge of Seller Parties, threatened
investigation by any Government Body with respect to possible violations of, any
applicable Insurance Laws; and (x) no Seller Entity is subject to any order or
decree of any

                                       57


Government Body relating specifically to such Person (as opposed to insurance
companies generally).

          (b)     Except as set forth in SECTION 3.24(b) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, each Seller Entity and its employees have all Permits and
insurance and other exemptions, classifications, and similar documents required
under applicable Insurance Laws for its conduct of the Acquired Business (each
of which, an "INSURANCE PERMIT") as it is currently conducted in each
jurisdiction (as listed in SECTION 3.24(b) OF THE SELLER PARTIES DISCLOSURE
SCHEDULE) in which such Persons require such Insurance Permits. The Acquired
Business has been and is being conducted in compliance in all material respects.

          (c)     All such received Insurance Permits are in full force and
effect, and there is no Action pending or, to the knowledge of Seller Parties,
threatened which could reasonably be expected to lead to the revocation,
amendment, failure to renew, limitation, modification, suspension or restriction
of any such Insurance Permit. No Seller Entity is operating under any agreement
or understanding with the regulatory authority of any state which in any way
restricts its authority to conduct the Acquired Business or requires any such
Person to take, or refrain from taking, any action relating to the conduct of
the Acquired Business otherwise permitted by Law.

          (d)     Seller Parties have made available for inspection by Buyer
complete copies of all registrations, filings and submissions made since January
1, 1996 by any Seller Entity (including its employees) pursuant to or under any
Insurance Laws.

     Section 3.25 INSURANCE.

          (a)     SECTION 3.25(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
contains a true, accurate and complete description of all policies of collision,
fire, casualty, liability, workmen's compensation and other forms of insurance,
reinsurance and similar arrangements (including polices providing coverage with
respect to so-called vicarious liability laws) pursuant to which any Seller
Entity seeks to limit, or transfer to a Third Party, financial or other risk,
owned or held by Seller and each of its Subsidiaries, applicable to any Seller
Entity or any of their respective assets, in each case relating to or in
connection with the Acquired Business. All such policies are in full force and
effect, all premiums with respect thereto covering all periods up to and
including the date of the Closing have been paid, and no notice of cancellation
or termination has been received with respect to any such policy. For each such
agreement, SECTION 3.25(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE provides:
(i) the date thereof; (ii) the name of the insurer; (iii) Seller Entities
covered thereby; (iv) the premiums (or similar consideration) paid therefor for
each contract/calendar year for the relevant policy since January 1, 2000; and
(v) expiration date. Such policies are (v) sufficient for compliance in all
material respects with Law and of all agreements to which Seller or any of its
Subsidiaries is a party, (w) valid, outstanding and enforceable policies, (x)
provide adequate insurance coverage for the assets and operations of Seller and
each of its Subsidiaries, (y) will remain in full force and effect through the
respective dates set forth in SECTION 3.25(a) OF THE SELLER PARTIES DISCLOSURE
SCHEDULE without the payment of additional premiums and (z) will not in any way
be affected by, or terminate or lapse by reason of, the transactions
contemplated hereby. Prior to the date of this Agreement, Seller Parties have
provided Buyer with a list of all claims made under the insurance policies and
other

                                       58


forms of insurance, reinsurance and similar agreements described in
SECTION 3.25(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE and of all payments
made to the insured party or parties thereunder since January 1, 2000, and the
information contained in such list is true, accurate and complete.

          (b)     SECTION 3.25(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
identifies all risks with respect to the Acquired Business which Seller Parties,
their Board of Directors or officers have designated as being self-insured.

          (c)     SECTION 3.25(c) OF THE SELLER PARTIES DISCLOSURE SCHEDULE
identifies: (i) each type of insurance offered by Seller Entities, Franchisees
or Dealers to renters of Rental Vehicles; (ii) premiums charged therefor; and
(iii) a description of the terms of any Third Party insurance or reinsurance
purchased in respect thereof. Seller Parties have provided Buyer with copies of
(x) all materials pursuant to which such insurance coverage is offered to
customers of the Acquired Business and (y) the policies of such Third Party
insurance or reinsurance. Prior to the date of this Agreement, Seller Parties
have provided Buyer with a true, correct and complete claims history in respect
of each such type of insurance coverage offered to customers of the Acquired
Business.

          (d)     Except as set forth in SECTION 3.25(d) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, (i) each of the policies being transferred to Buyer
pursuant to SECTION 2.3(n) provides insurance coverage for the exclusive benefit
of the Acquired Business, including Persons granted rights thereunder as
additional named insured in the ordinary course of business, (ii) prior to the
Closing, no Person shall have any rights, contractual or otherwise to assert any
claim or right of recovery or obtain any benefit under any such policies in
connection with the Retained Business and (iii) prior to the Closing, the
administration and servicing of claims arising under or relating to the policies
covering the Acquired Business are performed separate and apart from the
administration and servicing of claims arising under or relating to policies
covering the Retained Business.

     Section 3.26 BOOKS AND RECORDS. Except as set forth in SECTION 3.26 OF THE
SELLER PARTIES DISCLOSURE SCHEDULE, each Seller Entity has at all times since
formation maintained Business Records which accurately reflect all its material
transactions in reasonable detail, and have at all time maintained accounting
controls, policies and procedures reasonably designed to provide that such
transactions are executed in accordance with its management's general or
specific authorization, and recorded in a manner which permits the preparation
of financial statements in accordance with GAAP and applicable regulatory
accounting requirements and other account and financial data, and the
documentation pertaining thereof is retained, protected and duplicated in
accordance with applicable regulatory requirements.

     Section 3.27 FRANCHISEE MATTERS.

          (a)     Seller Parties have delivered to Buyer a true and complete
copy of the current uniform franchise offering circular and other disclosure
statements of Seller or of any of its Subsidiaries in connection with its sale
of franchises to subfranchisors and Franchisees (the "OFFERING CIRCULARS"). As
of their respective dates, such documents complied in all material respects with
the requirements of the Federal Trade Commission Act of 1914, as amended, to the
extent applicable, and to applicable Laws; and none of such documents contained
any untrue

                                       59


statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

          (b)     Except as set forth in SECTION 3.27(b) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, to the knowledge of Seller Parties, (i) each Franchisee and
Dealer (excluding Franchisees and Dealers of the Retained Business), operates,
and has since June 30, 2002 operated substantially in accordance with the
policies, procedures and guidelines of the Acquired Business as the same may be,
or have been, in effect from time to time and (ii) there is no Action pending or
threatened against any such Franchisee in connection with the conduct of the
Acquired Business.

          (c)     Neither Seller Parties nor any Dealer or agent of Seller
Parties is subject to any state franchise law in connection with the conduct or
operation of the Acquired Business through Dealers or agents.

     Section 3.28 VEHICLE RETURN PURSUANT TO REPURCHASE PROGRAMS; VEHICLE
ORDERS.

          (a)     Seller Parties have, since January 1, 2002, sold, returned or
otherwise disposed of, and have caused each other lessee under a TFFC MV Lease
to sell, return or otherwise dispose of each vehicle subject to a Repurchase
Program (other than a vehicle that has suffered a casualty loss) to the related
manufacturer official auction or other facility designated by the relevant
Vehicle Manufacturer or Affiliate thereof at the relevant lessee's sole expense
after the minimum term or mileage limit under such Repurchase Program for such
vehicle is achieved, but prior to the expiration of the maximum term and/or
prior to reaching the maximum mileage limit under such Repurchase Program for
such vehicle, other than isolated cases not exceeding more than 25 vehicles in
any calendar month on average. Seller Parties have disposed, and have caused
each other lessee under a TFFC MV Lease to dispose, of all vehicles not subject
to a Repurchase Program in accordance with the provisions of the applicable TFFC
MV Lease.

          (b)     SECTION 3.28(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE sets
forth each outstanding vehicle purchase or lease order placed by Seller Entities
with Vehicle Manufacturers relating to the Acquired Business and providing for
payments thereunder of $50,000 or more, specifying (i) the date of the relevant
order, (ii) the number, type and year model of the vehicles covered by such
order, (iii) the purchase price per vehicle and (iv) the expected date of
delivery thereof.

          (c)     None of the vehicles owned by TFFC are leased, rented or
otherwise used in connection with the Retained Business.

     Section 3.29 DISCLOSURE. No representation or warranty by any Seller Party
contained in this Agreement and no statement contained in any certificate or
other document required to be delivered by or on behalf of Seller or any of its
Subsidiaries pursuant to this Agreement contains or will contain (as applicable)
any untrue statement of material fact, or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading
or necessary in order to fully and

                                       60


fairly provide the information required to be provided in any such document,
schedule, list, certificate or other writing.

     Section 3.30 BROKERS. Other than Lazard Freres & Co. LLC, the fees and
expenses of which will be paid by Seller, no broker, investment banker,
financial advisor or other Person is or will be entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with this Agreement, any Ancillary Agreement or the transactions contemplated by
this Agreement or any Ancillary Agreement based upon arrangements made by or on
behalf of Seller or any Subsidiary of Seller.

     Section 3.31 USE OF CERTAIN FUNDS. None of the amounts required to be paid
by Seller Parties under the Assumed Contracts and Assumed Leases on or after
July 15, 2002 and which have not been paid in connection with or in anticipation
of the Chapter 11 Cases have been used to make any Investment in the Retained
Business, except for $3,000,000, which have been Invested or may be Invested in
the Retained Business in Europe, the Middle East or Africa as permitted pursuant
to the Thirteenth Amendment to the Amended and Restated Credit Facility.

                                    ARTICLE 4
               REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER

     Parent and Buyer, jointly and severally, represent and warrant to Seller
Parties as of the date hereof and as of the Closing Date that:

     Section 4.1  ORGANIZATION AND QUALIFICATION.

          (a)     Each of Parent and Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease and operate
its assets and to conduct its business.

          (b)     Buyer is a wholly-owned subsidiary of Parent.

     Section 4.2  CORPORATE POWER AND AUTHORITY; AUTHORIZATION.

          (a)     Each of Parent and Buyer has all requisite corporate or other
organizational power and authority to enter into and deliver this Agreement, the
Ancillary Agreements to which it is a party and any agreements, documents or
instruments to be executed and delivered in connection herewith and therewith
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement, the Ancillary Agreements
to which it is a party and any agreements, documents or instruments to be
executed and delivered in connection herewith and therewith by Parent and/or
Buyer and the consummation by Parent and/or Buyer of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate and other organizational action on the part of Parent and Buyer. This
Agreement, the Ancillary Agreements to which it is a party and any agreements,
documents or instruments to be executed and delivered in connection herewith and
therewith has been duly executed and delivered by each of Parent and Buyer and
constitutes the legal, valid and binding obligation of Parent and Buyer,
enforceable against them in accordance with its terms.

                                       61


          (b)     The execution and delivery of this Agreement by Parent and
Buyer, and the consummation by Parent and Buyer of the transactions contemplated
hereby have been duly authorized by all necessary corporate action of Parent and
Buyer.

     Section 4.3  CONFLICTS; CONSENTS AND APPROVALS. Neither the execution and
delivery of this Agreement, the Ancillary Agreements and any other agreements,
documents and instruments to be executed and delivered in connection with this
Agreement or any of the Ancillary Agreements, nor the consummation of the
transactions contemplated hereby and thereby, will:

          (a)     conflict with, or result in a breach of any provision of, the
organizational documents of each of Parent and Buyer;

          (b)     violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event that, with the giving of
notice, the passage of time or otherwise, would constitute a default) under, or
entitle any Person (with the giving of notice, the passage of time or otherwise)
to terminate, accelerate, modify or call a default under, or result in the
creation of any Encumbrance upon any of the properties or assets of each of
Parent and Buyer under any of the terms, conditions or provisions of (i) any
note, bond, mortgage, credit agreement, indenture, deed of trust, license,
contract, undertaking, agreement, lease, arrangement, understanding or other
instrument or obligation to which each of Parent and Buyer is a party or to
which any of their properties or assets may be bound or (ii) any permit,
registration, approval, license or other authorization or filing to which each
of Parent and Buyer is subject or to which any of their respective properties or
assets may be subject;

          (c)     require any action, consent or approval of any
non-governmental Third Party;

          (d)     violate any Law or any regulation of any self-regulatory
organization applicable to each of Parent and Buyer or any of their respective
properties or assets;

          (e)     require any action, consent or approval of, or review by, or
registration or filing by each of Parent and Buyer with, any Governmental Body,
other than (i) approvals under Competition Laws in jurisdictions in which
notifications are required or advisable and (ii) such Governmental Consents set
forth in SECTION 3.4(e) OF THE SELLER PARTIES DISCLOSURE SCHEDULE to be procured
by Buyer; or

          (f)     except in the case of SECTION 4.3(d) and SECTION 4.3(e), for
any of the items specified therein that would not, individually or in the
aggregate, have a material adverse effect on the ability of each of Parent and
Buyer to consummate the transactions contemplated hereby or by the Ancillary
Agreements.

     Section 4.4  BROKERS. Other than Salomon Smith Barney, the fees and
expenses of which will be paid by Buyer or an Affiliate of Buyer, no broker,
investment banker, financial advisor or other Person is or will be entitled to
any broker's, finder's, financial advisor's or other similar fee or commission
in connection with this Agreement, any Ancillary Agreement or the transactions
contemplated by this Agreement or any Ancillary Agreement based upon
arrangements made by or on behalf of Parent or Buyer.

                                       62


     Section 4.5  SUFFICIENCY OF FUNDS. At the Closing, Buyer will have
sufficient funds or financing available for the payment of the Cash Purchase
Price and the discharge of the indebtedness outstanding at Closing under the
Amended and Restated Credit Facility, the DIP Facility and the DIP L/C Rollover,
in each case to the extent such amounts constitute Assumed Indebtedness.

                                    ARTICLE 5
                                CERTAIN COVENANTS

     Section 5.1  CONDUCT OF BUSINESS. After the date hereof, subject to any
obligations imposed on each Seller Party as a debtor or debtor-in-possession
under the Bankruptcy Code or order of the Bankruptcy Court, Seller Parties
shall, and shall cause the Acquired Companies and their Subsidiaries to, conduct
their business in the ordinary course, consistent with past practice and in
accordance with Prudent Industry Practices. Without limiting the foregoing and
without regard to whether the Bankruptcy Code or the Bankruptcy Court so
requires or permits, from and after the date of this Agreement through the
Closing, except as contemplated by this Agreement, Seller Parties shall, and
shall cause the Acquired Companies and their Subsidiaries, to:

          (a)     use reasonable best efforts to preserve the relationships of
the Acquired Business with the Franchisees, Dealers, customers, suppliers,
licensors, licensees, distributors and others with whom the Acquired Business
conducts or transacts business;

          (b)     except for breaches and defaults of the type referred to in
section 365(b)(2) of the Bankruptcy Code, use reasonable best efforts to perform
in all material respects all of its obligations under all Contracts and other
agreements and instruments relating to or affecting the Acquired Business or the
Acquired Assets;

          (c)     not (i) amend in any material respect its certificate of
incorporation or by-laws or similar organizational documents, (ii) issue, sell,
transfer, pledge, dispose of or encumber any shares of any class or series of
its or their Equity Securities or voting debt, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire, any shares of any class or series of its Equity Securities or any
voting debt (except to another Seller Entity), (iii) declare, set aside or pay
any dividend or other distribution payable in cash, stock or property with
respect to any shares of any class or series of its Equity Securities (except to
another Seller Entity), (iv) split, combine or reclassify any shares of any
class or series of its Equity Securities, (v) redeem, purchase or otherwise
acquire directly or indirectly any shares of any class or series of its or their
Equity Securities, or any instrument or security which consists of or includes a
right to acquire such securities (except, in each case, from another Seller
Entity) or (vi) form or establish any new Subsidiaries or Affiliates;

          (d)     not permit, other than in the ordinary course of business
consistent with past practice, any of the assets of the Acquired Business to be
sold, licensed, mortgaged, leased, subleased, licensed, transferred or subjected
to any Liability or Encumbrance (other than Permitted Encumbrances);

          (e)     not terminate, release, assign any rights under or discharge
any other party thereunder of any of their obligations under any Assumed
Contract or any Assumed Lease, and

                                       63


not amend any of the terms and conditions thereof, in each case except in the
ordinary course of business consistent with past practice;

          (f)     (i) subject to clause (ii) below, timely comply with all
monetary and non-monetary obligations under the Assumed Contracts and Assumed
Leases as in effect on the date hereof and (ii) make timely payment in full of
all amounts due under the TFFC MV Leases and all other vehicle leases (including
all guaranties in respect thereof) with funds other than from draws of letters
of credit issued pursuant to the Amended and Restated Credit Agreement or the
DIP L/C Rollover; PROVIDED, HOWEVER, that Seller Parties shall be permitted to
make or cause to be made payments under the TFFC MV Leases with proceeds from
draws under letters of credit issued pursuant to the Amended and Restated Credit
Agreement and the DIP L/C Rollover, to the extent an amount equal to each such
draw is concurrently (x) applied by Seller Parties to reimburse previously drawn
letters of credit issued pursuant to the Amended and Restated Credit Agreement
or the DIP L/C Rollover, (y) applied by Seller Parties to provide credit
enhancement for purposes of the DIP Asset-Backed Fleet Financing or the
Additional DIP Asset-Backed Fleet Financing or (z) deposited by Seller Parties
pursuant to an escrow arrangement reasonably satisfactory to Buyer for purposes
of being transferred to Buyer hereunder at Closing;

          (g)     (i) collect accounts receivable and pay accounts payable and
perform all other obligations of the Acquired Business (including obligations
with respect to self-insurance) when they become due and payable in accordance
with the current terms thereof, (ii) not pay accounts payable prior to the
stated maturity thereof (other than for a valid and legitimate business reason),
(iii) not discharge any obligor from its obligations under any account
receivable other than upon payment in full of all amounts payable thereunder
(other than for a valid and legitimate business reason (for purposes of this
clause (iii), a valid and legitimate business reason shall not include
addressing the cash or liquidity needs of any of Seller Entities) and (iv) not
forgive any indebtedness held by any of Seller Entities;

          (h)     (i) not make any payments under or in respect of any
pre-Petition indebtedness for borrowed money (other than Assumed Indebtedness),
(ii) in the case of the Acquired Companies, not incur any indebtedness for
borrowed money other than (A) in the case of TFFC, Budget Funding Corporation
and BGI Leasing, Inc., pursuant to the DIP Asset-Backed Fleet Financing, the
Additional DIP Asset-Backed Fleet Financing and the Ford Line of Credit and (B)
in the case of Acquired Companies other than TFFC, BGI Leasing, Inc. and Budget
Funding Corporation, indebtedness not exceeding in the aggregate $15,000,000 and
(iii) not use or permit any of the proceeds from any indebtedness permitted to
be incurred pursuant to clause (ii)(B) above to be used other than solely in the
Acquired Business conducted by the Acquired Company that incurs such
indebtedness or any of its Subsidiaries;

          (i)     not layoff any employees, other than layoffs of employees of
the Acquired Business that are in the ordinary course of business and which do
not materially impair the operations of the Acquired Business;

          (j)     not make or agree to make any Investment in any Person (other
than in any other Seller Entity or a wholly-owned Subsidiary of a Seller Entity
other than with respect to the Retained Business) or in the Retained Business
(except in each case to the extent contemplated by SECTION 3.31), other than
Investments in the form of deferred purchase price for

                                       64


services provided by Seller Parties to its customers in the ordinary course of
business consistent with past practice;

          (k)     not increase the compensation or benefits provided to, or
change payroll periods or vacation accrual policies in respect of, any employee
of the Acquired Business or establish, increase or make any retention,
severance, deferred compensation, pension retirement, profit sharing or sales
bonus arrangement with any employee of the Acquired Business other than (i) in
the ordinary course of business consistent with past practice or (ii) as
contemplated by Sellers' retention plan set forth in SECTION 5.1(k) OF THE
SELLER PARTIES DISCLOSURE SCHEDULE (the "QUALIFIED RETENTION PLAN") and approved
by the Bankruptcy Court, in each case, after consultation with Buyer;

          (l)     not establish any new Benefit Plan or amend or modify any
existing Benefit Plan (except, in each case, to the extent not inconsistent with
SECTION 5.1(k) or as contemplated by SECTION 7.2(g)), to the extent such action
would affect any employee of the Acquired Business, or make any sales bonus
payments to any employee of the Acquired Business other than commission payments
made in the ordinary course of business consistent with past practice and
consented to by Buyer, which consent shall not be unreasonably withheld or
delayed;

          (m)     use reasonable best efforts to obtain and renew all material
Permits held by or in connection with the Acquired Business;

          (n)     administer insurance claims involving or relating to the
Acquired Business in the ordinary course of business consistent with past
practice. Subject to the foregoing, the claims administration performed by
Seller and its Subsidiaries regarding and with respect to the Acquired Business
shall include, but not be limited to: (i) the provisions of forms necessary for
submission and processing of claims; (ii) the receipt of notices and review of
all claims, and the creation and maintenance of files with respect to, and
administration to final disposition and payment of, each such claim; (iii)
prompt acknowledgment to claimants of the receipt of notices received from
claimants in connection with any claim to the extent required by applicable Law;
(iv) prompt investigation of any claim, as necessary, to determine its validity
and compensability, including verification of coverage; (v) performance of all
administrative and clerical work in connection with any claim; (vi) notification
to claimants of declined claims and the reasons for such declinations; (vii)
provision of the services of claim experts on matters relating to claims; (viii)
compliance with claims file maintenance, record retention and reconciliation
requirements in conformity with ordinary course standards; (ix) prosecution and
defense of disputes involving claims; (x) engagement and direction, as
necessary, of outside counsel consultants or other professionals in connection
with the processing and handling of claims; (xi) the establishment of adequate
reserves in respect of claims and (xii) generally, all such other acts and
things reasonably necessary in the administration and settlement of claims
regarding or relating to the Acquired Business;

          (o)     not change any of its or their accounting principles,
practices, methods or policies (including any reserving and depreciation
methods, practices and policies) used by it or them, in each case except (i) as
may be required as a result of a change in Law or GAAP or (ii)

                                       65


for changes to accounting principles, practices, methods or policies which are
immaterial and of which Buyer is given written notice by Seller Parties prior to
the implementation thereof;

          (p)     not terminate, cancel or amend, or cause the termination,
cancellation or amendment of, any insurance coverage (and any surety bonds,
letters of credit, cash collateral or other deposits related thereto required to
be maintained with respect to such coverage) maintained by it or them with
respect to the Acquired Business which is not replaced by a comparable insurance
coverage, other than in the ordinary course of business consistent with past
practice and consented to by Buyer, which consent shall not be unreasonably
withheld or delayed;

          (q)     use reasonable best efforts to (i) preserve and protect the
Intellectual Property, (ii) maintain the Business Records in the ordinary course
and in accordance with GAAP and (iii) maintain, preserve and protect all of the
Acquired Assets in the condition in which they exist on the date of this
Agreement, except for ordinary wear and tear or for assets no longer used or
useful in the Acquired Business;

          (r)     not enter into any new collective bargaining agreements or
amend or modify any existing collective bargaining agreements, in each case,
applicable to employees of the Acquired Business; PROVIDED, HOWEVER, that Seller
Parties may negotiate successor collective bargaining agreements to those listed
on SECTION 3.19(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, and may negotiate
other collective bargaining agreements or arrangements as required by Law or for
the purpose of implementing the agreements listed on SECTION 3.19(a) OF THE
SELLER PARTIES DISCLOSURE SCHEDULE; PROVIDED, FURTHER, that all such agreements
are negotiated and entered into in the ordinary course of business consistent
with past practice;

          (s)     not enter into any settlement or release with respect to any
material Action relating to or affecting the Acquired Business (unless such
Action constitutes an Excluded Asset or an Excluded Liability) without the
consent of Buyer (which consent shall not be unreasonably withheld or delayed),
other than in the ordinary course of business consistent with past practice;

          (t)     not grant, terminate, transfer, or otherwise materially alter
any licenses or other Contracts relating to any proprietary Intellectual
Property owned, used by or relating to the Acquired Business without the prior
written consent of Buyer, which consent shall not be unreasonably withheld or
delayed;

          (u)     not enter into any new joint venture, limited liability
company agreement, partnership agreement or similar agreement;

          (v)     not enter into any Related Party Agreement or Derivative
Agreement (other than interest rate protection agreements entered into in
connection with or required pursuant to the Assumed Indebtedness, the DIP
Asset-Backed Fleet Financing, the Additional DIP Asset-Backed Fleet Financing,
the Amended and Restated Series 1997-2 Supplement, dated as of June 20, 2001, to
the Amended and Restated Base Indenture, dated as of December 1, 1996, among
TFFC, Seller and Bankers Trust Company as Trustee and the Amended and Restated
Liquidity Agreement, dated as of June 20, 2001, among Budget Funding
Corporation, the liquidity lenders thereto and Deutsche Bank AG, as Liquidity
Agent);

                                       66


          (w)     not make any Tax election, file any amended Tax Return, enter
into any closing agreement or request a Tax ruling from a Tax authority, settle
any Tax Claim, surrender any right to claim a refund of Taxes, or consent to any
extension or waiver of the limitation period applicable to any Taxes, Tax Return
and Tax Claim, in each case (i) with respect to any Acquired Company or Acquired
Assets, without the consent of Buyer, which consent shall not be unreasonably
withheld or delayed and (ii) with respect to any Seller Party, other than in the
ordinary course of business consistent with past practice;

          (x)     (i) prepare and timely file all Tax Returns required to be
filed by each Seller Entity in a manner consistent with past practice, (ii)
timely pay all Taxes due and payable in respect of any Tax Returns of each
Seller Entity and (iii) promptly notify Buyer of any federal or state income or
franchise (or other material) Tax Action or audit pending or threatened against
or with respect to any Seller Entity (or any significant developments with
respect to any ongoing Tax matters);

          (y)     not permit any of Seller Entities to adopt a plan of complete
or partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization, reorganization or any comparable transaction, other than
solely for purposes of disposing of all or any part of the Retained Business;

          (z)     not, at any time during the Chapter 11 Cases, file a motion or
otherwise seek to convert to a Chapter 7 case;

          (aa)    (i)     within seven Business Days after the last day of each
     calendar month, deliver to Buyer a list of each account payable of the
     Acquired Business in excess of $10,000 then outstanding, together with the
     name of the relevant creditor, the date of incurrence thereof and its
     stated maturity, accompanied by a certificate of the chief financial
     officer of Seller stating that the information contained in such list is
     true, accurate and correct in all material respects;

                 (ii)     five Business Days prior to the expected Closing Date,
     deliver to Buyer a list of each payment in an amount of $100,000 or more
     made by any Seller Entity in connection with the Acquired Business from the
     date of this Agreement to the date such report is so delivered, accompanied
     by a certificate of the chief financial officer of Seller stating that the
     information contained in such list is true, accurate and correct in all
     material respects;

                (iii)     within 20 days from the last day of each calendar
     month, deliver to Buyer consolidating statements of income for the calendar
     month then ended, and the related balance sheet of Seller and its
     Subsidiaries operating in the United States and Canada (the "DOMESTIC
     SELLER ENTITIES") as of the end of such calendar month, in each case
     prepared in accordance with GAAP and accompanied by (w) a schedule of all
     capital expenditures made by the Domestic Seller Entities during such
     calendar month, (x) a schedule of payments made during such calendar month
     by the Domestic Seller Entities under or pursuant to Related Party
     Agreements, (y) a schedule of all intercompany balances and obligations of
     the Domestic Seller Entities as of the end of such calendar month and (z) a
     certificate of the chief financial officer of Seller stating

                                       67


     that such financial statements fairly present the financial condition and
     results of operations of the Domestic Seller Entities and that the other
     information accompanied thereto is true, accurate and correct in all
     material respects;

                 (iv)     within 30 days from the last day of each calendar
     month, deliver to Buyer consolidating statements of income for the calendar
     month then ended, and the related balance sheet of Seller and its
     Subsidiaries (other than with respect to each Subsidiary of Seller for
     which consolidating statements of income and related balance sheet for such
     month delivered pursuant to clause (iv) above and the Excluded Companies
     (the "INTERNATIONAL SELLER ENTITIES")), in each case prepared in accordance
     with GAAP and accompanied by (w) a schedule of all capital expenditures
     made during such calendar month by the International Seller Entities during
     such calendar month, (x) a schedule of payments made during such calendar
     month by the International Seller Entities under or pursuant to Related
     Party Agreements, (y) a schedule of all intercompany balances and
     obligations of the International Seller Entities as of the end of such
     calendar month and (z) a certificate of the chief financial officer of
     Seller stating that such financial statements fairly present the financial
     condition and results of operation of the International Seller Entities and
     that the other information accompanied thereto is true, accurate and
     correct in all material respects;

                  (v)     on or prior to September 13, 2002, deliver to Buyer
     the 13-Week Cash Flow Projections for the period commencing on September
     13, 2002, and on or prior to the second Friday of each calendar month
     subsequent to September 13, 2002, the 13-Week Cash Flow Projections for the
     period commencing with the immediately succeeding Saturday, accompanied by
     a certificate of the chief financial officer of Seller stating that the
     information contained in such 13-Week Cash Flow Projections has been
     prepared in accordance with the provisions of this Agreement and based on
     assumptions that are reasonable;

                 (vi)     within seven Business Days after the last day of each
     calendar month, deliver to Buyer a detailed report of (A) all paid or
     incurred Qualified Fees during such calendar month, (B) all payments made
     during such calendar month to directors and officers of Seller Entities or
     any of their Affiliates, their respective relatives and Affiliates and (C)
     all payments under all Related Party Agreements, accompanied by a
     certificate of the chief financial officer of Seller stating that the
     information contained in such report is true, accurate and correct in all
     material respects;

                (vii)     within two Business Days of the delivery thereof to
     TFFC, copies of all monthly vehicles statements and quarterly non-program
     vehicle reports required to be delivered pursuant to the TFFC MV Leases;

               (viii)     within two Business Days of the delivery thereof to
     the applicable lessor, trustee, holder or lender under the DIP Asset-Backed
     Fleet Financing, DIP L/C Rollover, the Amended and Restated Credit
     Facility, the Additional DIP Asset-Backed Fleet Financing and the Ford Line
     of Credit, copies of all statements, reports

                                       68


     certificates, financial statements and other information required to be
     delivered pursuant to such instruments;

                 (ix)     within seven Business Days (or 15 Business Days in the
     case of Adjusted EBITDAR) after the last day of each calendar month,
     deliver to Buyer a report setting forth the Adjusted EBITDAR, Automotive
     Fleet Utilization Ratio, Automotive Rental Revenue to Rental Days Ratio,
     Rental Transactions to Full-Time Equivalents Ratio, Automotive Rental Days,
     Automotive Rental Fleet, Automotive Rental Revenue, Full-Time Equivalents
     and Rental Transactions, in each case, for the most recently ended calendar
     month, accompanied by a certificate of the chief financial officer of
     Seller stating that the information contained in such report has been
     prepared in accordance with the provisions of this Agreement and is true,
     accurate and correct in all material respects;

                  (x)     within 20 Business Days of this Agreement, Seller
     Parties shall deliver to Buyer a reporting setting forth the Seller Entity
     that owns each of the vehicles listed in SECTION 3.7(b) OF THE SELLER
     PARTIES DISCLOSURE SCHEDULE;

                 (xi)     within five Business Days of entering into any
     amendment, modification or supplement to any Contract relating to any of
     the Assumed Indebtedness, the TFFC MV Leases or the Ford MV Lease, Seller
     Parties shall deliver a copy of each such amendment, modification or
     supplement to Buyer; and

                (xii)     five Business Days prior to the Closing Date, deliver
     to Buyer a detailed report of all amounts constituting Assumed Indebtedness
     that will be outstanding at Closing, accompanied by a certificate of the
     chief financial officer of Seller stating that the information contained in
     such report is true, accurate and correct in all material respects;

          (bb)    not purchase or acquire any vehicles, except to the extent
such vehicles (i) are purchased or acquired (including by way of leasing) for
use in connection with the Acquired Business through TFFC or, in connection with
the Ford Line of Credit, through BGI Leasing, Inc. and (ii) are subject to a
Repurchase Program and are listed in SECTION 3.28(b) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE; PROVIDED, HOWEVER, that Seller Entities may purchase or
acquire vehicles (including by way of leasing) that are not subject to
Repurchase Programs (A) if such vehicles are passenger vehicles (i.e., cars,
sport utility vehicles, passenger vans and pickup trucks) and the purchase price
therefor does not exceed, individually or in the aggregate, (1) $49,900,000 for
passenger vehicles to be used in connection with the Acquired Business in the
United States (including Puerto Rico) and Canada and (2) $25,000,000 for
passenger vehicles to be used in connection with the Acquired Business in
Australia and New Zealand and (B) if such vehicles are non-passenger vehicles to
be used in connection with the Acquired Business in the United States and the
purchase price therefor does not exceed, individually or in the aggregate,
$100,000;

          (cc)    continue to sell or dispose of the Existing Trucks in the
ordinary course of business consistent with past practice and Prudent Industry
Practices; PROVIDED, HOWEVER, (i) that Seller Parties shall use reasonable best
efforts to conduct such sales or dispositions so that

                                       69


Existing Trucks shall be sold or disposed of in such a manner that (A) the
highest accumulated mileage shall be sold or disposed of prior to those
comparable Existing Trucks with lower mileage and (B) earlier model years shall
be disposed of prior to comparable Existing Trucks of later model years and (ii)
Seller Parties may implement from time to time such reasonable changes to its
past practice relating to the sale or disposition of the Existing Trucks as may
be necessary in light of the liquidity requirements of Seller Parties;

          (dd)    not (i) enter into any new franchise, prime license, license,
sublicense or barter agreements; PROVIDED, HOWEVER, that Seller Parties may
enter into new franchise, prime license, license or sublicense agreements with
third parties (other than directors, officers employees or agents of any of
Seller Parties (or any Affiliate of any such director, officer, employee or
agent)) (A) with respect to any territory more than 25 miles from any location
where any Seller Party conducts an automotive rental business and (B) on terms
no less favorable than those contained in Seller Parties' current standard form
of prime license agreement attached as SECTION 5.1(dd) OF THE SELLER PARTIES
DISCLOSURE SCHEDULE, (ii) not enter into any new dealer agreements in connection
with Seller Parties' truck rental business; PROVIDED, HOWEVER, that Seller
Parties may enter into new dealer agreements with third parties (other than
directors, officers employees or agents of any of Seller Parties (or any
Affiliate of any such director, officer, employee or agent)) if each such dealer
agreement (A) is entered into in Seller Parties' current standard form of dealer
agreement and (B) may be terminated by 90 days' (or shorter period) written
notice by each Seller Party that is a party thereto without (1) any penalty or
other payment by such Seller Party (other than payments to which Buyer consents
in writing), (2) imposing any requirement that Seller Parties sell or dispose of
any assets or properties and (3) imposing any limitations on the conduct of
business by any Seller Party or (iii) open new automotive rental business
locations, other than new automotive rental business locations (w) to replace
existing automotive rental business locations, including those currently
operated by Seller Parties pursuant to the License Agreement, dated as of May 1,
1995, as amended, between Sears, Roebuck and Co. and Budget Rent a Car
Corporation, (x) pursuant to the Sub-Lease Agreement, dated as of March 13,
2002, between Wal-Mart Stores, Inc. and Budget Rent a Car Systems, Inc. as in
effect as of the date hereof, (y) pursuant to the Master Lease Agreement, dated
as of September 18, 2001, as amended, between The Pep Boys - Manny, Moe & Jack,
The Pep Boys Manny, Moe & Jack California, Pep Boys - Manny, Moe & Jack of
Delaware, Inc. and Budget Rent a Car Systems, Inc. as in effect as of the date
hereof or (z) locations that service any airport;

          (ee)    (i) not consent to the termination of any Airport Concession
or lease agreement with respect to premises located within any airport, (ii) use
reasonable best efforts to maintain, keep and renew each existing Airport
Concession in full force and effect, (iii) pay all rents and fees due and
payable in accordance with the terms thereof and make and maintain all required
deposits relating to each such Airport Concession and (iv) use reasonable best
efforts to resolve or settle all existing and future disputes or Actions and
secure Airport Concessions or lease agreements following the resolution or
settlement of any such dispute or Action with respect to the operation of any
automotive rental location within any airport, in each case other than with
respect to the San Juan, Puerto Rico airport;

          (ff)    not enter into, amend, modify or terminate any Contract with
Vehicle Manufacturers; PROVIDED, HOWEVER, that Seller Parties may enter into,
amend or modify any

                                       70


Contract with Vehicle Manufacturers to the extent that such Contract (i) is
applicable to models for a single year, (ii) is on terms and conditions
substantially similar to the existing terms and conditions under the current
applicable Contract with the relevant Vehicle Manufacturer and (iii) the Seller
Party which is a party to such Contract has given Buyer written notice,
accompanied by the proposed Contract, at least three Business Days prior to
execution of such Contract;

          (gg)    not to amend, modify or supplement the terms and conditions of
the Assumed Indebtedness, the TFFC MV Leases or the Ford MV Leases in each case
to the extent any such amendment, modification or supplement could be reasonably
expected to affect Buyer adversely;

          (hh)    not take any action or fail to take any action that would
reasonably be expected to result (i) in any of Seller Parties' representations
and warranties set forth in this Agreement being or becoming untrue or incorrect
in any material respect or (ii) in any of the conditions to Closing set forth in
ARTICLE 7 not being satisfied;

          (ii)    not make any payment to any director or officer of any of
Seller Entities or any of their Affiliates, or their respective relatives or
Affiliates, other than pursuant to the Qualified Retention Plan, the Assumed
Benefit Plans, the Related Party Agreements listed in SECTION 3.11 OF THE SELLER
PARTIES DISCLOSURE SCHEDULE and, subject to SECTION 5.1(k), director fees,
salaries, bonuses, payments of benefits and reimbursement of expenses in the
ordinary course of business consistent with past practice and payments set forth
in SECTION 5.1(ii) OF THE SELLER PARTIES DISCLOSURE SCHEDULE;

          (jj)    continue to prepay for Yellow Page advertising and listing,
security deposits for Airport Concessions and other customary prepaid expenses
relating thereto, in each case, in the ordinary course of business consistent
with past practice;

          (kk)    use reasonable best efforts to minimize the amount of
Qualified Fees incurred by Seller Parties following the date hereof; and

          (ll)    contest the Action instituted by RSI against Seller Parties
described in SECTION 3.13(a) OF THE SELLER PARTIES DISCLOSURE SCHEDULE and any
other Action instituted or commenced by RSI or any Affiliate thereof regarding
unlawful use of tradenames or trademarks, use all reasonable efforts to have
vacated, lifted, reverse or overturned any decree, judgment, injunction or other
order against Seller Parties rendered or entered in connection therewith, and
not enter into any settlement with respect to any such dispute without the prior
written consent of Buyer (which consent shall not be unreasonably withheld),
unless such settlement includes an absolute and unconditional release of Seller
Parties and Buyer from any and all claims and liabilities relating to or arising
from any such disputes.

     Section 5.2  ACCESS AND INFORMATION.

          (a)     Seller Parties shall, and shall cause their Subsidiaries,
accountants, auditors, counsel and other representatives to, give Buyer and its
Affiliates and to their respective directors, officers, employees, accountants,
agents, counsel, insurance brokers, insurance companies, lenders and other
financing sources and other representatives (collectively, "REPRESENTATIVES")
reasonable access during Seller Parties' normal business hours throughout the

                                       71


period prior to the Closing to all of Seller Entities' properties, books,
Business Contracts, commitments, financial and operating data, Tax Returns and
materials related to Taxes, accounting work papers, reports of examination and
records relating to the Acquired Business, the Acquired Assets or the Assumed
Liabilities. Without limiting the generality of the foregoing, Buyer and its
Affiliates shall be entitled to make (or cause to be made) such other
investigations of the Acquired Business, the Acquired Assets (including the
Acquired Companies), the Liabilities, Encumbrances and the condition (financial
or otherwise) of such businesses, assets and liabilities as Buyer or Parent
deems necessary or advisable in connection with the transactions contemplated by
this Agreement or the Ancillary Agreements (including, but not limited to,
conducting prior to the expected Closing Date a physical inspection and
preparing an inventory of Rental Vehicles and Support Vehicles (in each case,
including Owned Vehicles) in a manner that does not unreasonably interfere with
the business of Seller Entities and otherwise consistent with Prudent Industry
Practices), and Seller Parties shall reasonably cooperate with any such
investigations. Upon reasonable notice from Buyer, Seller Parties shall furnish
to Buyer updated information of the type described in SECTION 3.7(a) and (b) in
advance of such physical inspection.

          (b)     Through the Closing Date, Parent Buyer and Seller Parties
shall provide each other or each other's respective counsel the opportunity to
review in advance and comment on all filings with any Governmental Body
pertaining to the transactions contemplated in this Agreement and the Ancillary
Agreements and will keep each other informed of the status of matters pertaining
thereto. It is expressly understood by the parties that the representatives of
each of the parties shall have the right to attend and participate in any
hearing, proceeding, meeting, conference or similar event before or with a
Governmental Body or rating agency or other organization relating to this
Agreement or the Ancillary Agreements or the transactions contemplated hereby or
thereby. In furtherance of the foregoing, the parties shall provide each other
reasonable advance notice of any such hearing, proceeding, meeting, conference
or similar event.

          (c)     As soon as practicable after the execution of this Agreement,
Seller Parties shall permit Buyer to electronically link Seller's financial
reporting system related to the Acquired Business to Parent's financial
reporting system ("HYPERION"). Access to Hyperion will be provided by Buyer's
financial reporting staff and the tasks necessary to complete the link to
Hyperion will be led by Buyer's accounting staff, with the necessary assistance
from Seller's accounting staff and other technical staff; provided that neither
such installment nor the operation or use by Parent of Hyperion shall interfere
with or disrupt the normal operation of Seller's business or its financial
reporting system or violate any applicable software licenses. Buyer will provide
the necessary Hyperion software to be installed on a computer in Seller's
accounting department; PROVIDED, HOWEVER, that the information retrieved from
Seller's financial reporting system will not be made available to persons who
are directly involved in pricing or any other competitive activity at Parent or
any of its Subsidiaries.

          (d)     Seller Parties shall keep Buyer informed of all material
developments in the negotiations relating to the DIP Financing, the DIP
Asset-Backed Fleet Financing, the DIP L/C Rollover and the Additional
Asset-Backed Fleet Financing, and promptly provide copies of all documents
(including drafts) relating thereto, including term sheets, commitment letters,

                                       72


purchase agreements, vehicle lease agreements, credit agreements, security
agreements and other related agreements or documents.

     Section 5.3  EFFORTS TO EFFECT TRANSACTION; CERTAIN FILINGS.

          (a)     Subject to SECTION 5.3(d), Seller Parties, Parent and Buyer
shall (i) use reasonable best efforts to cooperate with each other in
determining which other filings are required or advisable to be made, prior to
the Closing Date with, and which Permits are required to be obtained prior to
the Closing Date from any Governmental Body in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
in this Agreement and the Ancillary Agreements, (ii) use reasonable best efforts
to take, or cause to be taken, all actions and do, or cause to be done, all
things necessary, proper, advisable or appropriate to consummate and make
effective the transactions contemplated by this Agreement and the Ancillary
Agreements, as soon as practicable, including using all reasonable best efforts
to obtain all necessary or advisable Permits in connection with the requirements
of all Governmental Bodies in respect of the transactions contemplated in this
Agreement and the Ancillary Agreements, and to effect all necessary
registrations and filings and (iii) cooperate with each other in determining
which Permits are required to be obtained by Buyer the operation the Acquired
Business by Buyer following the Closing. In connection with the foregoing,
Seller Parties will provide Parent and Buyer, and Parent and Buyer will provide
Seller Parties, with copies of all correspondence, filings, or communications
(or memoranda setting forth the substance thereof) between such party or any of
its representatives, on the one hand, and any Governmental Body, on the other
hand, with respect to this Agreement and the Ancillary Agreements and the
transactions contemplated hereby and thereby.

          (b)     In furtherance of the foregoing but subject to SECTION 5.3(d),
each Seller Party, Parent and Buyer shall: (i) make or cause to be made all
filings required of each of them or any of their respective Subsidiaries or
Affiliates under the applicable Competition Laws with respect to the
transactions contemplated by this Agreement as promptly as practicable and, in
any event, within five Business Days after the date of this Agreement, (ii)
comply at the earliest practicable date with any request under any applicable
Competition Laws for additional information, documents, or other materials
received by each of them or any of their respective Affiliates from any
Governmental Body in respect of such filings or such transactions, (iii)
cooperate with each other in connection with any such filing and in connection
with resolving any investigation or other inquiry of any Governmental Body under
any Competition Laws with respect to any such filing or any such transaction and
(iv) advise the other parties promptly of any material communication received by
such party from any other Governmental Body regarding any of the transactions
contemplated in this Agreement and the Ancillary Agreements, and of any
understandings, undertakings or agreements (oral or written) such party proposes
to make or enter into with any Governmental Body in connection with the
transactions contemplated in this Agreement and the Ancillary Agreements.

          (c)     Subject to SECTION 5.3(d), if any Action is instituted (or
threatened to be instituted) challenging any transaction contemplated in this
Agreement and the Ancillary Agreements as violative of any applicable
Competition Laws (a "REGULATORY CHALLENGE"), each Seller Party, Parent and Buyer
shall cooperate in all respects with each other and use its respective
reasonable efforts in order to contest and resist any such Regulatory Challenge
and

                                       73


have vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order, whether temporary, preliminary or permanent, that is in effect and
that prohibits, prevents or restricts the consummation of the transactions
contemplated by this Agreement.

          (d)     Notwithstanding anything to the contrary contained in this
Agreement, Parent, Buyer and their Affiliates shall not be required to (i) sell,
hold separate, license or otherwise dispose of or conduct any of their
businesses or assets in a specified manner, or agree to sell, hold separate,
license or otherwise dispose of or conduct any of their businesses or assets in
a specified manner, (ii) permit the sale, holding separate, licensing or other
disposition of, any portion of the Acquired Assets or the Acquired Business or
(iii) conduct all or any portion of the Acquired Business in a specified manner,
in each such case, whether as a condition to obtaining any approval from a
Governmental Body or any other Person or for any other reason.

     Section 5.4  BANKRUPTCY FILINGS.

          (a)     Within two Business Days of the date of this Agreement, Seller
Parties shall file with the Bankruptcy Court a motion, supporting papers,
notices and proposed Overbid Procedures Order seeking the Bankruptcy Court's
approval of (i) the provisions of SECTIONS 5.1 and 5.5 and ARTICLE 8 of this
Agreement and observance and performance of such provisions by Seller Parties
during the pendency of the Chapter 11 Cases, (ii) the date, time and place for,
and prescribing the form and manner of notice of, a hearing to consider approval
of the 363 Order and the 365 Order and (iii) this Agreement and the Ancillary
Agreements, Seller Parties' performance under this Agreement and the Ancillary
Agreements, and the transfer to Buyer of the Acquired Assets (including all the
Equity Securities of the Acquired Companies and the Minority Investees), the
assumption and assignment to Buyer of the Assumed Contracts and Assumed Leases
and the assumption by Buyer of the Assumed Liabilities.

          (b)     Seller Parties shall provide Buyer with copies of all motions,
applications and supporting papers prepared by or on behalf of Seller Parties
(including forms of orders and notices to interested parties) relating in any
way to Buyer, the Acquired Assets (including the Acquired Companies), the
Assumed Liabilities, the Acquired Business, or the transactions contemplated by
this Agreement and the Ancillary Agreements at least one full Business Day prior
to the filing thereof in the Chapter 11 Cases.

          (c)     Within two Business Days of the date of this Agreement, Seller
Parties shall file with the Bankruptcy Court a motion, supporting papers,
notices and proposed order in substance and form satisfactory to Buyer in its
sole and absolute discretion, and other motions, supporting papers and notices
necessary to effect the transactions contemplated in this Agreement and the
Ancillary Agreements.

          (d)     Seller Parties shall give appropriate notice, and provide
appropriate opportunity for hearing, to all parties entitled thereto, of all
motions, orders, hearings, or other proceedings relating to this Agreement and
the Ancillary Agreements or the transactions contemplated hereby and thereby.

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     Section 5.5  BIDDING PROCEDURES.

          (a)     Buyer and Seller Parties acknowledge that this Agreement is
the culmination of an extensive process undertaken by Seller Parties to identify
and negotiate a transaction with a bidder who was prepared to pay the highest
and best purchase price for the assets of Seller and its Subsidiaries while
assuming or otherwise satisfying specified liabilities in order to maximize
value for each Seller Party's constituents. The parties also acknowledge that
under the Bankruptcy Code, Seller Parties must take reasonable steps to
demonstrate that they have sought to obtain the highest and best price possible
for the assets, including, but not limited to, giving notice of the transactions
contemplated by this Agreement to creditors and other interested parties as
ordered by the Bankruptcy Court, providing information about the Acquired
Business and Acquired Assets to responsible bidders subject to appropriate
confidentiality agreements, entertaining higher and better offers from
responsible bidders, and, if necessary, conducting an auction. To facilitate the
foregoing, Seller Parties shall, within two Business Days of the date of this
Agreement, seek the entry of an order (in the form attached as EXHIBIT E) (a)
approving the bidding procedures attached as EXHIBIT F (the "BIDDING
PROCEDURES"), the amount, timing, terms of payment and priority of the
Termination Amount as set forth in ARTICLE 8 and the provisions of SECTION 5.1
and (b) providing for, among other things, the procedures set forth below (the
"OVERBID PROCEDURES ORDER").

          (b)     Seller Parties shall give notice of the transactions
contemplated by this Agreement and the Ancillary Agreements to such Persons and
in such manner as the Bankruptcy Court shall direct, and to such additional
Persons as Buyer requests.

          (c)     Unless this Agreement has been terminated in accordance with
its terms, until the earlier of the entry of the Overbid Procedures Order and
September 17, 2002, none of Seller Parties nor any of their Representatives
shall (i) solicit, initiate or encourage (including by way of furnishing
information), or take any other action to facilitate, any inquiry or the making
of any proposal that constitutes, or can reasonably be expected to lead to, an
Alternative Transaction; (ii) participate in any discussions or negotiations
that could possibly lead to an Alternative Transaction; (iii) enter into any
agreement regarding a possible Alternative Transaction or (iv) make or authorize
any statement, recommendation or solicitation in support of a possible
Alternative Transaction; PROVIDED, HOWEVER, that if the Board of Directors of
Seller determines in good faith that it is necessary to do so to comply with its
fiduciary duties under the Bankruptcy Code or applicable corporate law, Seller
Parties may, in response to an unsolicited inquiry: (x) provide public and
non-public information concerning the Acquired Business and its assets to those
Persons who first have delivered an inquiry meeting the requirements of the
Bidding Procedures; PROVIDED that such Person executes a confidentiality
agreement in accordance with the Bidding Procedures; and (y) participate in
negotiations or discussions concerning such inquiry. Seller Parties shall
promptly notify Buyer orally and in writing of all inquiries or proposals or
requests for information received from any party, the identity of the Person
making such inquiry, proposal or request and provide copies of any written
proposals. Seller Parties shall keep Buyer fully informed of the status
(including amendments or proposed amendments) of any written proposal. Upon
request by Buyer, Seller Parties will identify and furnish to Buyer all
information provided in response to any such inquiry, proposal or request.

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     Section 5.6  INTERCOMPANY AMOUNTS; OTHER AGREEMENTS.

          (a)     At or prior to the Closing, all intercompany receivables or
payables and loans then existing between any of Seller Parties, or any of the
Excluded Companies, on the one hand, and any of the Acquired Companies, on the
other hand, shall be settled in full by way of capital contribution or as
otherwise agreed by Buyer and Seller Parties. For the avoidance of doubt,
nothing in this SECTION 5.6(a) shall require Seller Parties to pay or otherwise
settle prior to or at Closing any amounts accrued but not yet payable under the
TFFC MV Leases and the Ford MV Leases (except to the extent required pursuant to
SECTION 2.10), or to pay or otherwise settle prior to or at Closing obligations
of Seller Parties under the Demand Notes, which shall be assumed by Buyer
hereunder pursuant to clauses (i) or (ii) of SECTION 2.5(a), as the case may be.

          (b)     At or prior to the Closing, Seller Parties shall, and shall
cause the Excluded Companies to, withdraw from, or otherwise terminate any
contractual rights they may have in, to or under the Acquired Insurance
Contracts being acquired by Buyer pursuant to this Agreement.

          (c)     Subject to this SECTION 5.6(c), Buyer shall make available to
Seller Parties and the Excluded Companies any insurance proceeds from any
Acquired Insurance Contract for which the premiums have been paid by Seller
Entities in respect of any Assumed Liability, to the extent Seller Parties are
determined to be liable therefor or such Acquired Insurance Contract provides
insurance coverage with respect to any Excluded Liability. Buyer shall submit
any claims under each Acquired Insurance Contract to the relevant insurance
company or companies, and Buyer shall have the sole and absolute authority to
manage any and all claims filed under any Acquired Insurance Contract. Seller
Parties shall cooperate with and assist Buyer in making claims under the
Acquired Insurance Contracts in respect of such Assumed Liabilities and
collecting recoveries with respect thereto. Subject to the foregoing, if any
limits apply to amounts payable under any Acquired Insurance Contract, payments
under each Acquired Insurance Contract shall be allocated between Buyer and
Seller Parties on a first come/first served basis.

     Section 5.7  UPDATES OF SCHEDULES.

          (a)     Within seven Business Days after the last day of each calendar
month and within five Business Days prior to the expected Closing Date, Seller
Parties shall prepare and deliver to Buyer a supplement to SECTIONS 3.15(a),
3.15(b), 3.15(c), 3.15(d), 3.15(f), 3.15(g), 3.15(i), 3.15(j), 3.15(k), 3.15(m),
3.15(s), 3.16(a), 3.17(a), 3.19(a) and 3.22(c) OF SELLER PARTIES DISCLOSURE
SCHEDULE to reflect all Contracts entered into following the date hereof that
constitute Assumed Contracts pursuant to SECTIONS 2.3(a), 2.3(b), 2.3(c),
2.3(d), 2.3(f), 2.3(g), 2.3(i), 2.3(j), 2.3(k), 2.3(o), 2.3(q), 2.3(r) and
2.3(s). Seller Parties shall provide copies of all such Contracts to Buyer
concurrently with each such supplement and other information related thereto
requested by Buyer and shall further supplement the Seller Parties Disclosure
Schedule to include any information omitted therein or to reflect Contracts
entered into by Seller Entities after the delivery thereof and which are Assumed
Contracts or Assumed Leases.

          (b)     Promptly upon becoming aware thereof, Seller Parties shall
prepare and deliver to Buyer a supplement to SECTION 3.13(a) OF SELLER PARTIES
DISCLOSURE SCHEDULE to reflect

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all Actions to which any Seller Party is a party following the date hereof that
constitute Assumed Liabilities pursuant to SECTION 2.5(a)(iv).

          (c)     From time to time promptly upon becoming aware thereof, Seller
Parties shall supplement or amend the Seller Parties Disclosure Schedule with
respect to any matter (i) which may arise hereafter and which, if existing or
occurring at or prior to the date hereof, would have been required to be set
forth or described in the Seller Parties Disclosure Schedule or (ii) which makes
it necessary to correct any information in the Seller Parties Disclosure
Schedule or in any representation and warranty of the parties herein.

          (d)     Notwithstanding the foregoing, for purposes of determining the
accuracy of the representations and warranties of the parties contained in this
Agreement, the Seller Parties Disclosure Schedule on the date hereof shall be
deemed to include only that information contained therein on the date of this
Agreement and the supplements thereto pursuant to clause (a) above and shall be
deemed to exclude any other information contained in any subsequent supplement
or amendment thereto.

     Section 5.8  TAX RETURNS; TAX SHARING AGREEMENTS. Seller shall prepare (or
cause to be prepared) all Tax Returns required to be filed by each of Seller
Parties and shall pay (or cause to be paid) all Taxes required to be paid by it
or any of Seller Parties. As of the Closing, all Tax sharing agreements, Tax
indemnification agreements (other than (x) a customary commercial agreement to
indemnify for Taxes contained in any Lease or (y) an employment agreement for
which a gross-up payment (described in SECTION 3.23(b)(xi)) is required to be
made) or similar Contracts, with respect to or involving any of the Acquired
Companies shall be terminated as of the Closing Date and, after the Closing
Date, none of the Acquired Companies shall have any further rights or
obligations under any such agreement or contract.

     Section 5.9  PURCHASE PRICE ALLOCATION.

          (a)     As promptly as practicable after the date hereof, Buyer and
Seller (on behalf of it, and as agent for each other Seller Party) shall agree
to an allocation of the Cash Purchase Price that will be paid to, or for the
benefit of, each Seller Party, which allocation shall be reasonable and in
accordance with the principles of section 1060 of the Code and the Treasury
Regulations thereunder. If Buyer and Seller cannot agree on the amounts and
allocations described in the preceding sentence, such amounts and allocations
shall be prepared by the Accounting Firm. The allocation determined pursuant to
this SECTION 5.9(a) shall be final, conclusive and binding on Buyer and each of
Seller Parties for tax purposes only.

          (b)     As promptly as practicable after the date hereof, with respect
to each Seller Party, Buyer and Seller (on behalf of it, and as agent for each
other Seller Party) shall agree to an allocation of the Cash Purchase Price
allocated to each Seller Party pursuant to SECTION 5.9(a) and the Assumed
Liabilities attributable to each such Seller Party among the Acquired Assets
attributable to each such Seller Party, which allocations shall be reasonable
and in accordance with section 1060 of the Code and the Treasury Regulations
thereunder. If Buyer and Seller cannot agree on the amounts and allocations
described in the preceding sentence, such amounts and allocations shall be
prepared by the Accounting Firm. The allocation determined pursuant to this
SECTION 5.9(b) shall be final, conclusive and binding on Buyer and each of
Seller

                                       77


Parties for tax purposes only. Buyer and each Seller Party shall file an asset
acquisition statement on IRS Form 8594 (or any replacement or successor form)
reflecting the allocation of the portion of the Cash Purchase Price and the
Assumed Liabilities attributable to each such Seller Party among the Acquired
Assets attributable to each such Seller Party.

          (c)     Buyer and each Seller Party shall (i) be bound by the
allocations determined pursuant to SECTIONS 5.9(a) and (b) for purposes of all
Tax related matters, (ii) prepare and file all Tax Returns to be filed with any
Tax authority in a manner consistent with such allocations determined pursuant
to SECTIONS 5.9(a) and (b) and (iii) take no position inconsistent with such
allocations determined pursuant to SECTIONS 5.9(a) and (b) in any Tax Return,
any Action before any Tax or other Governmental Body or otherwise. If any of the
allocations determined pursuant to SECTION 5.9(a) or (b) are disputed by any Tax
authority, the party receiving notice of such dispute shall promptly notify and
consult with the other party hereto concerning resolution of such dispute, and
Buyer and each Seller Party shall cooperate in good faith in responding to such
challenge in order to preserve the effectiveness of the allocations determined
pursuant to SECTIONS 5.9(a) and (b).

          (d)     Notwithstanding anything to the contrary contained in this
SECTION 5.9, the amount, if any, paid by Buyer pursuant to SECTION 2.5(b) shall
be allocated by Buyer and Seller among the Seller Parties and the Acquired
Assets of each Seller Party in accordance with, and subject to, the principles
of, and obligations set forth in, this SECTION 5.9.

     Section 5.10 TRANSFER TAXES.

          (a)     To the extent provided in the 363 Order, in accordance with
section 1146(c) of the Bankruptcy Code, the instruments transferring the
Acquired Assets to Buyer shall contain the following endorsement:

          "Because this [instrument] has been authorized pursuant to
          Order of the United States Bankruptcy Court for the District
          of Delaware relating to a chapter 11 plan of the Grantor, it
          is exempt from transfer taxes, stamp taxes or similar taxes
          pursuant to 11 U.S.C. Section 1146(c)."

          (b)     To the extent the endorsement described in SECTION 5.10(a) is
not applicable or effective, Seller Parties shall pay 50% and Buyer shall pay
50% of any real property transfer or gains Tax, sales Tax, use Tax, excise Tax,
stamp Tax, stock transfer Tax or, registration Tax documentary Tax or other
similar Tax incurred in connection with the transactions contemplated by this
Agreement (collectively, "TRANSFER TAXES"). No later than 15 days prior to the
date any Tax Return that must be filed by Seller (or the applicable Seller
Party) in connection with Transfer Taxes required to be paid pursuant to this
SECTION 5.10(b) (such Tax Returns, "TRANSFER TAX RETURNS") is due, Seller (or
the applicable Seller Party) shall prepare, on a basis consistent with the
allocations determined in accordance with SECTION 5.9, all Transfer Tax Returns
and provide copies of such Transfer Tax Returns to Buyer for its review and
consent, which consent shall not be unreasonably withheld or delayed. Seller (or
the applicable Seller Party) shall file any such Transfer Tax Return prepared
pursuant to this SECTION 5.10(b) that is required to be filed by Seller (or any
applicable Seller Party) under applicable law.

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Notwithstanding anything to the contrary in this Agreement, if such Transfer
Taxes are not paid on or prior to the Closing, Buyer shall be entitled to escrow
(on reasonable terms) from the Cash Purchase Price an amount of cash equal to
$3,000,000 to secure Seller Parties' obligations under this SECTION 5.10(b).

     Section 5.11 VEHICLE RETURN PURSUANT TO REPURCHASE PROGRAMS; DISPOSITION OF
VEHICLES. Seller Parties shall, and shall cause each other lessee under a TFFC
MV Lease to: (i) sell or return each vehicle subject to a Repurchase Program
(other than a vehicle that has suffered a casualty loss) to the nearest related
manufacture official auction or other facility designated by the relevant
Vehicle Manufacturer or Affiliate thereof at the relevant lessee's sole expense
after the minimum term or mileage limit under such Repurchase Program for such
vehicle is achieved, but prior to the expiration of the maximum term and/or
prior to reaching the maximum mileage limit under such Repurchase Program for
such vehicle, other than isolated cases not exceeding 25 vehicles in any
calendar month on average; and (ii) sell or dispose of all vehicles not subject
to a Repurchase Program in accordance with the provisions of the applicable TFFC
MV Lease. Each such lessee agrees that the vehicles will be in vehicle turn-in
condition as specified in the applicable Repurchase Program.

     Section 5.12 COOPERATION IN CONNECTION WITH REFINANCING. Seller Parties
shall, and shall cause their Affiliates to, cooperate with Parent, Buyer and
their respective Affiliates, in connection with any proposed refinancing by
Buyer of all or any part of the Assumed Indebtedness and of the indebtedness of
TFFC, Budget Funding Corporation and BGI Leasing, Inc. upon consummation of the
transactions contemplated hereby. Buyer will be responsible for any reasonable
out-of-pocket costs and expenses incurred by Seller Parties pursuant to this
SECTION 5.12. Such cooperation shall include, without limitation, providing all
such accurate and complete information relating to Seller Entities' vehicle
fleet as Buyer may reasonably request, assisting in the preparation of offering
documents and materials, rating agencies presentations and direct access to
Seller Parties' financing sources.

     Section 5.13 CONFIDENTIALITY.

          (a)     From the date hereof and until the Closing, subject to
SECTIONS 5.13(b) and 5.13(c), Buyer and Parent shall keep, and shall cause their
Affiliates and their Representatives to keep, all the Seller Evaluation Material
confidential and will not, without the prior written consent of Seller, disclose
any Seller Evaluation Material, in whole or in part, and will not use the Seller
Evaluation Material, directly or indirectly, for any purpose other than in
connection with this Agreement and the Ancillary Agreements and the transactions
contemplated hereby and thereby.

          (b)     Buyer and Parent agree to disclose Seller Evaluation Material
to their Representatives only if and to the extent that such Representatives
need to know the Seller Evaluation Material for the purpose of the transactions
contemplated by this Agreement and the Ancillary Agreements and are informed by
Buyer or Parent of the confidential nature of the Seller Evaluation Material.
Buyer and Parent each agree to be responsible for any breach of this
SECTION 5.13 by Representatives of Buyer or Parent.

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          (c)     Notwithstanding the foregoing, Buyer, Parent or any of their
Representatives may disclose any of Seller Evaluation Materials (to the extent
such disclosure is reasonably related to the purpose of approving or
consummating the transactions contemplated by this Agreement) to creditors of
Seller Parties that agree pursuant to a written agreement containing
confidentiality provisions substantially similar to those set forth in this
SECTION 5.13, to keep such Seller Evaluation Materials confidential, to the
creditors' committee formed in connection with the Chapter 11 Cases and in
connection with appearances by Buyer or any Affiliate thereof in the Bankruptcy
Court to the extent the Seller Evaluation Materials so disclosed reasonably
relate to the purpose of such appearances. Buyer shall deliver to Seller a copy
of each such written confidentiality agreement with creditors of Seller Parties
as promptly as reasonably practicable after any such confidentiality agreement
is executed and delivered to Buyer.

          (d)     If Buyer, Parent or any of their Representatives, or any
Person to whom any of the foregoing have, directly or indirectly, transmitted
Seller Evaluation Material, are requested or required by Law (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigation demand, any informal or formal investigation by any Governmental
Body, stock exchange regulation or otherwise) to disclose any Seller Evaluation
Material, each of Buyer and Parent agrees: (x) to promptly notify Seller of the
existence, terms and circumstances surrounding such request, (y) to consult with
Seller on the advisability of taking legally available steps to resist or narrow
such request and (z) if disclosure of any Seller Evaluation Material is
required, to furnish only that portion of Seller Evaluation Material, which is
required to be disclosed and to use reasonable efforts to cooperate with any
reasonable action by Seller Parties to obtain an appropriate protective order of
other reliable assurance that confidential treatment will be accorded to Seller
Evaluation Material.

          (e)     If the transactions contemplated by this Agreement are not
consummated and this Agreement is terminated in accordance with the terms
hereof, Buyer and Parent will redeliver to Seller or destroy all tangible Seller
Evaluation Material and any other tangible material containing any information
in the Seller Evaluation Material (whether prepared by a Seller Entity, their
Representatives or otherwise), and will not retain any copies, extracts or other
reproductions in whole or in part of such tangible material. If requested by
Seller, an appropriate officer of Buyer or Parent will certify to Seller that
all such Seller Evaluation Material has been so redelivered or destroyed.
Notwithstanding the delivery or destruction of the Seller Evaluation Material
required by this SECTION 5.13(e), all duties and obligations existing under this
SECTION 5.13 (including with respect to any oral Seller Evaluation Material)
will remain in full force and effect.

     Section 5.14 NO SOLICITATION OF EMPLOYEES. Without the consent of Seller,
until the later of December 21, 2002 and the termination of this Agreement,
Buyer, Parent and their Representatives who have knowledge of the transactions
contemplated by this Agreement and the Ancillary Agreements will not take any
action to solicit any officer or key employee of Seller to terminate his or her
employment with Seller (except for employment as contemplated by SECTION 6.1
after the Closing), it being understood that the foregoing shall not prohibit a
solicitation directed at the public in general, by a professional employment
agency or to any employee who approaches Buyer or Parent without being initially
solicited by Buyer or Parent;

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PROVIDED, HOWEVER, that the obligations of Buyer and Parent under this SECTION
5.14 shall terminate automatically upon Closing.

     Section 5.15 CERTAIN TAX REPORTING.

          (a)     CERTAIN PAYROLL REPORTING MATTERS. If so instructed by Buyer
(in its sole discretion), Seller Parties shall elect with Buyer (the "96-60
ELECTION") the "ALTERNATIVE PROCEDURE" set forth in section 5 of Revenue
Procedure 96-60, 1996-2 C.B. 399 ("REV PROC 96-60"). In accordance with the
96-60 Election, Seller Parties shall provide Buyer with the amounts of wages
paid from January 1, 2002 to the Closing Date to Affected Employees,
withholdings from such wages and any other information required pursuant to Rev
Proc 96-60. Provided Seller Parties have provided Buyer the information set
forth in the immediately preceding sentence, Buyer shall file Form W-2 for all
wages paid to Affected Employees for the period January 1, 2002 to December 31,
2002.

          (b)     Notwithstanding anything to the contrary contained in this
Agreement, Seller Parties shall calculate, report and pay all federal, state and
local employment tax obligations (e.g., FICA, Medicare, FUTA and SUTA) with
respect to Affected Employees for any period or portion thereof ending on or
prior to Closing Date (including, but not limited to, Form 941, all state and
local employee withholding tax obligations and state unemployment insurance
forms, in each case, for any period or portion of any period ending on or prior
to the Closing Date).

     Section 5.16 SEC REPORTS. Notwithstanding that the Seller and its
Subsidiaries may not be subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, Seller and its Subsidiaries shall file with the SEC
and provide Buyer with the quarterly report on Form 10-Q for the fiscal quarter
ended June 30, 2002 and the related certification required under Section 906 of
the Sarbanes-Oxley Act of 2002, as promptly as practicable but in no event later
than five Business Days prior to the Closing Date.

                                    ARTICLE 6
                        ADDITIONAL POST-CLOSING COVENANTS

     Section 6.1  BENEFIT AND EMPLOYMENT MATTERS.

          (a)     Prior to the Closing Date (to be effective on the Closing
Date), Buyer will offer regular full-time or part-time employment, as
applicable, to each full-time and part-time Seller Parties Employee with
comparable compensation, benefits and in the same geographic area as applicable
to such Seller Parties Employee immediately before the Closing Date. Seller
Parties Employees who accept offers of employment made by Buyer pursuant to this
SECTION 6.1(a) and commence employment with Buyer and its Affiliates immediately
upon Closing shall be referred to herein as the "AFFECTED EMPLOYEES;" PROVIDED,
HOWEVER, that any Seller Parties Employee who is not actively at work on the
Closing Date on account of sickness, vacation or short-term disability shall be
deemed a "Affected Employee" upon his or her return to active employment with
Buyer after the Closing Date. Except as specifically provided for in this
Agreement, Seller Parties shall be responsible for and shall indemnify, defend
and hold harmless Buyer and its Affiliates from any liabilities relating to any
current or former employee of Seller

                                       81


Parties who is not an Affected Employee (including, without limitation, any
liabilities arising under any Benefit Plan or other compensation program,
arrangement or agreement of Seller Parties). Seller Parties shall make their
employees available to Buyer, at reasonable times and in a manner intended not
to disrupt ongoing operations, for the purpose of making employment offers to
such employees.

          (b)     With respect to those employee benefit plans of Buyer or any
of its Subsidiaries ("BUYER PLANS") in which Buyer, in its sole discretion,
shall determine that Affected Employees may participate as of or following the
Closing Date, Buyer shall, and shall cause its Subsidiaries to, credit the prior
service of the Affected Employees with Seller Parties for purposes of
eligibility and vesting under such Buyer Plans to the extent that such service
was recognized under the analogous Benefit Plans; PROVIDED, HOWEVER, that such
service need not be credited to the extent it would result in a duplication of
benefits. Affected Employees shall also be given credit for any deductible or
co-payment amounts paid in respect of the Buyer Plan year in which the Closing
occurs, to the extent that, following the Closing, they participate in any Buyer
Plan during such plan year for which deductibles or co-payments are required.
Buyer shall, and shall cause its Subsidiaries to, waive (i) any preexisting
condition restriction (other than a restriction to which the Affected Employee
is subject immediately prior to the time of the Closing) under the terms of the
analogous Benefit Plan immediately prior to the Closing or (ii) any waiting
period limitation which would otherwise be applicable to an Affected Employee on
or after the Closing to the extent such Affected Employee had satisfied any
similar waiting period limitation under an analogous Benefit Plan prior to the
Closing.

          (c)     With respect to any Affected Employees who are given notice of
termination of employment during the first nine months immediately following the
Closing Date, Buyer shall provide each such Affected Employee with severance
benefits equal to those provided as of the date hereof under the applicable
Seller Entity severance plan in which such Affected Employee currently
participates.

          (d)     Nothing in this SECTION 6.1 shall be deemed to require that
the employment of any Affected Employee be continued for any specific period of
time after the Closing Date. Except as expressly provided in this SECTION 6.1,
nothing in this SECTION 6.1, express or implied, shall be construed to prevent
Buyer or its Affiliates from (i) terminating, or modifying the terms of
employment of, any Affected Employee following the Closing Date or (ii)
terminating or modifying to any extent or in any respect employee benefit plan,
program, agreement or arrangement that Buyer or its Affiliates, as applicable,
may establish or maintain. Buyer shall be responsible for and shall indemnify,
defend and hold harmless Seller and its Affiliates from any liabilities arising
from the termination, following the Closing Date, of any Affected Employee.

          (e)     Prior to Closing, Seller shall deliver to Buyer a list of all
employees who have suffered an "employment loss" (as defined in the WARN Act)
during the three months prior to the Closing Date.

          (f)     Subject to the consummation of the transaction pursuant to the
terms of this Agreement, effective as of Closing, Buyer shall be obligated to
provide, or to cause Parent to provide, the benefits set forth on
SCHEDULE 6.1(f).

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          (g)     With respect to the following plans: Automobile Mechanics
Local 701 - International Association of Machinists and Aerospace Workers,
AFL-CIO Mechanics Welfare Fund - Chicago; Teamsters Garage Employees Union Local
272 Management Pension Fund; Machinist Money Purchase Pension Fund - Auto Lodge
447; Western Conference of Teamsters Local 117 - Seattle; Western Conference of
Teamsters Local 78 - Oakland; W PA Teamsters and Employees Pension Fund Local -
Local 926 Pittsburgh; Union De Tronquistas De PR Local 901 - Puerto Rico; and
Teamsters Local 117, Supplemental Income 401K Plan - Seattle (collectively, the
"MULTIEMPLOYER PLANS"), after the Closing:

          (i)     Buyer will be obligated to make contributions to each
     Multiemployer Plan in accordance with all collective bargaining agreements
     relating thereto and shall contribute to such plan with respect to such
     operations for substantially the same number of contribution base units for
     which Seller Parties had an obligation to contribute to such plan.

         (ii)     Unless and until a variance or exemption is obtained in
     accordance with section 4204(c) of the Employee Retirement Income Security
     Act of 1974, as amended ("ERISA"), Buyer will provide to each Multiemployer
     Plan, for a period of five plan years commencing with the first plan year
     beginning after the Closing, a bond issued by a corporate surety company
     that is an acceptable surety for purposes of section 412 of ERISA, or an
     amount held in escrow by a bank or similar financial institution
     satisfactory to such Multiemployer Plan, or such other security as may be
     permitted under section 4204(a)(1)(B) of ERISA or regulations thereunder,
     in an amount equal to the greater of:

                  (A)  the average annual contribution required to be made by
          the Seller Parties to the Multiemployer Plan with respect to the
          operations thereunder for the three plan years preceding the plan year
          in which the Closing occurs, or

                  (B)  the annual contribution that the Seller Parties were
          required to make with respect to the operations under the
          Multiemployer Plan for the last plan year before the plan year in
          which the Closing occurs,

which applicable bond or escrow shall be paid to such Multiemployer Plan if
Buyer withdraws from such Multiemployer Plan, or fails to make a contribution to
such Multiemployer Plan when due, at any time during the first five plan years
beginning after the Closing.

        (iii)     If Buyer withdraws from a Multiemployer Plan in a complete
     withdrawal or a partial withdrawal with respect to the union employees
     within the period referred to in the preceding subsection (ii), Buyer will
     be primarily liable and Seller Parties agree to be secondarily liable for
     any withdrawal liability the Seller Parties would have had at the Closing
     Date to such Multiemployer Plan, but for the application of section 4204 of
     ERISA, if the withdrawal liability of Buyer with respect to such
     Multiemployer Plan is not paid.

                                       83


         (iv)     Buyer agrees that any action on its part that causes
     withdrawal liability (either partial or complete) during the period
     referred to in subsection (ii) hereof shall be for valid business reasons
     only. In the event of a subsequent sale of the assets of the Acquired
     Business by Buyer during such period, Buyer agrees to comply with the
     provisions of section 4204(a)(1) of ERISA.

          (v)     If all, or substantially all, of the Seller Parties' assets
     are distributed, or if the Seller Parties are liquidated before the end of
     the first five plan years beginning after Closing, then, except as may
     otherwise be required by law, Seller Parties shall provide a bond, an
     amount in escrow or such other security as may be permitted under section
     4204(a)(1)(B) of ERISA or regulations thereunder, equal to the present
     value of the withdrawal liability Seller Parties would have had but for the
     application of section 4204 of ERISA, which bond, amount in escrow or other
     security may be applied toward the satisfaction of Seller's secondary
     liability described in subsection (iii) hereof.

         (vi)     Buyer agrees to provide the applicable Seller Parties with
     reasonable advance notice of any action or event which could result in the
     imposition of withdrawal liability contemplated by this SECTION 6.1(g), and
     in any event Buyer shall immediately furnish such Seller Parties with a
     copy of any notice of withdrawal liability it may receive with respect to a
     Multiemployer Plan, together with all the pertinent details. In the event
     that any such withdrawal liability shall be assessed against Buyer, Buyer
     further agrees to provide the applicable Seller Parties with reasonable
     advance notice of any intention on the part of Buyer not to make full
     payment of any withdrawal liability when the same shall become due.

     Section 6.2  BOOKS AND RECORDS; PERSONNEL. For a period of six years after
the Closing Date, Buyer shall maintain all Business Records that are transferred
to Buyer hereunder. At all times during which Buyer maintains such Business
Records (including electronic access to the extent such Business Records are in
electronic form and the information can be provided separate and apart from all
other information relating to Buyer, any of its Affiliates or their respective
businesses), Buyer shall allow Seller Parties and their accountants and counsel
access to all such Business Records, properties and personnel that are
reasonably required in the administration of the Chapter 11 Cases or
anticipation of, or preparation for, any existing or future Action involving a
Seller Party, Tax Return preparation or defense, litigation or Excluded
Liability. Such access shall be afforded during regular business hours and upon
reasonable written notice at Buyer's principal place of business or at any
location where such Business Records are stored; PROVIDED, HOWEVER, that any
such access shall not interfere with the normal conduct of the business or
operations of Buyer and its Affiliates. Seller Parties shall be responsible for
any actual out-of-pocket costs and expenses incurred by Buyer and its Affiliates
in connection with granting Seller Parties access to such Business Records,
properties and personnel pursuant to this SECTION 6.2. If, prior to the
expiration of such six-year period, Buyer proposes to dispose of any such
Business Records, Buyer shall (and Parent shall cause Buyer to) provide Seller
with written notice and, if requested, shall deliver the same to Seller at
Seller's expense.

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     Section 6.3  SECTION 338(h)(10) ELECTIONS.

          (a)     Seller, in respect of each or any Seller Party, if so
instructed by Buyer, shall jointly make a timely election under section
338(h)(10) of the Code (and any comparable elections under state and local
income tax Law) with Buyer with respect to any domestic Acquired Company
(individually, any such election referred to herein as an "ELECTION" and,
collectively, such elections referred to herein as the "ELECTIONS"). On or prior
to the Closing Date, Seller (in respect of each Seller Party that Buyer has
instructed Seller to make an Election pursuant to this SECTION 6.3(a)) and Buyer
shall exchange completed and executed original copies of IRS Form 8023 and any
applicable similar state or local forms with respect to the Elections.
Notwithstanding the foregoing, Seller shall not be required to make an Election
with respect to any Acquired Company if the aggregate tax basis of the assets of
such Acquired Company exceeds the "Aggregate Deemed Sales Price" allocable to
such Acquired Company unless such Election has no adverse Tax effect on Seller
or any Seller Party.

          (b)     In connection with any Election with respect to an Acquired
Company, as promptly as practicable after the date hereof, Buyer and Seller
shall agree to: (i) a determination of the "Aggregate Deemed Sales Price" and
the "Adjusted Grossed Up Basis" (each, as defined under applicable Treasury
Regulations) with respect to any such Acquired Company and (ii) an allocation of
each such Aggregate Deemed Sales Price and Adjusted Grossed Up Basis among the
assets of any such Acquired Company, which allocations shall be made in
accordance with section 338 of the Code and any applicable Treasury Regulations
and the portion of the Cash Purchase Price, if any, and the Assumed Liabilities,
if any, attributable to such Acquired Company that have been allocated to such
Acquired Company pursuant to SECTION 5.9 (each, a "SECTION 338(h)(10) ALLOCATION
STATEMENT"). If Buyer and Seller cannot agree on the amount(s) and allocation(s)
described in the preceding sentence, such amount(s) and allocation(s) shall be
prepared by the Accounting Firm. Any Section 338(h)(10) Allocation Statement
prepared pursuant to this SECTION 6.3(b) shall be final, conclusive and binding
on Buyer and each Seller Party.

          (c)     Buyer and each Seller Party: (i) shall be bound by the
determinations of the Section 338(h)(10) Allocation Statements determined
pursuant to SECTION 6.3(b) consistently therewith for purposes of determining
any Taxes, (ii) shall prepare and file all Tax Returns to be filed with any Tax
authority in a manner consistent with the Section 338(h)(10) Allocation
Statements and (iii) shall take no position inconsistent with the Section
338(h)(10) Allocation Statements in any Tax Return, any Action before any Tax
authority or otherwise. In the event that a Section 338(h)(10) Allocation
Statement is disputed by any Tax authority, the party receiving notice of such
dispute shall promptly notify and consult with the other party hereto concerning
resolution of such dispute.

          (d)     Each Seller Party and Buyer shall cooperate in the preparation
and timely filing of (i) Forms 8023 with respect to any Election and any
comparable state or local forms or reports and (ii) to the extent permissible by
or required by Law, any corrections, amendments, or supplements thereto. To the
extent necessary for the valid filing of any such corrections, amendments,
supplements, forms or reports, each Seller Party and Buyer shall cooperate in
the timely execution thereof. Neither Seller nor Buyer shall, or shall permit
any of their Affiliates to, take any action to modify any of the forms or
reports (including any corrections, amendments,

                                       85


or supplements thereto) that are required for the making of any Election after
their execution or to modify or revoke any of the Elections following the filing
of the Forms 8023 without the prior written consent of the other party.

          (e)     Notwithstanding anything to the contrary contained in this
SECTION 6.3, the amount, if any, paid by Buyer pursuant to SECTION 2.5(b) and
allocated to an Acquired Company (for which an Election has been made pursuant
to SECTION 6.3(a)) pursuant to SECTION 5.9(d) shall be: (i) taken into account
for purposes of determining Aggregate Deemed Sales Price and Adjusted Grossed Up
Basis and (ii) allocated by Buyer and Seller among the assets of such Acquired
Company in accordance with, and subject to, the principles and obligations set
forth in this SECTION 6.3.

     Section 6.4  TAX COOPERATION. Seller Parties and Buyer agree to furnish or
cause to be furnished to each other, upon request, as promptly as practicable,
such information (including access to books and records) and assistance relating
to the Acquired Assets (including the Acquired Companies) as is reasonably
requested for the filing of any Tax Returns (including any Transfer Tax Return
required to be filed pursuant to SECTION 5.10(b)), for the preparation of any
audit and for the prosecution or defense of any Action or other matter related
to Taxes or any Tax Return. Any information obtained under this SECTION 6.4
shall be kept confidential except (i) as may be otherwise necessary in
connection with the filing of Tax Returns or claims for refund or in conducting
an audit or other proceeding or (ii) as may be consented to by Seller Parties or
Buyer, as applicable. Without limiting the foregoing, Buyer shall, as promptly
as practicable, cause the Acquired Companies and their Subsidiaries to prepare
and provide to Seller a package of Tax information materials, including
schedules and work papers (the "TAX PACKAGE") required by Seller to enable
Seller to prepare and file its U.S. federal consolidated (and any applicable
state unitary, combined or similar) income Tax Return. The Tax Package shall be
completed in accordance with past practice, including past practice as to
providing such information and as to the method of computation of separate
taxable income or other relevant measure of income of the Acquired Companies.

     Section 6.5  USE OF NAME. Seller Parties agree that promptly following the
Closing Date, Seller and its Affiliates shall, except to the extent provided in
the license agreement to be entered into pursuant to SECTION 2.11, cease and
desist, and cause all other Persons to cease and desist, from all further use of
the names "Budget" or "Ryder" and any variation or derivation thereof and any
trademarks, service marks, trade names, domain names, trade dress, logos,
business and product names, slogans and registrations and applications for
registration thereof (the "MARKS AND LOGOS") and will (i) adopt new Marks and
Logos which are not confusingly similar to the Marks and Logos, (ii) file
amendments to the certificate or articles of incorporation, as the case may be,
of Seller with the Delaware Secretary of State (or other appropriate
Governmental Body) and shall make appropriate filings with any other applicable
registry(ies) changing Seller's and its Subsidiaries' corporate names and any
d/b/a's to names that do not include any of the Marks and Logos or words
confusingly similar thereto and (iii) neither Seller nor any of its Subsidiaries
shall make any further use of the Marks and Logos.

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     Section 6.6  REMITTANCE OF FUNDS.

          (a)     Any interest, commissions, fees and other payments, including
without limitation, payments in respect of principal and interest, received by
Seller Parties or any Affiliate thereof relating to the Acquired Business after
the Closing Date in any capacity, whether accrued prior to or on the Closing
Date, including with respect to any TFFC MV Lease, franchise or other Contract
included in the Acquired Business, shall as of the Closing Date be for the
account of Buyer. Any such amounts received by Seller Parties and their
Affiliates after the Closing Date shall be received by Seller Parties and their
Affiliates in trust for Buyer and Seller Parties will, and will cause their
Affiliates to, subject to the consummation of the Closing, immediately pay such
amounts to an accounted designated by Buyer upon receipt thereof.

          (b)     Any interest, commissions, fees and other payments, including
payments in respect of principal and interest, received by Buyer in any capacity
in respect of any Excluded Asset or Retained Business (whether because the
Closing has not yet occurred or otherwise) shall be received by Buyer in trust
for Seller Parties and Buyer will immediately pay such amounts to an account
designated by Seller upon receipt thereof.

     Section 6.7  MAIL RECEIVED AFTER THE CLOSING. Following the Closing, Buyer
may receive and open all mail addressed to Seller or any of its Affiliates and
deal with the contents thereof in its reasonable discretion to the extent that
such mail and the contents thereof relate to the Acquired Business, the Acquired
Assets or any of the Assumed Liabilities. Buyer shall deliver or cause to be
delivered to Seller, at Seller's expense, all mail received by Buyer after the
Closing addressed to any Seller Entity which does not relate to the Acquired
Business, the Acquired Assets or the Assumed Liabilities until the earlier of
(i) one year after the Closing and (ii) the entry of a final order in the
Chapter 11 Cases.

     Section 6.8  FURTHER ASSURANCES.

          (a)     At any time and from time to time after Seller Parties shall
execute and deliver to Buyer such instruments of transfer, conveyance,
assignment and confirmation, in addition to those executed and delivered by
Seller Parties at Closing, and take such action as Buyer may reasonably deem
necessary or desirable in order to more effectively transfer, convey and assign
to Buyer and to confirm Buyer's title to all of the Acquired Assets, to put
Buyer in actual possession and operating control thereof and to permit Buyer to
exercise all rights with respect thereto and otherwise to give full effect to
the provisions of this Agreement.

          (b)     If, notwithstanding the 363 Order and the 365 Order, any
transfer or assignment by Seller Parties to, or any assumption by Buyer of, any
interest in, or liability, obligation or commitment under, any Acquired Asset
requires a Governmental Consent or a Third Party Consent and any such consent is
not obtained prior to the Closing and Buyer, in its sole discretion, waives the
condition set forth in SECTION 7.2(d) with respect to such Governmental Consent
or Third Party Consent, then, if Buyer so elects, such Acquired Asset shall not
be transferred to Buyer at the Closing Date and Seller Parties shall cooperate
(at their own expense) in any lawful and reasonable arrangement reasonably
proposed by Buyer under which Buyer shall obtain the economic benefits under the
asset, claim or right with respect to which the consent has not been obtained.
Such reasonable arrangement may include (i) the

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subcontracting, sublicensing or subleasing to Buyer of any and all rights of
Seller Parties against the other party to such third-party agreement arising out
of a breach or cancellation thereof by the other party and (ii) the enforcement
by Seller Parties of such rights.

                                    ARTICLE 7
                         CONDITIONS PRECEDENT TO CLOSING

     Section 7.1  GENERAL CONDITIONS. The respective obligations of Buyer and
Seller Parties to effect the Closing are subject to the fulfillment, prior to or
at the Closing, of each of the following conditions:

          (a)     No statute, rule, regulation, executive order, decree,
decision, ruling or preliminary or permanent injunction shall have been enacted,
entered, promulgated or enforced by any Governmental Body, that enjoins,
prevents or prohibits confirmation of the transactions contemplated by this
Agreement or any of the Ancillary Agreements.

          (b)     Any applicable waiting period (and any extension thereof)
under applicable Competition Law shall have expired or been terminated, and all
approvals under such applicable Competition Law in jurisdiction which filings
relating to the transactions contemplated by this Agreement or the Ancillary
Agreement are required and under the Competition Law of Australia and New
Zealand shall have been obtained.

          (c)     The 363 Order and the 365 Order shall have been entered and
shall not have been stayed or vacated.

          (d)     No Action shall have been taken or remain pending and unstayed
by any Governmental Body seeking to restrain or materially and adversely alter
the transactions contemplated by this Agreement.

     Section 7.2  CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The obligations
of Buyer to effect the Closing are subject to the fulfillment, prior to or at
the Closing, of each of the following additional conditions, any of which may be
waived in writing by Buyer:

          (a)     The representations and warranties of Seller Parties contained
in this Agreement or in any certificate delivered pursuant to this Agreement
(without regard to any qualifications therein as to materiality or Material
Adverse Effect) shall be true and correct in all material respects at and as of
the date hereof and at and as of the Closing Date (except to the extent that
such representations and warranties are made as of a specified date, in which
case, such representations and warranties shall be true and correct in all
material respects as of such date); PROVIDED, HOWEVER, that the representations
and warranties of Seller Parties contained in this Agreement or in any
certificate delivered pursuant to this Agreement shall be deemed true and
correct in all material respects at and as of the date hereof and at and as of
the Closing Date notwithstanding that a representation and warranty of Seller
Parties contained in this Agreement is not true and correct in all material
respects (a "REPRESENTATION FAILURE") if (i) the Representation Failure was the
result of an inadvertent error or omission by Seller Parties and (ii) to the
extent the impact of Representation Failure can be measured adequately or
reasonably estimated in monetary terms, the adverse impact of each
Representation Failure does not exceed in the aggregate, together with the
impact of all other Representation Failures, $10,000,000, it

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being understood that if the impact of a Representation Failure can not be
measured adequately or reasonably estimated in monetary terms, this proviso
shall not apply to such a Representation Failure; and PROVIDED, FURTHER, that
the representations and warranties of Seller Parties contained in this Agreement
or in any certificate delivered pursuant to this Agreement shall not be deemed
to be true and correct in all material respects if the adverse impact of any
Representation Failure which can be measured adequately or reasonably estimated
in monetary terms, together with the impact of all other Representation
Failures, exceeds $10,000,000.

          (b)     Seller Parties shall have performed all obligations and
agreements and complied in all material respects with all covenants required by
this Agreement to be performed or complied with by Seller Parties prior to or at
the Closing.

          (c)     Buyer shall have received a certificate of the chief executive
officer of each Seller Party as to the satisfaction of the conditions set forth
in SECTION 7.2(a) and SECTION 7.2(b).

          (d)     All Governmental Consents and Third Party Consents shall have
been obtained and shall remain in full force and effect, except for Third Party
Consents required pursuant to Contracts (in each case other than Airport
Concessions and Leases in any airport or area adjacent thereto) to which any of
the Acquired Companies is a party and which are not, individually or in the
aggregate, material to the Acquired Business or to the Acquired Business
conducted by the Acquired Company that is a party to such Contract.

          (e)     Since the date hereof, there shall have been no change,
effect, event, occurrence or state of facts that, individually or in the
aggregate, would be reasonably expected to have a Material Adverse Effect.

          (f)     Seller Parties shall have delivered all other documents
specified in SECTION 2.8 to Buyer.

          (g)     The Benefit Plans listed on items 1 through 9, 11, 12 and 13in
SECTION 3.18(b) OF THE SELLER PARTIES DISCLOSURE SCHEDULE, shall have been
amended effective as of not later than the Closing to be consistent with
SCHEDULES 1.1(c) and 6.1(f).

          (h)     The 363 Order and the 365 Order shall have become Final
Orders.

          (i)     Each of the BRACI Administrative Services Agreement and the
BRACI License Agreement shall have been terminated, in each case on terms
satisfactory in substance and form to Buyer.

          (j)     Seller Parties shall have delivered to Buyer a report setting
forth the aggregate amount of Qualified Fees paid by Seller Parties from June
30, 2002 until the Closing, an itemized list of each Qualified Fee so paid
specifying the Person to which such payment has been made, the amount of such
payment, the date thereof, accompanied by a certificate of the chief financial
officer of Seller stating that the information contained in such list is true,
accurate and complete in all respects and all supporting documentation for each
such payment.

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     Section 7.3  CONDITIONS PRECEDENT TO SELLER PARTIES' OBLIGATIONS. The
obligations of Seller Parties to effect the Closing of the transactions
contemplated hereby are subject to the fulfillment, prior to or at the Closing,
of each of the following additional conditions, any of which may be waived in
writing by Seller Parties:

          (a)     The representations and warranties of each of Parent and Buyer
contained in this Agreement or in any certificate or document delivered pursuant
to the provisions hereof or in connection with the transactions contemplated
hereby (without regard to any qualifications therein as to materiality or
material adverse effect) shall be true and correct in all material respects at
and as of the date hereof and at and as of the Closing Date (except to the
extent that such representations and warranties are made as of a specified date,
in which case such representations and warranties shall be true and correct in
all material respects as of such date).

          (b)     Buyer and Parent shall have performed in all material respects
all obligations and agreements and complied in all material respects with all
covenants required by this Agreement to be performed or complied with by it
prior to or at the Closing.

          (c)     Seller shall have received a certificate of an officer of
Buyer and Parent as to the satisfaction of the conditions set forth in
SECTION 7.3(a) and SECTION 7.3(b).

          (d)     Buyer shall have delivered all documents specified in
SECTION 2.9 to Seller Parties.

                                    ARTICLE 8
                         TERMINATION; TERMINATION AMOUNT

          Section 8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated at any time prior to the Closing Date by mutual written agreement of
Buyer and Seller Parties.

          Section 8.2 TERMINATION BY EITHER BUYER OR SELLER PARTIES. This
Agreement may be terminated at any time prior to the Closing Date by either
Buyer or Seller Parties:

          (a)     upon written notice to the other party, (i) by Buyer, if the
Closing shall not have occurred by November 9, 2002 (the "BUYER CLOSING
DEADLINE") and (ii) by Seller Parties, if the Closing shall not have occurred by
December 6, 2002 (the "SELLER CLOSING DEADLINE" and together with the Buyer
Closing Deadline, the "CLOSING DEADLINES"); PROVIDED, HOWEVER, that the right to
terminate this Agreement under this SECTION 8.2(a) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Closing to be consummated on or
prior to the Closing Deadline; and PROVIDED, FURTHER, that if the Closing shall
not have occurred by the Buyer Closing Deadline solely as a result of any
applicable waiting period (or any extension thereof) under any Competition Law
relating to the transactions contemplated by this Agreement or the Ancillary
Agreements (the "APPLICABLE WAITING PERIOD") not having expired or been
terminated, the Closing Deadline shall be deemed to read "December 31, 2002";
and PROVIDED, FURTHER, that if at any time Buyer or Seller Parties have the
right to terminate this Agreement pursuant to this SECTION 8.2(a) but neither
does so within five Business Days after the applicable Closing Deadline, then
such Closing Deadline shall be extended by an additional thirty days; or

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          (b)     if a Governmental Body shall have issued a Final Order or
taken any other nonappealable final action having the effect of restraining,
enjoining or otherwise prohibiting the transactions contemplated hereby.

          Section 8.3 TERMINATION BY BUYER. This Agreement may be terminated at
any time prior to the Closing Date by Buyer if:

          (a)     there has been a breach by any Seller Party of any
representation or warranty contained in this Agreement or in any certificate
delivered pursuant to this Agreement which breach is not curable or, if curable,
is not cured within 15 days after written notice of such breach given by Buyer
to Seller Parties and which has caused, or could reasonably be expected to
cause, the condition set forth in SECTION 7.2(a) not to be satisfied;

          (b)     there has been a breach by any of Seller Parties of any of the
covenants or agreements contained in this Agreement, which breach is not curable
or, if curable, is not cured within 15 days after written notice of such breach
given by Buyer to Seller Parties;

          (c)     the Bankruptcy Court shall not have entered the Overbid
Procedures Order satisfying the requirements of SECTION 5.5 not later than
September 10, 2002;

          (d)     (i) any of Seller Parties or any Chapter 11 trustee appointed
for any Seller Parties shall (A) accept a proposal providing for, relating to or
supporting an Alternative Transaction, (B) seek the approval by the Bankruptcy
Court of an Alternative Transaction (whether pursuant to Section 363, in a
Chapter 11 plan or otherwise) or, other than as expressly permitted by, and
following the approval and entry by the Bankruptcy Court of, the Overbid
Procedures Order, take any other action to pursue an Alternative Transaction,
(C) file or support, or advocate in any court, a Chapter 11 plan, motion or
other pleading requesting the Bankruptcy Court to approve an Alternative
Transaction or which, if adopted, granted, approved or confirmed, could
reasonably be expected to lead to consummation of an Alternative Transaction, or
(D) other than as expressly permitted by, and following the approval and entry
by the Bankruptcy Court of, the Overbid Procedures Order, take any action which
is otherwise inconsistent with the consummation of the transactions contemplated
by this Agreement; or (ii) the Committee of Unsecured Creditors in connection
with the Chapter 11 Cases shall (A) withdraw or announce the withdrawal of its
support to the transaction contemplated by this Agreement (including, without
limitation, the Bidding Procedures and the Termination Amount), other than
following a breach by Buyer or Parent which would permit Seller Parties to
terminate this Agreement pursuant to SECTIONS 8.4(a) or 8.4(b) or (B) file or
support, or advocate in any court, a Chapter 11 plan, motion or other pleading
requesting the Bankruptcy Court to approve an Alternative Transaction or which,
if adopted, granted, approved or confirmed, could reasonably be expected to lead
to the confirmation of an Alternative Transaction, other than as expressly
permitted by, and following the approval and entry by the Bankruptcy Court of,
the Overbid Procedures Order;

          (e)     the 363 Order and the 365 Order containing the provisions
required by this Agreement shall not have been entered not later than October
28, 2002 (or shall be vacated or stayed as of such date);

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          (f)     the 363 Order and the 365 Order containing the provisions
required by this Agreement shall not have become Final Orders by November 8,
2002; PROVIDED, HOWEVER, that if the Applicable Waiting Period shall not have
expired or terminated on or before November 8, 2002, then the November 8, 2002
date set forth in this clause (f) shall be extended to the earlier of (i) the
fifth Business Day after such Applicable Waiting Period expires and (ii)
December 31, 2002 (the "FINAL ORDER DEADLINE");

          (g)     the Bankruptcy Court enters an order approving an Alternative
Transaction or confirming a Chapter 11 plan not incorporating the transactions
contemplated by this Agreement;

          (h)     any of the Seller Parties' Chapter 11 Cases shall be converted
into a case under Chapter 7 of the Bankruptcy Code or dismissed;

          (i)     Seller Parties shall have failed to (i) obtain a cumulative
Adjusted EBITDAR for any period commencing on August 1, 2002 and ending on the
last day of each calendar month commencing on August 31, 2002 (each such period,
a "TESTING PERIOD") equal to or larger than the cumulative Adjusted EBITDAR
projected for such Testing Period in the Operating Metric Forecast and (ii)
achieve at least one of the following projected ratios or the projected Rental
Transactions as set forth in the Operating Metric Forecast for the calendar
month ending on the same day as the day on which the relevant Testing Period
expires: (A) the Automotive Fleet Utilization Ratio; (B) the Automotive Rental
Revenue to Rental Days Ratio; (C) the Rental Transactions to Full-Time
Equivalents Ratio; or (D) Rental Transactions;

          (j)     Seller Parties shall not have entered into definitive
agreements satisfactory in substance and form to Buyer (including, but not
limited to, with respect to the ability of Buyer to prepay all amounts
outstanding thereunder concurrently with the Closing without penalty, fee or
breakage fee or similar payment or cost) with respect to each of the Ford MV
Lease by August 30, 2002 or any of the orders entered by the Bankruptcy Court in
connection with the DIP Financing, the DIP Asset-Backed Fleet Financing, the DIP
L/C Rollover or the Ford Line of Credit shall not be reasonably satisfactory in
substance and form to Buyer; PROVIDED, HOWEVER, that if Seller Parties enter
into the documents attached as SCHEDULE 8.2(j) with respect to the Ford MV Lease
by August 30, 2002, the definitive documentation with respect thereto shall be
deemed satisfactory in substance and form to Buyer;

          (k)     TFFC, Budget Funding Corporation or BGI Leasing, Inc. shall
commence a voluntary bankruptcy, reorganization, arrangements, insolvency or
liquidation proceeding or any other proceeding under any federal or state
bankruptcy or similar law; or an involuntary bankruptcy, insolvency or
liquidation proceeding or any other proceeding under any federal or state
bankruptcy or similar law case is commenced against any of TFFC, Budget Funding
Corporation or BGI Leasing, Inc. and the petition is not controverted within 10
days, or is not dismissed within 30 days, after commencement of the case; or

          (l)     any event of default or amortization event under or relating
to any of the DIP Financing, the DIP L/C Rollover, the DIP Asset-Backed Fleet
Financing, the Additional DIP Asset-Backed Fleet Financing or the Ford Line of
Credit shall have occurred and be continuing, to the extent (A) in the case of
the DIP Financing and the DIP L/C Rollover, the amounts due

                                       92


under the DIP Financing on the DIP L/C Rollover, as the case may be, have become
due and payable prior to the stated maturity thereof (based on the original
amortization or repayment schedule) and (B) in the case of the DIP Asset-Backed
Fleet Financing, the Additional DIP Asset-Backed Fleet Financing or the Ford
Line of Credit, any action is taken to terminate the related vehicle lease
agreements.

          If Buyer elects to terminate this Agreement pursuant to (i)
SECTION 8.3(e), it must do so on or before the tenth Business Day after the
later of (A) October 28, 2002 and (B) the date upon which a 363 order not
complying with the requirements of this Agreement is entered or (ii)
SECTION 8.3(i), it must do so, with respect to each Testing Period, within ten
Business days after Buyer receives the last report required to be delivered
pursuant to SECTION 5.1(aa)(ix) for such Testing Period. If Buyer fails to
terminate this Agreement (A) pursuant to SECTION 8.3(e) by the date set forth in
clause (i) above, Buyer shall not thereafter be entitled to terminate this
Agreement pursuant to SECTION 8.3(e) or (B) pursuant to SECTION 8.3(i) by the
date set forth in clause (ii) above, Buyer shall not thereafter be entitled to
terminate this Agreement pursuant to SECTION 8.3(i) as a result of Seller
Parties failure to satisfy the requirements of SECTION 8.3(i) for the applicable
Testing Period.

          Section 8.4 TERMINATION BY SELLER PARTIES. This Agreement may be
terminated prior to the Closing Date by Seller Parties if:

          (a)     there has been a breach by Buyer or Parent of any
representation or warranty contained in this Agreement which breach is not
curable or, if curable, is not cured within ten days after written notice of
such breach given by Seller Parties to Buyer or Parent, as the case may be, and
which has caused or could reasonably be expected to cause the condition set
forth in SECTION 7.3(a) not to be satisfied;

          (b)     there has been a breach by Buyer or Parent of any of the
covenants or agreements contained in this Agreement, which breach is not curable
or, if curable, is not cured within ten days after written notice of such breach
given by Seller Parties to Buyer or Parent, as the case may be;

          (c)     any Seller Party enters into a binding commitment with respect
to, or consummates, an Alternative Transaction; or

          (d)     (i) the 363 Order and the 365 Order shall have been entered on
or before October 28, 2002, but shall not have become Final Orders by the Final
Order Deadline, (ii) Seller Parties have requested in writing that Buyer waive
its right to terminate this Agreement under SECTION 8.3(f) (which request shall
not be made (or if made, shall not be effective) until the later of entry of (A)
the 363 Order and the 365 Order and (B) any order disposing of a motion under
Fed. R. Bankr. P. 7052, 9023 or 9024 relating to the 363 Order and the 365
Order) and (iii) Buyer has refused or failed to waive its right to terminate
this Agreement under SECTION 8.3(f) within 30 days of receiving the request
referred to in clause (ii) above.

          Section 8.5 EFFECT OF TERMINATION. In the event of termination of the
Agreement pursuant to this ARTICLE 8, written notice thereof shall as promptly
as practicable be given to the other parties to this Agreement, and this
Agreement shall terminate and the transactions

                                       93


contemplated hereby shall be abandoned, without further action by any of the
parties hereto. If this Agreement is terminated as provided herein (a) there
shall be no liability or obligation on the part of Seller Parties, Buyer or
their respective officers and directors, and all obligations of the parties
shall terminate, except for the obligations of the parties pursuant to this
SECTION 8.5 and SECTIONS 5.13, 8.6, 9.3, 9.7, 9.10, 9.11 and 9.14; PROVIDED,
HOWEVER, that notwithstanding the foregoing or any other provision hereof, a
party that is in breach of its representations, warranties, covenants or
agreements set forth in this Agreement shall be liable for all damages caused by
such breach, including, without limitation, any expenses incurred by the other
party in connection with this Agreement and the transactions contemplated
hereby; and PROVIDED, FURTHER, Buyer's right to damages from Seller Parties
hereunder shall be limited to the Termination Amount (or appropriate percentage
thereof) and shall constitute liquidated damages and (b) all filings,
applications and other submissions made pursuant to the transactions
contemplated by this Agreement shall, to the extent practicable, be withdrawn
from the Governmental Body or Person to which made.

          Section 8.6 EXPENSES; TERMINATION AMOUNT.

          (a)     Subject to SECTION 2.5(a)(vi), costs and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such cost or expense.

          (b)     If this Agreement is terminated, Seller Parties, jointly and
severally, shall pay in cash to Buyer as a termination fee and/or as liquidated
damages, the applicable percentages set forth below of an amount equal to
$15,000,000 (the "TERMINATION AMOUNT"):

               (i)    upon termination of this Agreement pursuant to
     SECTIONS 8.3(a), 8.3(b), 8.3(d), 8.3(g), or 8.4(c), Seller Parties shall
     pay to Buyer an amount equal to (A) 23.34% of the Termination Amount (i.e.,
     $3,500,000) within two Business Days of such termination and (B) 76.66% of
     the Termination Amount (i.e., $11,500,000) on or before the earlier of (x)
     the date of closing of Alternative Transaction (if any) and (y) the sixth
     month anniversary of the termination of this Agreement; PROVIDED, HOWEVER,
     that: (i) notwithstanding the foregoing if Buyer terminates this Agreement
     pursuant to SECTION 8.3(a), Buyer's recovery shall be limited to 23.34% of
     the Termination Amount (i.e., $3,500,000) if and only if (A) the breaches
     of representations and warranties by Seller Parties giving rise to such
     termination do not, individually or in the aggregate with all other
     breaches of representations and warranties by Seller Parties under this
     Agreement, constitute or have a Material Adverse Effect, (B) the
     representations or warranties of Seller Parties whose breach gives rise to
     the termination were true and correct (to the extent that the condition set
     forth in SECTION 7.2(a) was satisfied on the date of this Agreement) when
     first given or made, (C) such representations and warranties of Seller
     Parties have become untrue or incorrect (to the extent Buyer has a
     termination right under SECTION 8.3(a)) solely as a result of an event(s)
     or occurrence(s) which was and is outside the control of, and which was not
     and is not caused by or remediable by, any of Seller Parties or their
     Affiliates and (D) Seller Parties have not breached any of their covenants
     in any material respect; (ii) if Buyer terminates this Agreement pursuant
     to SECTION 8.3(b), Buyer's recovery shall be limited to 23.34% of the
     Termination Amount (i.e., $3,500,000) if but only if the breaches giving
     rise to such termination do not, individually

                                       94


     or in the aggregate with all other breaches by Seller Parties under this
     Agreement, constitute or have (A) a Material Adverse Effect, (B) a material
     adverse effect on the value to Buyer of the Acquired Business or the
     Acquired Assets or of the transactions contemplated hereby or (C) a
     material adverse effect on consummation of the transactions contemplated
     hereby on a timely basis; and (iii) if this Agreement is terminated
     pursuant to SECTION 8.3(d)(ii) or SECTION 8.3(g), Buyer's recovery shall be
     limited to 23.34% of the Termination Amount (i.e., $3,500,000) unless an
     Alternative Transaction closes on or before (A) six months after the
     termination of this Agreement pursuant to SECTION 8.3(d)(ii) or (B) one
     year after the termination of this Agreement pursuant to SECTION 8.3(g), in
     which case the remaining 76.66% (i.e., $11,500,000) shall be due on the
     date of closing of such Alternative Transaction, without any need of
     written demand therefor by Buyer; and

              (ii)    upon termination of this Agreement pursuant to
     SECTIONS 8.2(a) (if any of Seller Parties is the terminating party),
     8.3(c), 8.3(e), 8.3(f), 8.3(h), 8.3(j), 8.3(k) or 8.3(l) Seller Parties
     shall pay to Buyer 23.34% of the Termination Amount (i.e., $3,500,000)
     within two Business Days of such termination; PROVIDED, HOWEVER, that if
     Buyer terminates this Agreement pursuant to SECTION 8.3(e), Buyer shall not
     be entitled to any portion of the Termination Amount if by October 23, 2002
     Seller Parties shall have notified Buyer in writing of their desire to
     extend the October 28, 2002 deadline set forth in SECTION 8.3(e) to and
     including November 28, 2002 and Buyer terminates this Agreement pursuant to
     SECTION 8.3(e) prior to November 28, 2002; PROVIDED, FURTHER, that if (A)
     Buyer terminates this Agreement pursuant to SECTION 8.3(e), and (B) any of
     Seller Parties obtains approval of Bankruptcy Court for an Alternative
     Transaction within 275 days of the termination of this Agreement pursuant
     to Section 8.3(e) and (C) a proposal for the Alternative Transaction so
     approved was in existence prior to such termination, then Seller Parties
     shall pay to Buyer an additional amount in cash equal to 76.66% of the
     Termination Amount (i.e., $11,500,000) on the date of closing of such
     Alternative Transaction, without need of any written demand therefor by
     Buyer.

     For purposes of clauses (i) and (ii) of this SECTIONS 8.6(b), the closing
of an Alternative Transaction shall be deemed to occur on the earliest of (i)
the date any payment in respect thereof or relating thereto is made, (ii) the
date on which any asset or property is transferred, conveyed, assigned or leased
pursuant thereto, (iii) the date on which any Equity Securities are issued
pursuant thereto and (iv) the date of substantial consummation of any plan of
reorganization or liquidation.

          (c)     No portion of the Termination Amount shall be payable to Buyer
if (i) this Agreement is terminated (A) pursuant to SECTIONS 8.1 or (B) because
the necessary approvals under the applicable Competition Law relating to the
transactions contemplated by this Agreement or the Ancillary Documents have been
denied and (ii) no event has occurred (or failed to occur) which has or could at
the time of the termination described in clause (B) above, form the basis for
termination of this Agreement by Buyer under any other provision of this
Agreement.

          (d)     If Buyer terminates or is entitled to terminate this Agreement
pursuant to more than one Section of this Agreement, Buyer shall be entitled to
receive from Seller Parties

                                       95


an amount equal to the highest percentage of the Termination Amount prescribed
by all such Sections.

          (e)     The obligations of Seller Parties to pay the Termination
Amount as provided herein shall be, pursuant to section 364(c) of the Bankruptcy
Code, entitled to administrative expense status with priority over any and all
administrative expenses of the kind specified in sections 503(b) and 507(b) of
the Bankruptcy Code in each of the Chapter 11 Cases and senior to all other
superpriority administrative expenses in such cases, except any superpriority
administrative expenses granted pursuant to the interim orders of the Bankruptcy
Court dated August 5, 2002 or to be granted pursuant to Final Orders of the
Bankruptcy Court, authorizing and approving the DIP Financing and the DIP L/C
Rollover.

          (f)     Seller Parties agree and acknowledge that Buyer's due
diligence, efforts, negotiation and execution of this Agreement have involved
substantial investment of management time and have required significant
commitment of financial, legal and other resources by Buyer and its Affiliates
and that such due diligence, efforts, negotiation and execution have provided
value to Seller Parties.

                                    ARTICLE 9
                            MISCELLANEOUS PROVISIONS

     Section 9.1  NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS. The representations and warranties of and covenants to be performed
on or prior to the Closing by Seller Parties, Parent and Buyer set forth in this
Agreement or any document or instrument delivered pursuant hereto shall not
survive the Closing.

     Section 9.2  GUARANTEE BY PARENT. Parent hereby guarantees the performance
of all the obligations of Buyer contained in this Agreement (other than with
respect to the assumption of the Assumed Liabilities, other than under the
Amended and Restated Credit Agreement, the DIP Financing and the DIP L/C
Rollover).

     Section 9.3  NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given upon receipt if (i)
mailed by certified or registered mail, return receipt requested, postage
prepaid (ii) sent by express carrier, fee prepaid, (iii) sent via facsimile with
receipt confirmed or (iv) delivered personally, addressed as follows or to such
other address or addresses of which the respective party shall have notified the
other.

          (a)     If to Seller Parties, to:

     Budget Group, Inc.
     4225  Naperville Road
     Lisle, IL 60532
     Fax: (630) 955-7517
     Attention: General Counsel

with a copy to

     Sidley Austin Brown & Wood

                                       96


     Bank One Plaza
     10 S. Dearborn Street
     Chicago, IL  60603
     Fax: (312) 853-7036
     Attention: Larry J. Nyhan, Esq.

If to Buyer, to:

     Cendant Corporation
     Six Sylvan Way
     Parsippany, NJ 07054
     Fax: (973) 496-5335
     Attention: General Counsel

and

     9 West 57th Street, 37th Floor
     New York, NY 10019
     Fax: (212) 413-1800

with a copy to

     Skadden, Arps, Slate, Meagher & Flom LLP
     Four Times Square
     New York, New York 10036
     Fax: (212) 735-2000
     Attention: David Fox, Esq. and Alesia Ranney-Marinelli, Esq.

     Section 9.4  BULK SALES LAWS. Each Seller Party each hereby waives
compliance by each such party with the provisions of the "bulk sales," "bulk
transfer" or similar laws of any state.

     Section 9.5  AMENDMENT OF AGREEMENT. This Agreement may be amended with
respect to any provision contained herein at any time by action of the parties
hereto; PROVIDED, HOWEVER, that such amendment shall be evidenced by a written
instrument duly executed on behalf of each party by its duly authorized officer
or employee.

     Section 9.6  ENTIRE AGREEMENT. The agreement of the parties, which consists
of this Agreement, the Schedules and Exhibits hereto and the documents referred
to herein, sets forth the entire agreement and understanding between the parties
and supersedes any prior agreement or understanding, written or oral, relating
to the subject matter of this Agreement including the Confidentiality Agreement.

     Section 9.7  ASSIGNMENT. This Agreement and the rights and obligations of
the parties hereunder may not be assigned by any party hereto without the other
parties' written consent; PROVIDED, HOWEVER, that (i) Buyer may assign any or
all of its rights and obligations to a direct or indirect wholly-owned
Subsidiary of Parent (PROVIDED that no such assignment shall relieve

                                       97


Buyer of its obligations under this Agreement) and (ii) Seller may assign any or
all of its rights to a successor or assignee of all or part of the Retained
Business. Any assignment in violation of this SECTION 9.7 shall be null and
void.

     Section 9.8  PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any Person other than
Buyer and Seller Parties, and their successors or permitted assigns, any rights
or remedies under or by reason of this Agreement.

     Section 9.9  SEVERABILITY. The provisions of this Agreement are severable,
and if any one or more provisions are deemed illegal or unenforceable the
remaining provisions shall remain in full force and effect unless the deletion
of such provision shall cause this Agreement to become materially adverse to
Buyer on the one hand or Seller Parties on the other hand, in which event the
parties shall use reasonable best efforts to arrive at an accommodation that
best preserves for the parties the benefits and obligations of the offending
provision.

     Section 9.10 GOVERNING LAW; CONSENT TO JURISDICTION. Except to the extent
the mandatory provisions of the Bankruptcy Code apply, this Agreement shall be
governed by, and construed in accordance with, the laws of the State of New York
applicable to contracts made and to be performed entirely in such state without
regard to principles of conflicts or choice of laws or any other law that would
make the laws of any other jurisdiction other than the State of New York
applicable hereto. The parties agree that, except as provided herein without
limitation of any party's right to appeal any order of the Bankruptcy Court, (a)
the Bankruptcy Court shall retain jurisdiction to enforce the terms of this
Agreement and to decide any claims or disputes which may arise or result from,
or be connected with, this Agreement, any breach or default hereunder, or the
transactions contemplated herein; and (b) any and all Actions or causes of
action relating to the foregoing shall be filed and maintained only in the
Bankruptcy Court, and the parties hereby consent and submit to the jurisdiction
of the Bankruptcy Court.

     Section 9.11 WAIVER OF JURY TRIAL. The parties hereto hereby irrevocably
and unconditionally waive trial by jury in any legal action or proceeding
relating to the Agreement and the agreements entered into in connection herewith
and any amendment, waiver, consent or other document that amends, waives,
supplements or otherwise modifies the Agreement or any of the agreements entered
into in connection herewith and therewith.

     Section 9.12 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.

     Section 9.13 PUBLIC ANNOUNCEMENT. Prior to the signing of this Agreement,
Seller Parties, Parent and Buyer shall prepare a mutually agreeable release
announcing the transaction contemplated hereby. Except for such press release,
none of Seller Parties, Parent or Buyer shall, without the approval of the
other, make any press release or other announcement concerning the existence of
this Agreement or the terms of the transactions contemplated by this Agreement,
except as and to the extent that any such party shall be so obligated by Law, in
which case the other parties shall be advised and the parties shall use their
reasonable best efforts

                                       98


to cause a mutually agreeable release or announcement to be issued; PROVIDED,
HOWEVER, that the foregoing shall not preclude communications or disclosures
necessary to comply with accounting, stock exchange or federal securities Law
disclosure obligations.

     Section 9.14 NO STRICT CONSTRUCTION. The parties have participated jointly
in the negotiation and drafting of this Agreement. Consequently, in the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
each be construed as if drafted jointly by the parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provision of this Agreement.

     Section 9.15 DISCLAIMER OF WARRANTIES. EXCEPT AS TO THOSE MATTERS EXPRESSLY
COVERED BY THE REPRESENTATIONS AND WARRANTIES IN THIS AGREEMENT, SELLER PARTIES
ARE SELLING THE ACQUIRED ASSETS ON AN "AS IS, WHERE IS" BASIS AND SELLER PARTIES
DISCLAIM ALL OTHER WARRANTIES, REPRESENTATIONS AND GUARANTIES WHETHER EXPRESS OR
IMPLIED, SELLER PARTIES MAKE NO REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY
OR FITNESS FOR ANY PARTICULAR PURPOSE AND NO IMPLIED WARRANTIES WHATSOEVER.
Parent and Buyer acknowledge that neither Seller Parties nor any of its
Affiliates or representatives or any other Person has made any representation or
warranty, express or implied, as to the accuracy or completeness of any
memoranda, charts, summaries or schedules heretofore made available by Seller
Parties or their Affiliates or representatives to Parent or Buyer or any other
information that is not included in this Agreement, the Exhibits and Schedules
attached hereto or the Seller Parties Disclosure Schedule, and neither Seller
Parties nor any of their Affiliates or Representatives or any other Person will
have or be subject to any liability to Parent, Buyer, any Affiliate of Parent or
Buyer or any other Person resulting from the distribution of any such
information to, or use of any such information by, Parent, Buyer, any Affiliate
of Parent or Buyer or any of their Representatives; PROVIDED, HOWEVER, that the
foregoing shall in no manner limit the rights of Buyer hereunder (in particular
under ARTICLE 8).

     Section 9.16 EFFECT OF INVESTIGATION. No investigation conducted by Parent,
Buyer, any of their Affiliates and any of their Representatives made heretofore
or hereafter shall affect the representations and warranties of Seller Parties
which are contained herein.

                [Remainder of this page intentionally left blank]

                                       99


     IN WITNESS WHEREOF, each party has caused this Asset and Stock Purchase
Agreement to be duly executed on its behalf by its duly authorized officer as of
the date first written above.

                                        BUDGET GROUP, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        CHEROKEE ACQUISITION CORPORATION


                                        By: /s/ Eric J. Bock
                                           -------------------------------
                                        Name: Eric J. Bock
                                        Title: Executive Vice President and
                                                  Corporate Secretary


                                        CENDANT CORPORATION


                                        By: /s/ Eric J. Bock
                                           -------------------------------
                                        Name: Eric J. Bock
                                        Title: Executive Vice President and
                                                  Corporate Secretary


                                        BGI AIRPORT PARKING, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:



                                        BGI SHARED SERVICES, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        BGI SHARED SERVICES, LLC


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        VEHICLE RENTAL ACCESS COMPANY, LLC


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        PREMIER CAR RENTAL LLC


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:



                                        AUTO RENTAL SYSTEMS, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        RYDER TRS, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        RYDER MOVE MANAGEMENT, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        MASTERING THE MOVE REALTY, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:



                                        THE MOVE SHOP, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        RYDER RELOCATION SERVICES, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        BUDGET STORAGE CORPORATION


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        BUDGET RENT A CAR CORPORATION


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:



                                        CONTROL RISK CORPORATION


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        PHILIP JACOBS INSURANCE AGENCY, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        BUDGET RENT-A-CAR INTERNATIONAL,
                                        INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        BUDGET CAR SALES, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:



                                        TCS PROPERTIES, LLC


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        IN MOTORS VI, LLC


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        VALCAR RENTAL CAR SALES, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        DIRECTORS ROW MANAGEMENT
                                        COMPANY, LLC


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:



                                        TEAM CAR SALES OF SOUTHERN
                                        CALIFORNIA, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        TEAM CAR SALES OF SAN DIEGO, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        TEAM CAR SALES OF RICHMOND, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        TEAM CAR SALES OF PHILADELPHIA, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:



                                        TEAM CAR SALES OF DAYTON, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        TEAM CAR SALES OF CHARLOTTE, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        WARREN WOOTEN FORD, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        PAUL WEST FORD, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:



                                        CARSON CHRYSLER PLYMOUTH DODGE
                                        JEEP EAGLE, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        BUDGET SALES CORPORATION


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        RESERVATION SERVICES, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        TEAM REALTY SERVICES, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:



                                        TEAM HOLDINGS CORPORATION


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        BUDGET RENT-A-CAR SYSTEMS, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        BUDGET -RENT-A-CAR OF ST. LOUIS, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        BUDGET -RENT-A-CAR OF THE MIDWEST,
                                        INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:



                                        BVM, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        DAYTON AUTO LEASE COMPANY, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        MOSIANT CAR SALES, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        NYRAC INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:



                                        BUDGET RENT A CAR CARIBE
                                        CORPORATION


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        BUDGET FLEET FINANCE CORPORATION


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        TRANSPORTATION AND STORAGE
                                        ASSOCIATES


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        BRAC CREDIT CORPORATION


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:



                                        TEAM FLEET SERVICES CORPORATION


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        BUDGET RENT A CAR ASIA-PACIFIC, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:


                                        BUDGET RENT A CAR OF JAPAN, INC.


                                        By: /s/ Sanford Miller
                                           -------------------------------
                                        Name:
                                        Title:




                                                                   EXHIBIT 10.72

                               FIRST AMENDMENT TO
                       ASSET AND STOCK PURCHASE AGREEMENT

          FIRST AMENDMENT TO ASSET AND STOCK PURCHASE AGREEMENT, dated as of
September 10, 2002 (the "FIRST AMENDMENT"), by and among Budget Group, Inc., a
Delaware corporation ("SELLER"), the Subsidiaries of Seller listed on SCHEDULE 1
(collectively with Seller, "SELLER PARTIES"), Cendant Corporation, a Delaware
corporation ("PARENT"), and Cherokee Acquisition Corporation, a Delaware
corporation ("BUYER").

          WHEREAS, Parent, Cherokee and Seller Parties have entered into the
Asset and Stock Purchase Agreement, dated as of August 22, 2002 (the "PURCHASE
AGREEMENT"); and

          WHEREAS, Parent, Cherokee and Seller Parties desire to amend the
Purchase Agreement as set forth herein.

          NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties agree as follows:

          1.   DEFINED TERMS. Capitalized terms used but not defined in this
First Amendment shall have the respective meanings assigned thereto in the
Purchase Agreement.

          2.   AMENDMENT TO THE PURCHASE AGREEMENT.

               (a)    The definition of the term "Cash Purchase Price" in
SECTION 1.1 OF THE PURCHASE AGREEMENT is hereby amended by replacing
"$107,500,000" with "$110,000,000."

               (b)    SECTION 2.5(a)(vi) OF THE PURCHASE AGREEMENT is hereby
amended by adding", or on account of the fees and expenses, including the fees
and expenses of attorneys and professionals, of the Indenture Trustees of (i)
the 9 1/8% Senior Notes Due 2006, (ii) the 6.85% Convertible Subordinated Notes,
Series B, Due 2007 and (iii) the Remarketable Term Income Deferrable Equity
Securities Due 2028" after the words "Additional DIP Asset-Backed Financing" in
the fourteenth line thereof.

               (c)    SECTION 8.6(b)(i) OF THE PURCHASE AGREEMENT is hereby
amended by adding the following proviso at the end of such Section:

          "; PROVIDED, FURTHER, that if Buyer terminates this Agreement pursuant
          to SECTIONS 8.3(a) or 8.3(b) and Buyer's recovery is not limited to
          $3,500,000 by virtue of the immediately preceding proviso (i) or (ii)
          above, Buyer shall be entitled to receive (A) 23.34% of the
          Termination Amount (I.E., $ 3,500,000) within two Business Days of
          such termination and (B)



          76.66% of the Termination Amount (I.E., $11,500,000) upon the closing
          of an Alternative Transaction or (C) if no Alternative Transaction
          closes, such additional amount, not to exceed $11,500,000, as the
          Bankruptcy Court determines pursuant to a Final Order compensates
          Buyer and Parent for their reasonable pre-Petition and post-Petition
          attorneys', accountants' and financial advisors' fees and expenses)
          incurred in connection with the transaction contemplated by this
          Agreement (including their due diligence with respect to the Debtors,
          the Acquired Assets and the Assumed Liabilities, the drafting and
          negotiation of this Agreement (including the schedules and exhibits
          hereto and the Seller Parties Disclosure Schedule) and the Ancillary
          Agreements), such reasonableness to be determined from the point of
          view of a reasonable potential buyer of the Acquired Business after
          taking into account the actual payment of the $3,500,000 referred to
          above."

          3.   CONTINUING EFFECT OF PURCHASE AGREEMENT. Except as specifically
amended pursuant to this First Amendment, the provisions of the Purchase
Agreement are and shall remain in full force.

          4.   COUNTERPARTS. This First Amendment may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
the executed counterparts taken together shall be deemed to be one originally
executed document.

          5.   GOVERNING LAW. Except to the extent the mandatory provisions of
the Bankruptcy Code apply, this First Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts made and to be performed entirely in such state without regard to
principles of conflicts or choice of laws or any other law that would make the
laws of any other jurisdiction other than the State of New York applicable
hereto.

                [Remainder of this page intentionally left blank]

                                        2


          IN WITNESS WHEREOF, Parent, Cherokee and Seller Parties have caused
this First Amendment to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.

                                         BUDGET GROUP, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         CHEROKEE ACQUISITION
                                         CORPORATION


                                         By: /s/ Eric J. Bock
                                            ------------------------------
                                         Name: Eric J. Bock
                                         Tile: Secretary


                                         CENDANT CORPORATION


                                         By: /s/ Eric J. Bock
                                            ------------------------------
                                         Name: Eric J. Bock
                                         Title: Executive Vice President, Law
                                         and Corporate Secretary

                                         BGI AIRPORT PARKING, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President

                                        3


                                         BGI SHARED SERVICES, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         BGI SHARED SERVICES, LLC


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         VEHICLE RENTAL ACCESS
                                         COMPANY, LLC


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         PREMIER CAR RENTAL LLC


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President

                                        4


                                         AUTO RENTAL SYSTEMS, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         RYDER TRS, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         RYDER MOVE MANAGEMENT, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         MASTERING THE MOVE REALTY, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President

                                        5


                                         THE MOVE SHOP, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         RYDER RELOCATION SERVICES, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         BUDGET STORAGE CORPORATION


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         BUDGET RENT A CAR CORPORATION


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President

                                        6


                                         CONTROL RISK CORPORATION


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         PHILIP JOCOBS INSURANCE AGENCY,
                                         INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         BUDGET RENT-A-CAR
                                         INTERNATIONAL, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         BUDGET CAR SALES, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President

                                        7


                                         TCS PROPERTIES, LLC


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         IN MOTORS VI, LLC


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         VALCAR RENTAL CAR SALES, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         DIRECTORS ROW MANAGEMENT
                                         COMPANY, LLC


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President

                                        8


                                         TEAM CAR SALES OF SOUTHERN
                                         CALIFORNIA, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         TEAM CAR SALES OF SAN DIEGO,
                                         INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         TEAM CAR SALES OF RICHMOND,
                                         INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         TEAM CAR SALES OF PHILADEPHIA,
                                         INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President

                                        9


                                         TEAM CAR SALES OF DAYTON, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         TEAM CAR SALES OF CHARLOTTE,
                                         INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         WARREN WOOTEN FORD, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         PAUL WEST FORD, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President

                                       10


                                         CARSON CHRYSLER PLYMOUTH
                                         DODGE JEEP EAGLE, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         BUDGET SALES CORPORATION


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         RESERVATION SERVICES, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         TEAM REALTY SERVICES, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President

                                       11


                                         TEAM HOLDINGS CORPORATION


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         BUDGET RENT-A-CAR SYSTEMS, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         BUDGET-RENT-A-CAR OF ST.LOUIS,
                                         INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         BUNGET-RENT-A-CAR OF THE
                                         MIDWEST, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President

                                       12


                                         BVM, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         DAYTON AUTO LEASE COMPANY,
                                         INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         MOSIANT CAR SALES, INC.

                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         NYRAC INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President

                                       13


                                         BUDGET RENT A CAR CARIBE
                                         CORPORATION


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         BUDGET FLEET FINANCE
                                         CORPORATION


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         TRANSPORTATION AND STORAGE
                                         ASSOCIATES


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President

                                         BRAC CREDIT CORPORATION


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President

                                       14


                                         TEAM FLEET SERVICES
                                         CORPORATION


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         BUDGET RENT A CAR ASIA-PACIFIC,
                                         INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President


                                         BUDGET RENT A CAR OF JAPAN, INC.


                                         By: /s/ Robert L. Aprati
                                            ------------------------------
                                         Name: Robert L. Aprati
                                         Title: Executive Vice President

                                       15





                                                                   EXHIBIT 10.73


                    AMENDED AND EXTENDED EMPLOYMENT AGREEMENT


         This Amended and Extended Employment Agreement ("Agreement") dated as
of July 1, 2002 (the "Effective Date"), by and between Cendant Corporation, a
Delaware corporation (the "Company"), and Henry R. Silverman (the "Executive").

         WHEREAS, the Executive has served as the Chairman of the Board and
Chief Executive Officer and President of the Company or its predecessors and
currently serves as such pursuant to an employment agreement that has been
amended over the years to reflect the growth of the Company and the Executive's
expanded responsibilities and duties (the "Prior Agreement"):

         WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the Executive's contribution to the growth and success of the Company has
been substantial and that the size and scope of the Company's operations have
expanded significantly in recent years requiring increased executive management
oversight and additional responsibilities for the Executive; and

         WHEREAS, the Board and the Executive desire to further amend and
restate the Executive's employment agreement to extend the term of employment of
the Executive and to provide the Executive with employment arrangements with the
Company in the best interests of the Company and its stockholders and the
Executive is willing to commit himself to serve the Company on the terms and
conditions herein provided, which terms and conditions shall be considered for
all purposes an extension of the Executive's Prior Agreement.






         NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree to the terms and conditions set forth
below.

         1. TERM OF EMPLOYMENT. The employment of the Executive by the Company
pursuant to this Agreement shall begin as of the Effective Date and shall end on
December 31, 2012, subject to earlier termination as provided herein (the
"Expiration Date") (such period from the Effective Date to the Expiration Date,
the "Term").

         2. POSITION AND DUTIES. During the Term the Executive shall serve as
Chairman of the Board and Chairman of the Executive Committee and President and
Chief Executive Officer of the Company and shall report solely and directly to
the Board. During the Term, the Executive shall at all times be the senior-most
officer of the Company, with the duties, responsibilities and authority
commensurate with chief executive officers of public entities of similar size,
and in any case consistent with such duties, responsibilities and authority as
have heretofore been his as Chairman and CEO. The Executive shall devote such
time and effort as may be necessary and appropriate from time to time in the
circumstances for the proper discharge of his duties and obligations under the
Agreement.

         3. PLACE OF PERFORMANCE. In connection with the Executive's employment,
the Company shall continue to provide him with an office, office furniture and
office staff of his selection in midtown Manhattan of the New York City
metropolitan area at the same level as currently provided for, which office
shall continue to be his base of operations, except to the extent that the
Executive may, at his election, render his services from other locations, and
except for required travel on the Company's business. The Company shall pay all
the


                                       2




Executive's reasonable business expenses which relate to the Company at such
Manhattan location.

         4. COMPENSATION AND RELATED MATTERS. (a) SALARY. During the Term, the
Company shall pay the Executive an annual base salary at a rate of $3,300,000
per year, such salary to be paid in substantially equal semi-monthly or
bi-weekly installments. Such annual salary shall be increased on each January 1,
commencing January 1, 2003, during the Term (an "Adjustment Date") as follows:
if the "Consumer Price Index" for the calendar month immediately preceding the
applicable Adjustment Date shall exceed the Consumer Price Index for the
corresponding month during the prior year, then such salary (as previously
adjusted) shall be determined by multiplying the amount of such salary (as
previously adjusted) by a fraction, the numerator of which shall be the Consumer
Price Index for the calendar month immediately preceding the applicable
Adjustment Date, and the denominator of which shall be the Consumer Price Index
for the applicable month during the prior year. Each adjustment shall be made as
promptly as practicable after publication of the Consumer Price Index for the
month immediately preceding the applicable Adjustment Date. Immediately after
such publication, the Company shall pay to the Executive such additional amount
as shall be required to bring the aggregate of the semimonthly installments of
the then current annual salary paid to the Executive on and after the applicable
Adjustment Date up to the total dollar amount required by reason of such
adjustment; thereafter, all monthly installments of the adjusted annual salary
for the balance of the 12 months shall be made at the newly adjusted rate. In no
event shall such annual salary (as previously adjusted) be decreased to reflect
a decline in the Consumer Price Index. As used in this Agreement, "Consumer
Price Index" shall mean the Consumer Price Index, Urban Wage Earners and
Clerical Workers, Northeast Urban Size A, published by the Bureau of Labor
Statistics of



                                       3




the United States Department of Labor. The applicable number in such Index, for
purposes of this Agreement, shall be the number for "All Items" (which number
for the month of March 2002 was 183.6). In the event a substantial change is
made with respect to the information used to determine the Consumer Price Index,
or in the event another publication is used because the Consumer Price Index is
not published, appropriate adjustment shall be made in the corresponding numbers
for prior periods so that after such adjustment the same result will be produced
as would have resulted had there been no such change in the Consumer Price Index
or had it continued to be published. Notwithstanding the foregoing, the Board
may, during the Term, increase (but not decrease) the Executive's annual base
salary from what would otherwise be payable hereunder.

         (b) EXPENSES. During the Term, the Executive shall be entitled to
receive prompt reimbursement for all reasonable and customary expenses incurred
by him in performing services hereunder, including first-class travel
accommodations (air and lodging) for business-related travel and living expenses
while away from home on business or at the request of and in the service of the
Company; provided, that such expenses are incurred and accounted for in
accordance with the policies and procedures established by the Company and
approved by the Board. The Company shall provide the Executive with a car and
driver. So long as the Company is in the car rental or car leasing business, the
Company shall also continue to arrange to provide the Executive, in a manner
consistent with past practice prior to the execution of this Agreement, access
to and the use of "demonstration" and/or other vehicles used for product testing
and evaluation at the Executive's request.

         (c) OTHER BENEFITS. The Executive shall be entitled to participate in
or receive benefits under any employee benefit plan, arrangement or perquisite
made available by the


                                       4




Company now or in the future to its senior- most management and key management
employees, and nothing paid to the Executive under any plan, arrangement or
perquisite presently in effect or made available in the future shall be deemed
to be in lieu of the salary and other compensation payable to the Executive
pursuant to this Section 4. Any payments or benefits payable to the Executive
hereunder in respect of any year during which the Executive is employed by the
Company for less than the entire such year shall, unless otherwise provided in
the applicable plan or arrangement, be prorated in accordance with the number of
days in such year during which he is so employed. Without limiting the
generality of the foregoing, the compensation, benefits and perquisites provided
pursuant to this paragraph (c) shall (i) in no event be less favorable than such
compensation, benefits and perquisites provided to the Company's Chairman of the
Board of Directors (at such times as the Executive is not serving in such
capacity) or the Chief Executive Officer (at all other times during the term of
employment hereunder), (ii) provide the Executive with a level of benefits and
perquisites no less favorable than those that are made available to chief
executive officers of other comparable public companies, (iii) be no less
favorable than the highest level of compensation, benefits and perquisites
provided to the Executive currently under the Prior Agreement, and (iv) include
(A) use of an automobile driver and car service consistent with current practice
as in effect prior to the execution of this Agreement and (B) priority use and
scheduling of the Company aircraft as provided for in Section 4(h) below.

         (d) INDEMNIFICATION. In addition to any indemnification provided by the
Certificate of Incorporation or By-Laws of the Company or otherwise (the
indemnification provisions of which shall not be amended in any way to limit or
reduce the level or nature of indemnification available to the Executive as a
Director or officer of the Company during the



                                       5




         Term from that in effect immediately prior to the execution of this
Agreement), the Company shall indemnify and provide reasonable advances for
expenses to the Executive, to the fullest extent permitted by the laws of the
State of Delaware, if the Executive is made a party, or threatened to be made a
party, to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that the Executive is or was an officer, director or employee of the Company or
any subsidiary or affiliate thereof, in which capacity the Executive is or was
serving at the Company's request, against expenses (including reasonable
attorneys' fees and expenses), judgments, fines and amounts paid in settlement
incurred by him in connection with such action, suit or proceeding. The Company
shall at no cost to the Executive at all times include the Executive, during the
Term and for so long thereafter as Executive may be subject to any such claim,
as an insured under any directors' and officers' liability insurance policy
maintained by the Company, which policy shall provide such coverage as the Board
may deem appropriate (but in no event less than the coverage as in effect prior
to the execution of this Agreement). Any payments under this provision which are
treated as taxable income to the Executive (in accordance with IRS rules and
regulations) shall be grossed up for tax purposes at the Executive's then
applicable federal, state and local tax rate.

         (e) BONUS. (i) In addition to the annual base salary provided for above
in Section 4(a), the Company shall pay to the ----- Executive incentive
compensation in an amount determined as follows (such amount, the "Annual
Formula Bonus"):

         (A) FOR FISCAL YEAR 2002 FROM JANUARY 1, 2002 THROUGH TO THE EFFECTIVE
             DATE:

         The Company shall pay to the Executive an Annual Formula Bonus in an
         amount equal to seventy-five basis points (0.75%) of the Company's


                                       6




         Adjusted EBITDA (as defined below) for Fiscal Year 2002 determined
         through to the Effective Date; PROVIDED, HOWEVER, that such bonus
         payment shall in no event exceed 150% of the pro rated annual base
         salary payable to the Executive through to the Effective Date.

         (B) FOR FISCAL YEAR 2002 FROM THE EFFECTIVE DATE THROUGH TO THE END OF
             FISCAL YEAR 2002 AND EACH FISCAL YEAR THEREAFTER

         The Company shall pay to the Executive an Annual Formula Bonus for any
         particular fiscal year (or part thereof) during the Term equal to the
         product of (I) sixty basis points (0.60%) multiplied by (II) the
         Company's Adjusted Pre-Tax Income (as defined below) for such fiscal
         year (or part thereof, and in the case of Fiscal Year 2002 Adjusted
         Pre-Tax Income shall be determined from the Effective Date through the
         end of Fiscal Year 2002); PROVIDED, HOWEVER, that such bonus payment
         shall in no event exceed the product of (x) $100,000 multiplied by (y)
         each penny of the Company's Adjusted Diluted Earnings Per Share (as
         defined below) for such fiscal year (or part thereof, and in the case
         of Fiscal Year 2002 Adjusted Diluted Earnings Per Share shall be
         determined from the Effective Date through the end of Fiscal Year
         2002).

         (ii)     The aggregate Annual Formula Bonus due the Executive for
                  Fiscal Year 2002 shall be the sum of the Fiscal Year 2002
                  bonus calculations provided for in subclauses (e)(i)(A) and
                  (e)(i)(B) above.

         (iii)    For purposes of this Agreement:

                  "Adjusted EBITDA" shall mean the Company's earnings before
                  interest, taxes, depreciation and amortization for any
                  applicable fiscal year as

                                       7



                  reflected on the Company's audited consolidated statements of
                  income, but (A) adjusted for any extraordinary gains or losses
                  or items of a non-recurring nature to the extent such may have
                  otherwise been reflected in the Company's audited financial
                  statements and any acquisition and integration costs arising
                  in connection with or otherwise related to acquisitions or
                  mergers undertaken by the Company and (B) including any
                  budgeted EBITDA for the applicable fiscal year (or part
                  thereof) attributable to any business division, unit or
                  operation that was sold, transferred, spun-off, or otherwise
                  disposed of during such fiscal year; "Adjusted Pre-Tax Income"
                  shall mean the Company's income before taxes for any
                  applicable fiscal year as reflected on the Company's audited
                  consolidated statements of income, as the same may be adjusted
                  by the Company's auditors, and further adjusted for any
                  extraordinary gains or losses or items of a non-recurring
                  nature to the extent such may have otherwise been reflected in
                  the Company's audited financial statements and any acquisition
                  and integration costs arising in connection with or otherwise
                  related to acquisitions or mergers undertaken by the Company;
                  and "Adjusted Diluted Earnings Per Share" shall mean the
                  Company's diluted earnings per share as reflected on the
                  Company's quarterly and/or annual press releases as the same
                  may be adjusted by the Company's auditors, and including
                  adjustments for any extraordinary gains or losses (net of
                  taxes, per diluted share) or items of a non-recurring nature
                  (net of taxes, per diluted share) to the extent such may have
                  otherwise been


                                       8



                  reflected in the Company's audited financial statements and
                  any acquisition and integration costs (net of taxes, per
                  diluted share) arising in connection with or otherwise related
                  to acquisitions or mergers undertaken by the Company to the
                  extent such may have otherwise been reflected in the Company's
                  audited financial statements and/or press releases.


         (iv)     The Annual Formula Bonus, with respect to any fiscal year of
                  the Company, shall be paid to the Executive no later than
                  ninety (90) days following the end of such fiscal year, or as
                  soon as practicable thereafter if the amount of such Annual
                  Formula Bonus cannot be determined by such date.
                  Notwithstanding the foregoing, a prorated Annual Formula Bonus
                  shall not be paid for a partial year if the Executive's
                  employment is terminated for Cause pursuant to Section
                  6(a)(iii) or by a voluntary resignation pursuant to Section 6
                  (b).

         (f) OPTIONS AND RESTRICTED STOCK. During the Term, the Board or the
Compensation Committee of the Board may grant options or restricted stock to the
Executive from time to time on a discretionary basis, on such terms and
conditions as the Board or Committee deems appropriate; provided that to the
extent the terms and conditions of this Agreement conflict with or are otherwise
inconsistent with the terms and conditions of any such stock option, restricted
stock or other equity based award plan (including but not limited to the
provisions regarding accelerated vesting of options or lapsing of restrictions
on restricted stock), the terms and conditions of this Agreement shall govern
and prevail.

         (g) LIFE INSURANCE BENEFITS. Subject to the terms and conditions of the
Split-Dollar Agreements dated as of August 23, 2000 by and between the Company
and the Executive and the Limited Collateral Assignments related thereto (the
"Insurance Agreements"), the



                                       9




Company shall maintain throughout the Term and following the termination or
expiration of the Term for any reason and for the remainder of the Executive's
life, one or more term life insurance policies on the life of the Executive in
the aggregate face amount of $100 million. Any reference to the Executive's
Amended and Restated Employment Agreement set forth in the Insurance Agreements
shall be deemed to mean this Agreement. Nothing contained in this paragraph
shall in any way reduce or alter the Executive's rights under the Insurance
Agreements or reduce or alter the Company's obligations under the Insurance
Agreements, including without limitation the Executive's right to name
beneficiaries of the policies and the Company's obligation to make certain
premium payments in respect of the policies. The Company represents and warrants
that the terms of the Insurance Agreements are in conformance with the
provisions of this Agreement.

         (h) USE OF AIRCRAFT. In order to ensure the accessibility and safety of
the Executive during the Term, the Executive shall have priority scheduling on
Company aircraft used for business purposes and Executive shall be entitled to
any other use of Company aircraft in accordance with Company practice. The
Company also shall reimburse Executive for all costs associated with the
Executive's use of aircraft in accordance with the Company's policies, whether
the aircraft is being chartered or is Company-owed. Any payments under this
provision which are to be treated as taxable compensation to the Executive (in
accordance with IRS rules and regulations) shall be grossed up for tax purposes
at the Executive's then applicable federal, state and local tax rate.

         (i) REGISTRATION RIGHTS AND RELATED ASSISTANCE. During the Term and for
so long thereafter as the Executive or his estate directly or indirectly own
common stock, stock options or equity-based awards in the Company, (A) the
Company shall file with the Securities



                                       10




and Exchange Commission and thereafter maintain the effectiveness of one or more
registration statements registering under the Securities Act of 1933, as amended
(the "1933 Act"), the offer and sale of shares by the Company to Executive
pursuant to stock options or other equity-based awards granted to Executive
under Company plans or otherwise or, if shares are acquired by Executive in a
transaction not involving an offer or sale to Executive but resulting in the
acquired shares being "restricted securities" for purposes of the 1933 Act,
registering the reoffer and resale of such shares by Executive, (B) the
Executive shall have unlimited piggyback registration rights in connection with
any proposed public offering by the Company (subject to any reasonable
allocation requirements and/or restricted selling or blackout periods imposed by
the Company or any applicable regulatory agency), and (C) to the extent the
Executive (or his estate) determines to engage in an exempt sale of any common
stock or other securities of the Company, the Company shall take all reasonable
steps to cooperate with and assist the Executive (or his estate) in connection
with such sale.

         5. ADDITIONAL POTENTIAL COMPENSATION. Nothing in this Agreement shall
prohibit the Compensation Committee of the Company's Board of Directors from
awarding additional compensation to the Executive if, in its sole discretion,
the Compensation Committee determines that such a payment is warranted based
upon the Executive's performance.

         6. TERMINATION. (a) The Executive's employment pursuant to this
Agreement may be terminated by the Company only under the following
circumstances:

         (i)      DEATH. The Executive's employment shall terminate upon his
                  death. If the Executive's employment is terminated pursuant to
                  this paragraph his estate or legal representative shall
                  receive his accrued annual base salary through the date his
                  employment is terminated, an Annual Formula Bonus prorated for
                  the period



                                       11




                  ending on the date his employment is terminated and any other
                  earned and accrued, but otherwise unpaid amounts (including,
                  without limitation, any then unpaid Annual Formula Bonus). In
                  addition, the Executive's eligible dependants shall be
                  entitled to continued Health and Welfare Coverage (as defined
                  below) for the remainder of their lives at the prevailing
                  contribution rates applicable to Company employees receiving
                  such Health and Welfare Coverage.

         (ii)     DISABILITY. If, in the written opinion of a qualified
                  physician selected by the Company and acceptable to the
                  Executive (or the Executive's legal representative) the
                  Executive shall become permanently and totally unable to
                  perform his duties hereunder due to physical or mental
                  illness, and has failed, because of such illness, to render,
                  for at least six (6) consecutive months, services of the
                  character contemplated by this Agreement, the Company may
                  terminate the Executive's employment upon 30 days written
                  notice to the Executive , and in such event, the Executive's
                  employment with the Company shall terminate effective upon the
                  30th day after receipt of such notice (provided that the
                  Executive shall not have returned to full-time performance
                  prior to such time). If the Executive's employment is
                  terminated pursuant to this paragraph, he shall receive a lump
                  sum cash payment within 30 days of the date of termination in
                  an amount equal to the sum of (A) the Executive's accrued and
                  unpaid Base Salary through the date of termination and any
                  earned but unpaid Annual Formula Bonus, (B) an Annual Formula
                  Bonus for the fiscal year in which such termination occurred,
                  prorated for the number of whole or partial months worked by
                  the Executive in such year, but based upon the Company's then
                  most current



                                       12




                  financial forecast of pre-tax income for such fiscal year
                  consistent with past practices, and (C) the greater of (I) the
                  aggregate amount of Base Salary that would have been paid to
                  the Executive for the remainder of the Term, assuming for
                  purposes of this Section 6(a)(ii) that the Executive would
                  have received for the remainder of the Term the highest annual
                  Base Salary paid (or in the case of Base Salary due during the
                  year of termination, payable) within five (5) years of the
                  date of termination (the "Designated Base Salary"), or (II)
                  the product of the Designated Base Salary multiplied by three
                  (3); PROVIDED THAT the amount of any Base Salary payable
                  hereunder shall be reduced by the sum of (x) amounts that have
                  been paid to the Executive under any Company-sponsored
                  disability plan providing disability benefits to the Executive
                  with respect to the disability giving rise to the termination
                  pursuant to this Section 6(a)(ii) ("Covered Disability
                  Payment") and (y) the present value, calculated in a manner
                  reasonably acceptable to the Executive, of any Covered
                  Disability Payment to be paid to the Executive. In addition,
                  the Executive and his eligible dependants shall be entitled to
                  continued Health and Welfare Coverage (as defined below) for
                  three (3) years after the date of his termination ("3-Year
                  Benefit Plan Coverage"), after which the Executive (and his
                  eligible dependants) shall be eligible for the lifetime
                  benefits provided for under Section 6(vi) of this Agreement.

         (iii)    CAUSE. The Company may terminate the Executive's employment
                  for Cause. As used in this Agreement, "Cause" shall mean: (A)
                  the willful and continued failure by the Executive
                  substantially to perform his duties hereunder (other than any
                  such failure resulting from the Executive's incapacity due to
                  physical or mental



                                       13




                  illness) after written warning from the Board specifying in
                  reasonable detail the breach(es) complained of; (B) fraud or
                  willful misconduct that has a material detrimental effect upon
                  the Company, as finally determined through arbitration or
                  final judgment of a court of competent jurisdiction (which
                  arbitration or judgment, due to the passage of time or
                  otherwise, is not subject to further appeal); or (C)
                  conviction of a criminal offense constituting a felony (which
                  conviction, due to the passage of time or otherwise, is not
                  subject to further appeal). For purposes of the foregoing, no
                  act or failure to act on the part of the Executive shall be
                  considered "willful" unless it is done, or omitted to be done,
                  by the Executive without reasonable belief that Executive's
                  action or omission was in the best interests of the Company.
                  Any act or failure to act that is authorized by the Board or
                  pursuant to the advice of counsel and that is undertaken by
                  the Executive for the Company shall be conclusively presumed
                  to be done, or omitted to be done, by the Executive in the
                  best interests of the Company. The Executive's employment
                  shall not be deemed to have been terminated for Cause unless
                  the Company shall have given or delivered to the Executive (I)
                  reasonable notice setting forth the reasons for the Company's
                  intention to terminate the Executive's employment for Cause,
                  (II) an opportunity for the Executive to cure any such breach
                  during the 30-day period after the Executive's receipt of such
                  notice, (III) a reasonable opportunity, at any time during the
                  30-day period after the Executive's receipt of such notice,
                  for the Executive, together with his counsel, to be heard
                  before the Board, and (IV) a Notice of Termination (as defined
                  below) stating that, in the good faith opinion of not less
                  than 75% of the



                                       14




                  disinterested Board members then in office, the Executive was
                  guilty of the conduct set forth in clauses (A), (B) or (C) of
                  the preceding sentence. For purposes of this Agreement, a
                  "Notice of Termination" means a written notice which (x)
                  indicates the specific termination provision of this Agreement
                  relied upon, (y) sets forth in reasonable detail the facts and
                  circumstances claimed to provide a basis for termination of
                  the Executive's employment under the provision so indicated
                  and (z) specifies the termination date (which date shall be
                  not less than ninety (90) days after the giving of such
                  notice). On the termination date specified in a Notice of
                  Termination duly delivered pursuant to this paragraph, the
                  Executive's compensation and other benefits set forth in this
                  Agreement (other than Section 4(d) and other than any
                  compensation or benefit that shall have been earned or
                  otherwise accrued but not been paid as of such date) shall
                  terminate. For purposes of the foregoing, no certification by
                  the Executive, as may be required by any governmental
                  authority, of any periodic reports or other documentation
                  filed by the Company under any applicable law, rule or
                  regulation shall provide any basis for any alleged "Cause"
                  hereunder so long as the Executive reasonably relied on the
                  Company's disclosure and reporting procedures in connection
                  with Executive's review of the periodic reports or other
                  documentation underlying his certification and the Executive
                  believed that his certification was accurate at the time made
                  (such certification shall be referred to as a "Covered
                  Certification").

         (iv)     GOOD REASON. The Executive may terminate his employment for
                  "Good Reason." As used in this Agreement, "Good Reason" shall
                  mean: (A) the failure to elect


                                       15


                  and continue the Executive as Chairman of the Board and
                  Chairman of the Executive Committee or to nominate the
                  Executive for re-election as a member of the Board; (B) the
                  assignment to the Executive of duties, authorities,
                  responsibilities and reporting requirements inconsistent with
                  his position, or if the scope of any of the Executive's
                  material duties or responsibilities as Chief Executive Officer
                  and President of the Company is reduced or expanded to a
                  significant degree without the Executive's prior consent,
                  except for any reduction in duties and responsibilities due to
                  Executive's illness or disability and except in the event the
                  Board shall determine that the Executive shall no longer serve
                  the Company in the capacity of President and/or Chief
                  Executive Officer but permits the Executive to continue to
                  serve the Company in the capacity of Chairman of the Board of
                  Directors and Chairman of the Executive Committee; (C) a
                  reduction in or a substantial delay in the payment of the
                  Executive's compensation or benefits from those required to be
                  provided in accordance with the provisions of this Agreement;
                  (D) a requirement by the Company or the Board, without the
                  Executive's prior written consent, that the Executive be based
                  in another location that is more than a 20-mile radius from
                  the Executive's mid-town Manhattan offices as provided for
                  under Section 3, other than on travel reasonably required to
                  carry out the Executive's obligations under this Agreement;
                  (E) the failure of the Company to indemnify the Executive
                  (including the prompt advancement of expenses), or to maintain
                  directors' and officers' liability insurance coverage for the
                  Executive, in accordance with the provisions of Section 4(d)
                  hereof; (F) the Company's purported termination of the
                  Executive's employment for Cause other



                                       16




                  than in accordance with the requirements of this Agreement;
                  (G) a "Change of Control" as defined below shall have
                  occurred; (H) the delivery to the Board of a written notice
                  from the Executive stating that the Executive is unable to
                  deliver a Covered Certification because either (I) the Company
                  and/or its representatives have failed to cooperate or
                  otherwise have prevented the Executive from completing such
                  review as he deems necessary to deliver a Covered
                  Certification or (II) the Company and/or its representatives
                  have failed to address the Executive's reasonable concerns
                  regarding the adequacy and completeness of the periodic
                  reports or other documentation, or regarding the Company's
                  disclosure or reporting procedures, as to which the Covered
                  Certification relates, PROVIDED THAT in any such case the
                  Board fails to cure to the Executive's satisfaction any of the
                  matters addressed in subclauses (I) or (II) in a timely manner
                  prior to when the Covered Certification would otherwise have
                  been required to be filed; (I) the failure of any successor
                  company to the Company to assume this Agreement in accordance
                  with Section 9 hereof; and (J) any other breach by the Company
                  of any provision of this Agreement. For purposes of this
                  Agreement, "Change of Control" shall have the meaning set
                  forth in the Company's 1993 Stock Option Plan as of the date
                  hereof with respect to the definitions of a "Change-of-Control
                  Transaction," subject to any subsequent modifications in such
                  definitions that are more favorable to the Executive, PROVIDED
                  THAT in any event "Change of Control" shall include the
                  approval by the shareholders of the Company of any transaction
                  or series of transactions under which the Company is merged or
                  consolidated with any other company, other than a merger or
                  consolidation (I) which would result in



                                       17




                  the voting securities of the Company outstanding immediately
                  prior thereto continuing to represent (either by remaining
                  outstanding or by being converted into voting securities of
                  the surviving entity) more than 66 2/3% of the combined voting
                  power of the voting securities of the Company or such
                  surviving entity outstanding immediately after such merger or
                  consolidation and (II) after which no person holds 20% or more
                  of the combined voting power of the then-outstanding
                  securities of the Company or such surviving entity.

          (v)     OTHER. If the Executive's employment is terminated by the
                  Company, other than as set forth in paragraphs (i), (ii) or
                  (iii) of this Section 6(a), or if the Executive terminates for
                  Good Reason, then (A) the Company shall continue to make
                  available to the Executive and his eligible dependants
                  continued Health and Welfare Coverage (as defined below) until
                  the later of the remainder of the Term or the 3-Year Benefit
                  Plan Coverage period, unless the Executive shall theretofore
                  deliver a written notice to the Company to the effect that he
                  elects not to accept such other benefits (and provided that
                  upon the expiration of this Agreement at the end of the Term,
                  the Executive (and his eligible dependants) shall be entitled
                  to the benefits set forth in Section 6(vi) hereof), (B) all
                  stock options held by the Executive immediately prior to such
                  termination, to the extent not theretofore fully vested and
                  exercisable, shall become fully vested and exercisable and all
                  shares of restricted stock held by the Executive immediately
                  prior to such termination shall become fully vested and free
                  of restrictions (PROVIDED THAT the vesting and exercisability
                  of those stock options granted to the Executive on October 14,
                  1998 (the "1998 Option Grant") shall continue to be governed
                  by the



                                       18



                  operative terms of the Prior Agreement applicable to the 1998
                  Option Grant, and (C) the Company shall pay to the Executive,
                  on the date of termination, a lump sum cash payment equal to
                  the sum of (I) the Annual Formula Bonus pro rated through the
                  date of termination (the "Accrued Bonus") plus (II) the
                  product of (x) the sum of (1) the Executive's annual base
                  salary (as in effect immediately prior to such termination)
                  plus (2) the Annual Formula Bonus, multiplied by (y) the
                  greater of (1) the number of years (including partial years)
                  remaining in the Term (determined immediately prior to such
                  termination) or (2) 2.99. (the amounts payable to the
                  Executive pursuant to preceding subclauses (I) and (II) shall
                  be referred to as the "Termination Payment"). For purposes of
                  determining the Termination Payment, the Annual Formula Bonus
                  shall be calculated assuming the Executive is employed for the
                  entire fiscal year in which such termination occurs, but shall
                  be based upon the Company's then most current financial
                  forecast of pre-tax income for such fiscal year consistent
                  with past practices. Notwithstanding anything herein to the
                  contrary, in the event the Board and the Executive agree that
                  the Executive shall no longer serve the Company in the
                  capacity of President and/or Chief Executive Officer, then so
                  long as the Executive agrees to continue to serve the Company
                  in the capacity of Chairman of the Board of Directors and
                  Chairman of the Executive Committee, such change in position
                  and duties shall not be deemed a termination of the
                  Executive's employment by the Company within the meaning of
                  this Section 6(a)(v). Notwithstanding any provision of this
                  Agreement to the contrary, if the Executive is eligible under
                  any other plan or arrangement for any additional benefit or



                                       19



                  payment in the event of a change of control of the Company
                  then the Executive shall be entitled to receive such payment
                  or benefit in accordance with the terms of such plan or
                  arrangement.

         (vi)     CERTAIN POST TERM BENEFITS AND OBLIGATIONS. (A) If the
                  Executive's employment under this Agreement is terminated by
                  the Company, other than as set forth in paragraphs (i) or
                  (iii) of this Section 6(a), or if the Executive terminates his
                  employment for Good Reason under this Agreement, or upon the
                  expiration of the Term (in each case, the "Post Term Period"),
                  then (I) the Company shall provide to the Executive the
                  Separation Benefits for the remainder of his life and/or the
                  Separation Benefits Buyout, if applicable, each as defined
                  below, and (II) for the remainder of his life, the Company
                  agrees to maintain the Executive as an employee (but not an
                  officer) of the Company, and the Executive agrees to keep
                  himself reasonably available to the chief executive officer of
                  the Company to render such advice and perform such services on
                  behalf of the Company as may be reasonably requested by such
                  chief executive officer (provided that the Executive shall not
                  be required to render such advice or perform such services for
                  more than ninety (90) days in any calendar year, subject to
                  the Executive's reasonable availability) (such services, the
                  "Post Term Services"), in consideration for which the
                  Executive shall receive monthly payments from the Company in
                  the amount of $83,000 (which amount shall be adjusted to
                  reflect all increases in the Consumer Price Index following
                  the Effective Date and to be adjusted annually following
                  termination of the Executive's employment to reflect any
                  increase in the Consumer Price Index from the preceding
                  calendar year) (the



                                       20




                  "Post Term Compensation"). The Company's obligations set forth
                  in this Section 6(a)(vi) are not to be subject to setoff or
                  reduction, PROVIDED, HOWEVER, that (x) the Company's
                  obligation to continue to employ the Executive and pay any
                  future Post Term Compensation not yet then accrued shall
                  terminate if during the Post Term Period (1) the Executive
                  should become totally and permanently unable to provide the
                  Post Term Services, (2) absent a breach of this Agreement by
                  the Company, the Executive is otherwise unwilling to continue
                  to perform the Post Term Services, (3) the Executive is
                  convicted of a criminal offense constituting a felony (which
                  conviction, due to the passage of time or otherwise, is not
                  subject to further appeal) or (4) the Executive is found to
                  have breached the restrictive covenants set forth in this
                  Agreement, if applicable, (y) the Company's obligation to pay
                  and/or continue any Separation Benefits (as defined below) not
                  yet then accrued shall terminate upon the occurrence during
                  the Post Term Period of any of the events described in
                  subclauses (2), (3) or (4) in clause (x) above (the "Benefit
                  Termination Events") and (z) upon the occurrence of the event
                  described in subclause (1) in clause (x) above, the Company
                  shall only have an obligation to continue to provide Health
                  and Welfare Coverage (as defined below) and no other component
                  of the Separation Benefits (as defined below). (B) For
                  purposes of this Section 6(a)(vi), the following benefits,
                  services, facilities and perquisites shall constitute
                  "Separation Benefits":

                  (I)      all group and/or executive hospitalization, medical
                           or health programs, dental, vision and disability
                           insurance coverage (for himself and his eligible
                           dependents) to the extent provided generally to all
                           full-time



                                       21




                           employees of the Company, and/or to the extent
                           provided additionally to all senior officers of the
                           Company at no additional cost to the Executive or his
                           family and/or dependents and on a basis no less
                           favorable than was provided to him during his
                           employment (collectively "Health and Welfare
                           Coverage"), PROVIDED that the Executive executes
                           appropriate enrollment materials;

                  (II)     office space convenient to the Executive's primary
                           residence and suitable in respect of the services
                           which the Executive provides to the Company
                           hereunder, along with suitable clerical support;

                  (III)    access to Company-owned or leased aircraft or charter
                           equivalent thereof on terms then applicable to senior
                           executives of the Company;

                  (IV)     access to one Company-provided car and driver;

                  (V)      appropriate personal security to be provided when
                           traveling on Company business;

                  (VI)     reimbursement for any properly documented business
                           expenses incurred on behalf of the Company.


                  (C) In lieu of providing those Separation Benefits listed
                  under Section 6(a)(vi)(B)(I) through (V), but not clause (VI),
                  and including the Post Term Compensation, and provided a
                  Benefit Termination Event has not occurred, the Company may
                  elect to substitute one or more cash lump-sum payments to
                  satisfy in full or in part any or all of such Company
                  obligations to the Executive as provided for herein with
                  respect to the Separation Benefits and Post Term Compensation
                  (the "Separation Benefits Buyout"); PROVIDED the Company has



                                       22



                  provided thirty days' advance written notice to the Executive
                  of its election hereunder. In the event of a Separation
                  Benefits Buyout with respect to the Post Term Compensation,
                  the Executive shall have no further obligation to provide the
                  Post Term Services. The amount of any cash lump-sum payment to
                  be made to the Executive with respect to the Separation
                  Benefits Buyout shall be determined by reasonable agreement of
                  the parties hereto, after providing good faith consideration
                  to the following factors, to the extent applicable: (u) the
                  historical and forecast cost to the Company for providing the
                  applicable item; (v) the forecast cost to the Executive for
                  purchasing a comparable replacement of the applicable item;
                  (w) any relevant actuarial considerations to the extent such
                  items are required to be provided for the life of the
                  Executive; (x) any appropriate adjustments to reflect net
                  present value and/or inflationary considerations; (y) any
                  appropriate adjustment to reflect the obligations of the
                  Executive under Section 8; and (z) any relevant taxation
                  considerations applicable to the Executive's receipt of a
                  current lump-sum payment. The Company shall provide the
                  Executive with all work papers supporting its determination
                  and calculation of the Separation Benefits Buyout. Any
                  disputes as to the amount to be paid in accordance with a
                  Separation Benefits Buyout shall be settled by an independent
                  third party reasonably acceptable to the parties hereto within
                  sixty (60) days after submission of any such dispute by the
                  parties, and shall be final and binding on all parties hereto.
                  The Separation Benefits Buyout shall be in addition to, and
                  not in lieu of, any other payments, severance or otherwise,
                  owed by the Company to the



                                       23



                  Executive. Any payment made in respect of a Separation
                  Benefits Buyout shall be subject to the approval of the
                  Company's Audit Committee. (D) Upon the occurrence of a
                  Potential Change in Control or Change in Control during the
                  Post Term Period, the Executive may elect to receive, and the
                  Company shall be required to immediately pay to the Executive,
                  the Separation Benefits Buyout as determined pursuant to this
                  subparagraph (D). In the event the Executive makes the
                  foregoing election, such election shall be accompanied by a
                  written determination of a national accounting firm selected
                  by the Executive setting forth the amount of the Separation
                  Benefits Payout, after applying the factors and considerations
                  set forth in subparagraph 6(a)(vi)(C) above, and the
                  determination of such firm shall be final and binding on the
                  Company. The Company shall bear all costs and expenses
                  incurred in connection with the retention of such accounting
                  firm.

         (vii)    INTEGRATION. Notwithstanding any other provision of this
                  Agreement to the contrary, to the extent that the Company is
                  obligated to provide Health and Welfare Coverage and payments
                  to the Executive pursuant to Section 6(a)(v)(A) and (C) as a
                  result of a termination of the Executive's employment with
                  less than three (3) years remaining in the Term, then the
                  amount otherwise payable to the Executive pursuant to the
                  foregoing provisions of this Section 6 shall be reduced so
                  that the aggregate value of such Health and Welfare Coverage
                  and payments (other than the portion of the Termination
                  Payment attributable to the Accrued Bonus) shall not exceed
                  the sum of the Executive's annual base salary (as in


                                       24



                  effect immediately prior to such termination) plus the Annual
                  Formula Bonus determined pursuant to Section 6(a)(v),
                  multiplied by 2.99.

         (b) RESIGNATION. If the Executive voluntarily resigns his employment
under this Agreement during the Term (other than for Good Reason), the
Executive's compensation and other benefits (other than those under Section 4(d)
and other than any compensation or benefit that shall have accrued but not been
paid as of the date of such resignation) set forth in this Agreement shall
thereupon terminate.

         (c) RABBI TRUST FUNDED UPON POTENTIAL CHANGE IN CONTROL OR CHANGE IN
CONTROL. In the event of a Potential Change in Control or Change in Control, the
Company shall, not later than 15 days thereafter, have established one or more
rabbi trusts and shall deposit therein cash in an amount sufficient to provide
for full payment of all potential obligations of the Company that would arise
assuming consummation of a Change in Control, or that have arisen in the case of
an actual Change in Control and a subsequent termination of Executive's
employment under Section 6(a)(iv) or Section 6(a)(v). Such rabbi trust(s) shall
be irrevocable and shall provide that the Company may not, directly or
indirectly, use or recover any assets of the trust(s) until such time as all
obligations which potentially could arise hereunder have been settled and paid
in full, subject only to the claims of creditors of the Company in the event of
insolvency or bankruptcy of the Company; PROVIDED, HOWEVER, that if no Change in
Control has occurred within two years after such Potential Change in Control,
such rabbi trust(s) shall at the end of such two-year period become revocable
and may thereafter be revoked by the Company. For purposes of this Agreement, a
"Potential Change in Control" shall be deemed to have occurred if, during the
term of this Agreement: (i) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change in Control;
(ii) any Person



                                       25




(including the Company) publicly announces an intention to take or to consider
taking action which if consummated would constitute a Change in Control; or
(iii) the Board adopts a resolution to the effect that, for purposes of this
Agreement, a Potential Change in Control has occurred.

         7. ADDITIONAL EXCISE TAX PAYMENT. (a) Anything in this Agreement or in
any other plan, program or agreement to the contrary notwithstanding and except
as set forth below, in the event that (i) the Executive becomes entitled to any
benefits or payments under this Agreement in connection with a termination of
employment including any Post Term Compensation, Separation Benefits and/or
Separation Benefits Buyout, and (ii) it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any Gross-Up Payments
(as defined below) made hereunder, such payments being referred to herein as the
"Payments") would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.


                                       26



         (b) Subject to the provisions of Section 7(c), all determinations
required to be made under this Section 7, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Deloitte &
Touche LLP or such other certified public accounting firm as may be designated
by the Executive and reasonably acceptable to the Company (the "Accounting
Firm") which shall provide detailed supporting calculations both to the Company
and the Executive within 15 business days of the receipt of notice from the
Executive, or such earlier time as is requested by the Company. In the event
that the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change-of-Control Transaction, the Executive and
the Audit Committee of the Company shall mutually agree to appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 7, shall be paid by the Company to the Executive within ten days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 7(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount



                                       27




of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.

         (c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which the Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:

         (i)      give the Company any information reasonably requested by the
                  Company relating to such claim,

         (ii)     take such action in connection with contesting such claim as
                  the Company shall reasonably request in writing from time to
                  time, including, without limitation, accepting legal
                  representation with respect to such claim by an attorney
                  reasonably selected by the Company,

         (iii)    cooperate with the Company in good faith in order effectively
                  to contest such claim, and

         (iv)     permit the Company to participate in any proceedings relating
                  to such claim;


                                       28




PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 7(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; PROVIDED, HOWEVER, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.


                                       29



         (d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 7, the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 7(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 60 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

         (e) The provisions of this Section 7 shall be in addition to any rights
to payment available to the Executive under the terms of the Tax Gross-Up
Program and to the extent the provisions of this Section 7 are more favorable to
the Executive than the terms of the Tax Gross-Up Program, the provisions of this
Section 7 shall control. The Company shall not terminate or amend the Tax
Gross-Up Program without the Executive's consent.

         8. OTHER COVENANTS BY THE EXECUTIVE. (a) During the Restricted Period
(as defined in Section 8(c)), neither the Executive nor any "Controlled
Affiliate" will, without the prior written consent of the Board, in any way
directly or indirectly hire or attempt to hire any person who, to the
Executive's best knowledge, was employed at any time during the period
commencing six months prior to the termination of the Executive's employment
with the Company, as an officer or executive or professional employee of the
Company or any of its subsidiaries or affiliates. As used in this Agreement,
"Controlled Affiliate" means any company,



                                       30




partnership, firm or other entity as to which the Executive possesses, directly
or indirectly, the power to direct or cause the direction of the management and
policies of such entity, whether through the ownership of voting securities, by
contract or otherwise.

         (b) The Executive acknowledges that, through his status as Chairman of
the Board, President and Chief Executive Officer of the Company, he has and will
have possession of important, confidential information and knowledge as to the
Company's business, including, but not limited to, knowledge of marketing and
operating strategies, franchise agreements, financial results and projections,
future plans, the provisions of important contracts entered into by the Company
and possible acquisitions and divestitures. The Executive agrees that such
knowledge and information constitute a vital part of the business of the Company
and are by their nature trade secrets and confidential information
(collectively, "Confidential Information"). The Executive agrees that he shall
not, so long as the Company or any successor remains in existence, divulge,
communicate, furnish or make accessible (whether orally or in writing or in
books, articles or any other medium) to any individual, firm, partnership or
corporation any knowledge and information with respect to Confidential
Information directly or indirectly useful in any aspect of the business of the
Company. As used in the preceding sentence, "Confidential Information" shall not
include any knowledge or information which (i) is or becomes available to others
or the public, other than as a result of breach by the Executive of this Section
8(b), (ii) was available to the Executive on a nonconfidential basis prior to
its disclosure to the Executive through his status as an officer of the Company
or (iii) becomes available to the Executive on a nonconfidential basis from a
third party (other than the Company or its representatives) who is not bound by
any confidentiality obligation to the Company.


                                       31




         (c) During the Restricted Period, neither the Executive nor any of his
Controlled Affiliates will render any services, directly or indirectly, as an
employee, officer, consultant or in any other capacity, to any individual, firm,
corporation or partnership engaged in business activities that are competitive
with any business segment activities in which the Company or its subsidiaries or
affiliates are engaged at the time of such termination (such competitive
businesses being herein called the "Company Business"). During the Restricted
Period, the Executive shall not, without the prior written consent of the
Company, hold an equity interest in any firm, partnership or corporation which
competes with the Company Business, except that beneficial ownership by the
Executive (together with any one or more members of his immediate family and
together with any entity under his direct or indirect control) of less than 1%
of the outstanding shares of capital stock of any corporation which may be
engaged in any of the same lines of business as the Company Business which stock
is listed on a national securities exchange or publicly traded in the
over-the-counter market shall not constitute a breach of the covenants in this
Section 8(c). As used in this Agreement, "Restricted Period" shall mean (i) if
the Executive's employment with the Company shall be terminated for Cause or by
the Executive's voluntary resignation (except any such resignation for Good
Reason or arising from a breach of this Agreement by the Company), the period
beginning on the date of such termination and ending on the second anniversary
thereof and (ii) if the Executive's employment with the Company under this
Agreement shall be terminated under any circumstances other than those to which
clause (i) above applies, the period beginning on the date of such termination
and ending on the later of (A) the second anniversary thereof or (B) the "Post
Term Cessation Date" (as defined below). For purposes of the foregoing sentence,
the "Post Term Cessation Date" shall mean the earlier of (I) the date that the
Company ceases



                                       32




making payments of Post Term Compensation or ceases providing Separation
Benefits in breach of this Agreement, or (II) the date that the Executive shall
deliver a written notice to the Company to the effect that he elects not to
accept such Post Term Compensation, unless the parties otherwise agree to a
different expiration date for the Restricted Period in connection with the
determination and payment of the Separation Benefits Buyout. Notwithstanding the
foregoing, in the event the Separation Benefits Buyout is paid to the Executive
covering all of the Executive's lifetime rights with respect to the Post Term
Compensation and the Separation Benefits listed under Section 6(a)(vi)(B)(I)
through (V), the Restricted Period shall terminate as of the Executive's death.

         (d) The Executive agrees that the provisions of Sections 8(a), (b) and
(c) may not be adequately enforced by an action for damages and that, in the
event of a breach thereof by the Executive or any such other entity, the Company
shall be entitled to seek injunctive relief in any court of competent
jurisdiction to restrain the breach or threatened breach of such violation or
otherwise to enforce specifically such provisions against such violation.

         9. SUCCESSORS: BINDING AGREEMENT. (a) This Agreement is personal to
each of the parties hereto, and neither party may assign nor delegate any of its
rights or obligations hereunder without the prior written consent of the other.
The Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all the business
and/or assets of the Company, by agreement in form and substance satisfactory to
the Executive, expressly to assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to perform
it if no such succession had taken place.


                                       33




         (b) This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive's personal legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.

         10. NOTICE. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be given either by hand delivery or (unless otherwise specified) mailed by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:

                  If to the Executive:

                      Henry R. Silverman
                      9 West 57th Street
                      New York, New York 10019

                  If to the Company:

                      Cendant Corporation
                      1 Campus Drive
                      Parsippany, New Jersey 07054
                      Attention:  General Counsel

or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt. Notice and communications shall be effective
when actually received by the addressee.

         11. MISCELLANEOUS. (a) No provisions of this Agreement may be amended,
supplemented, modified, cancelled or discharged unless such amendment,
supplement, modification, cancellation or discharge is agreed to in writing
signed by the Executive and a duly authorized officer of the Company (other than
the Executive); and no provisions hereof may be waived except in writing so
signed by or on behalf of the party granting such waiver. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be



                                       34




deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior subsequent time. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State. The obligations
of the Company, the Successor and the Executive under this Agreement, which by
their nature may require either partial or total performance after the
expiration of this Agreement or the termination of the Executive's employment
(including, without limitation, under Sections 4, 6 and 7 hereof) shall survive
such expiration and termination.

         (b) The Company represents and warrants to the Executive that: (i) the
Company has all necessary power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby; (ii) the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized and
approved by the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby; and (iii) this Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid and
binding agreement of the Company enforceable in accordance with its terms.

         (c) After a termination of employment for any reason, the Executive
shall not be obligated to mitigate damages by seeking other comparable
employment, and any payments or benefits payable or due to the Executive shall
not be subject to reduction as a result of any compensation received from other
employment or from any other source whatsoever.

         (d) The Company shall pay all reasonable attorneys' fees and related
costs incurred by the Executive in connection with the negotiation of this
Agreement.


                                       35



         (e) The amounts required to be paid by the Company to the Executive
pursuant to this Agreement shall not be subject to offset.

         12. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

         13. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled conclusively by arbitration,
conducted before a panel of three arbitrators in New York, New York, in
accordance with the rules of the American Arbitration Association then in
effect. One arbitrator shall be selected by the Executive, one by the Company
and the third arbitrator shall be selected by the first two arbitrators;
PROVIDED THAT if the first two arbitrators cannot agree on appointment of the
third, the American Arbitration Association rules shall govern the process for
selection of the third arbitrator. Judgment may be entered on the arbitrators'
award in any court having jurisdiction; PROVIDED, HOWEVER, that the Company
shall be entitled to seek a restraining order or injunction in any court of
competent jurisdiction to prevent any continuation of any violation of the
provisions of Section 8 and the Executive hereby consents that such restraining
order or injunction may be granted without the necessity of the Company's
posting any bond. The expenses of the arbitration shall be borne by the Company;
and the Company shall bear its own legal fees and expenses and pay, at least
monthly, all of the Executive's legal fees and expenses incurred in connection
with such arbitration regardless of the outcome, except that the Executive shall
have to reimburse the Company for his legal fees and expenses if the arbitrators
find that Executive brought an action in bad faith.

         14. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and shall
be deemed an extension of the



                                       36




Prior Agreement and shall supersede all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written by any officer, employee or representative of any party hereto, and any
prior agreement of the parties hereto in respect of the subject matter contained
herein (PROVIDED THAT the terms of the Prior Agreement shall survive and govern
solely with respect to the vesting and exercisability of the 1998 Option Grant
as provided for therein).

                           [signature page to follow]



                                       37





           [Amended and Extended Employment Agreement Signature Page]

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.

                                           CENDANT CORPORATION


                                           By: /s/ James E. Buckman
                                              ---------------------------------
                                           Name:
                                           Title: Vice Chairman &
                                                  General Counsel


                                           HENRY R. SILVERMAN

                                           /s/ Henry R. Silverman
                                           ------------------------------------







                                       38

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Exhibit 23


INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Cendant Corporation's Registration Statement Nos. 333-11035, 333-17323, 333-17411, 333-20391, 333-23063, 333-26927, 333-35707, 333-35709, 333-45155, 333-45227, 333-49405, 333-78447, 333-86469, 333-51586, 333-59246, 333-65578, 333-65456, 333-65858, 333-83334, 333-84626, 333-86674 and 333-87464 on Form S-3 and Registration Statement Nos. 33-74066, 33-91658, 333-00475, 333-03237, 33-58896, 33-91656, 333-03241, 33-26875, 33-75682, 33-93322, 33-93372, 33-75684, 33-80834, 33-74068, 33-41823, 33-48175, 333-09633, 333-09655, 333-09637, 333-22003, 333-30649, 333-42503, 333-34517-2, 333-42549, 333-45183, 333-47537, 333-69505, 333-75303, 333-78475, 333-51544, 333-38638, 333-64738, 333-71250, 333-58670, 333-89686 and 333-98933 on Form S-8 of our report dated February 7, 2002 (April 1, 2002 as to the subsequent events described in Note 28 and August 12, 2002, as to the effects of the discontinued operation described in Notes 1 and 5 and as to the pro forma effect of the non-amortization of goodwill disclosed in Note 1) (which expresses an unqualified opinion and includes explanatory paragraphs with respect to the modification of the accounting treatment relating to securitization transactions, the accounting for derivative instruments and hedging activities, the revision of certain revenue recognition policies and as to the effects of the discontinued operation as discussed in Notes 1 and 5) appearing in this Annual Report on Form 10-K/A of Cendant Corporation for the year ended December 31, 2001.

/s/ Deloitte & Touche
New York, New York

November 1, 2002



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INDEPENDENT AUDITORS' CONSENT



                                                                   EXHIBIT 99.3



                    CERTIFICATION OF CEO AND CFO PURSUANT TO
                           18 U.S.C. SECTION 1350,
                           AS ADOPTED PURSUANT TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Cendant Corporation (the "Company")
on Form 10-K/A for the period ended December 31, 2001, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), Henry
R. Silverman, as Chief Executive Officer of the Company, and Kevin M.
Sheehan, as Chief Financial Officer of the Company, each hereby certifies,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

     (1)  The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.



/s/ Henry R. Silverman
- ------------------------------
Henry R. Silverman
Chief Executive Officer
November 4, 2002


/s/ Kevin M. Sheehan
- ------------------------------
Kevin M. Sheehan
Chief Financial Officer
November 4, 2002



This certification accompanies the Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by
the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes
of Section18 of the Securities Exchange Act of 1934, as amended.