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EXHIBIT 10.2
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SUNTERRA FINANCE L.L.C.
COMPANY,
SIGNATURE RESORTS, INC.
SERVICER
AND
LASALLE NATIONAL BANK
TRUSTEE AND BACK-UP SERVICER
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SERVICING AGREEMENT
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DATED AS OF MAY 1, 1998
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TABLE OF CONTENTS
Page
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PRELIMINARY STATEMENT.............................................................................................1
ARTICLE I. DEFINITIONS............................................................................................1
1.1. Defined Terms...................................................................................1
ARTICLE II. ADMINISTRATION AND SERVICING OF MORTGAGE LOANS........................................................1
2.1. Appointment of the Servicer.....................................................................1
2.2. Subservicing Agreements.........................................................................2
2.3. Servicer to Collect Payments....................................................................2
2.4. Servicing and Collection Responsibilities.......................................................3
2.5. Remittance of Funds to Lock-Box Accounts and Collection Account.................................4
2.6. Advances........................................................................................5
2.7. Liquidations....................................................................................5
2.8. Realization upon Liquidated Mortgage Loans......................................................5
2.9. Modifications...................................................................................7
2.10. Assumptions....................................................................................7
2.11. Records........................................................................................7
2.12. Indemnification; Third Party Claim.............................................................7
2.13. Fidelity Bond and Errors and Omissions Insurance; Hazard Insurance.............................8
2.14. Servicing Compensation and Trustee Expenses....................................................9
2.15. No Offset......................................................................................9
ARTICLE III. ACCOUNTINGS; STATEMENTS AND REPORTS..................................................................9
3.1. Monthly Servicer Report.........................................................................9
3.2. Certification as to Compliance; Notice of Default...............................................9
3.3. Annual Accountants' Reports....................................................................10
3.4. Financial and Business Information.............................................................10
ARTICLE IV. THE SERVICER AND BACK-UP SERVICER....................................................................12
4.1. Representations, Warranties and Certain Covenants of the Servicer..............................12
4.2. Corporate Existence; Status as Servicer; Merger................................................15
4.3. Performance of Obligations.....................................................................15
4.4. The Servicer's Resignation.....................................................................15
4.5. Liability of the Servicer......................................................................16
4.6. Representations and Warranties of the Back-up Servicer.........................................16
4.7. Performance of Back-up Servicer's Duties.......................................................17
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ARTICLE V. DEFAULT ..............................................................................................17
5.1. Events of Default..............................................................................17
5.2. Trustee to Act as Back-up Servicer; Appointment of Successor; Limitations on Liability.........19
5.3. Notification to Noteholders and DCR............................................................20
5.4. No Effect on Other Parties.....................................................................20
5.5. Rights Cumulative..............................................................................21
5.6. Directions by Noteholders and Duties of Trustee During Servicing Event of Default..............21
ARTICLE VI. MISCELLANEOUS PROVISIONS.............................................................................21
6.1. Effectiveness and Termination of Agreement.....................................................21
6.2. Amendments.....................................................................................22
6.3. Governing Law..................................................................................22
6.4. Notices........................................................................................23
6.5. Severability of Provisions.....................................................................24
6.6. Inspection and Audit Rights....................................................................24
6.7. Binding Effect.................................................................................24
6.8. Article Headings...............................................................................25
6.9. Legal Holidays.................................................................................25
6.10. Counterparts..................................................................................25
EXHIBIT A Form of Servicer Report...............................................................................A-1
APPENDIX A Standard Definitions
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THIS SERVICING AGREEMENT, dated as of May 1, 1998, is entered
into by and among Sunterra Finance L.L.C., a Georgia limited liability company
(the "Company"), Signature Resorts, Inc., a Maryland corporation, for itself and
as the Servicer hereunder (the "Servicer"), and LaSalle National Bank, a
nationally chartered bank, as trustee (the "Trustee") under the Indenture and as
back-up servicer (the "Back-up Servicer") hereunder.
PRELIMINARY STATEMENT
The Company has entered into an Indenture, dated as of the
date hereof (the "Indenture"), with the Trustee pursuant to which the Company
intends to issue three separate classes of Signature Resorts Vacation Ownership
Receivables-Backed Notes 1998-A.
The Company and the Sellers contemporaneously herewith are
entering into the Sale Agreement providing for, among other things, the sale,
assignment and contribution by the Sellers and the purchase by the Company of
certain Mortgage Loans. Pursuant to the Indenture, the Company will grant to the
Trustee a lien upon and a security interest in all Mortgage Loans now owned or
hereafter acquired pursuant to the Sale Agreements by the Company for the
benefit of the Holders from time to time of the Notes. As a precondition to the
effectiveness of such Sale Agreements, the Sale Agreements require that the
Servicer and the Company enter into this Servicing Agreement to provide for the
servicing of the Mortgage Loans. In order further to secure the Notes, the
Company is granting to the Trustee a lien upon and a security interest in, among
other things, the Company's rights derived under this Servicing Agreement and
the Sale Agreements, and the Servicer agrees that all covenants and agreements
made by the Servicer herein with respect to the Mortgage Loans and other
collateral shall also be for the benefit and security of the Trustee and all
Holders from time to time of the Notes. For its services hereunder the Servicer
is to receive a Servicing Fee as set forth in Section 2.14 with respect to the
Mortgage Loans serviced hereunder.
ARTICLE I.
DEFINITIONS
1.1. Defined Terms. Except as otherwise specified or as the
context may otherwise require, the capitalized terms used in this Servicing
Agreement shall have the respective meanings specified in the Standard
Definitions set forth as Appendix A hereto, which is incorporated herein by this
reference. The definitions of such terms are equally applicable both to the
singular and plural forms of such terms and to the masculine, feminine and
neuter genders of such terms.
ARTICLE II.
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
2.1. Appointment of the Servicer. The Servicer shall service
and administer the Mortgage Loans and perform all of its duties hereunder in
accordance with applicable law, the terms of the respective Mortgage Loans and,
to the extent consistent with the foregoing, in
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accordance with customary and usual procedures employed by institutions
servicing mortgage loans secured by vacation ownership intervals, which
institutions are considered prudent by the Servicer, and in accordance with the
Servicer's own past practices, or if a higher standard, the highest degree of
skill and attention that the Servicer exercises with respect to comparable
mortgage loans secured by vacation ownership intervals that the Servicer
services for itself.
2.2 Subservicing Agreements.
(a) The Servicer may enter into one or more Subservicing
Agreements with a Subservicer to assist the Servicer in the performance of its
duties under this Servicing Agreement; provided, however, the Servicer shall not
delegate to a Subservicer any duties related to (i) directing the Trustee with
respect to the allocation of any funds received with respect to the Mortgage
Loans and (ii) any duties related to Mortgage Loans with respect to which
Monthly P&I is 120 or more days past due (including any duties related to
foreclosure proceedings or similar matters). References in this Servicing
Agreement to actions taken or to be taken by the Servicer in servicing the
Mortgage Loans include actions taken or to be taken by a Subservicer on behalf
of the Servicer. Any Subservicing Agreement will be upon such terms and
conditions as the Servicer may reasonably agree and as are not inconsistent with
this Servicing Agreement. Except as provided in Section 5.2(c), the Servicer
shall be solely responsible for any subservicing fees.
(b) The Servicer shall be entitled to terminate any
Subservicing Agreement that may exist in accordance with the terms and
conditions of such Subservicing Agreement; provided, however, that in the event
of the termination of any Subservicing Agreement by the Servicer or the related
Subservicer, the Servicer shall either act directly as Servicer in accordance
with its duties hereunder or shall enter into a Subservicing Agreement with a
successor subservicer.
(c) Notwithstanding any Subservicing Agreement, or any of the
provisions of this Servicing Agreement other than Section 5.2(c) relating to
agreements or arrangements between the Servicer and a Subservicer, the Servicer
shall remain obligated and liable for the servicing and administering of the
Mortgage Loans in accordance with the provisions of this Servicing Agreement
without diminution of such obligation or liability by virtue of such
Subservicing Agreement and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the
Mortgage Loans.
2.3 Servicer to Collect Payments.
(a) Prior to the Closing Date, the Servicer shall open and
maintain at one or more depository institutions, accounts which shall be
Eligible Accounts (the "Lock-Box Accounts") and provide the Trustee with the
name and location thereof. The Servicer may substitute a Lock-Box Bank for
another bank, but only (i) upon ten days' prior written notice from the Servicer
to the Trustee and (ii) so long as no Servicer Event of Default shall have
occurred and be continuing. Such notice shall state the name and address of the
proposed new Lock-Box Bank and shall identify the related Lock-Box Account.
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(b) The Servicer shall use its best efforts to cause each
Mortgagor to timely make all payments (other than ACH Payments) in respect of
his or her Mortgage Loan to the applicable Lock-Box Account. Any such payments
received by the Servicer shall be deposited in the Collection Account no later
than one Business Day following its receipt. ACH Payments shall be deposited in
the Collection Account no later than one Business Day following receipt thereof.
(c) All interest earned on funds received with respect to
Mortgage Loans and deposited in the Lock-Box Accounts shall be deposited in the
Collection Account within one Business Day after receipt thereof.
(d) The Trustee shall review each Servicer Report and
determine whether such Servicer Report contains information in the stated
categories or fields, but shall not be obligated to make any further examination
thereof, and shall have no other duty to supervise the Servicer and the Trustee
shall not be responsible for the actions and omissions of the Servicer. In the
event the Trustee determines that a Servicer Report is incomplete, the Trustee
shall promptly notify the Servicer and the Servicer shall, promptly upon
receiving such notice, complete such Servicer Report.
2.4 Servicing and Collection Responsibilities. In addition to
any other customary services which the Servicer may perform, the Servicer shall
perform the following servicing and collection activities:
(a) perform standard accounting services and general record
keeping services with respect to the Mortgage Loans;
(b) respond to any telephone or written inquiries of
Mortgagors concerning the Mortgage Loans;
(c) keep Mortgagors informed of the proper place and method
for making payments with respect to the Mortgage Loans;
(d) contact Mortgagors to effect collection and to discourage
delinquencies in the payment of Mortgage Loans, doing so by any lawful means,
including, but not limited to, the following:
(i) mailing of routine past due notices;
(ii) preparing and mailing collection letters;
(iii) contacting delinquent Mortgagors by telephone
to encourage payment;
(iv) mailing of reminder notices to delinquent
Mortgagors; and
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(v) initiating and pursuing termination or
foreclosure actions deemed necessary by the Servicer;
(e) report tax information to Mortgagors as required by law;
and
(f) take such other action as may be necessary or appropriate
in the discretion of the Servicer for the purpose of collecting and transferring
to the Collection Account all payments received in respect of Mortgage Loans
(except as otherwise expressly provided herein), and to carry out the duties and
obligations imposed upon the Servicer pursuant to the terms of this Section,
provided, however, that the Servicer may, in its discretion, waive any Late Fees
in connection with delinquent payments on a Mortgage Loan.
2.5 Remittance of Funds to Lock-Box Accounts and Collection
Account.
(a) On each Business Day, the Servicer shall deposit or cause
to be deposited into the Lock-Box Accounts Monthly P&I collected after the
Cut-off Date.
(b) Subject to Section 2.5(c), the Servicer shall:
(1) remit, by any commercially acceptable method, to
the appropriate party the portion of any payments by or on behalf of a
Mortgagor with respect to a Mortgage Loan representing Insurance
Proceeds to be applied to the repair or restoration of a Mortgaged
Property, Miscellaneous Payments, Late Fees and Maintenance Fees, it
being understood that such Insurance Proceeds, Miscellaneous Payments,
Late Fees and Maintenance Fees (i) need not be deposited in the
Lock-Box Accounts, and may be retained by the Servicer in one or more
segregated accounts, which shall be Eligible Accounts or applied on
behalf of Mortgagors, as the case may be, and (ii) will not be
distributed pursuant to Section 13.1 of the Indenture or otherwise paid
under any of the Notes issued pursuant to the Indenture; and
(2) not later than the Business Day following the
date of receipt by the Servicer of any payment by or on behalf of a
Mortgagor with respect to a Mortgage Loan, remit into the Collection
Account all payments received from or on behalf of Mortgagors less
Insurance Proceeds to be applied to the repair or restoration of a
Mortgaged Property and amounts described in subclause (b)(1) above, and
any Prepayments, Upgrade Prepayments and Net Liquidation Proceeds.
(c) To the extent that the Servicer determines that during any
Collection Period any Miscellaneous Payments, Late Fees, Maintenance Fees,
charges for checks returned for insufficient funds, amounts deposited in a
Lock-Box Account or the Collection Account in error or other amounts not
constituting a portion of the related Collection Account Amount have been
deposited in a Lock-Box Account or the Collection Account, the Servicer may
withdraw such amounts from the related Lock-Box Account or, if applicable,
request the Trustee to withdraw such amounts from the Collection Account and
remit them to the Servicer for application in accordance with the Servicer's
normal servicing procedures. Upon receipt of a
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request from the Servicer, the Trustee shall withdraw the appropriate amount
from the Collection Account and remit such amount to the Servicer.
(d) In the event that the Company, the Trustee or the Servicer
shall have received any Insurance Proceeds, to the extent such Insurance
Proceeds are not used to rebuild or repair the related Mortgaged Property, the
Company, the Trustee or the Servicer, as applicable, shall promptly deposit such
Insurance Proceeds into the Collection Account.
(e) No later than the Business Day after deposit in the
Lock-Box Accounts, the Servicer shall transfer all available funds related to
the Mortgage Loans from the Lock-Box Accounts to the Collection Account.
2.6 Advances. On the second Business Day preceding each
Distribution Date, the Servicer shall instruct the Trustee to withdraw from the
Reserve Account and deposit in the Collection Account, an amount equal to the
sum of the interest and principal portions due, but not collected, with respect
to Delinquent Mortgage Loans during the prior Collection Period, but shall be
obligated to do so if and only if, in its good faith business judgment, the
Servicer reasonably believes that such amount will ultimately be recovered from
future collections on the related Mortgage Loan. Such amounts are "P&I
Advances." Neither the Servicer, the Trustee nor the Back-up Servicer shall have
any obligation to make any P&I Advances from its own funds.
2.7 Liquidations.
(a) The Servicer shall, not later than the second Business Day
following the Liquidation of a Defaulted Mortgage Loan, deposit the related
Liquidation Proceeds less the related Liquidation Expenses, to the extent
thereof, in the Collection Account; provided, however, that the Servicer shall,
concurrently with such deposit, furnish to the Trustee a certificate setting
forth the basis for the Servicer's determination of the amount, if any, of such
Net Liquidation Proceeds.
(b) To the extent that Net Liquidation Proceeds in respect of
any Defaulted Mortgage Loan are to be taken into account in calculating the
Current Principal Amount in respect of any Distribution Date, such Net
Liquidation Proceeds shall be allocated first to accrued unpaid interest on the
related Mortgage Loan and second to the unpaid principal balance thereof unless
such allocation is inconsistent with the terms of the related Mortgage or
Mortgage Note, in which event such Net Liquidation Proceeds shall be allocated
in the order specified therein.
2.8 Realization upon Defaulted Mortgage Loans.
(a) In connection with Liquidations, the Servicer shall follow
such practices and procedures as it shall deem necessary or advisable and as
shall be consistent with the servicing standards set forth in Section 2.1. In
addition, the Servicer shall comply with all applicable laws in connection with
the foreclosure of any Mortgaged Property, and may
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commence and prosecute any proceedings in respect of such related Mortgage Loan
in the name of and on behalf of the Trustee.
(b) The Trustee on behalf of the Noteholders shall not acquire
any Mortgaged Property except in connection with a default or imminent default
of a Mortgage Loan. In the event a Mortgaged Property is acquired by the Trustee
on behalf of the Noteholders as a result of foreclosure proceedings, pursuant to
a power of sale to the extent permitted by law, by means of a deed-in-lieu of
foreclosure or otherwise (a "Foreclosure Property"), the Servicer on behalf of
the Trustee shall use its best efforts to sell such Foreclosure Property as soon
as possible or practicable to a Person other than the Company or the applicable
Seller and shall manage, operate, conserve and protect the Foreclosure Property
solely for the purpose of its prompt disposition. The Servicer shall use its
best efforts to sell or cause the Seller to sell such Foreclosure Property prior
to any sale of Comparable Property.
(c) Notwithstanding anything to the contrary contained herein,
the Servicer shall not obtain on behalf of the Trustee a deed as a result or in
lieu of foreclosure, and shall not otherwise acquire possession of or title to,
or take any other action with respect to, any Mortgaged Property, if the
Servicer is aware, after reasonable visual inspection, or is advised by the
Trustee (which shall have no obligation to so advise) or any Noteholder that
such Mortgaged Property or the related Resort is not in compliance with
applicable environmental laws or that there are circumstances present at such
Mortgaged Property or Resort relating to the use, management or disposal of any
hazardous substances, hazardous materials, hazardous wastes, or petroleum-based
materials for which investigation, testing, monitoring, containment, clean-up or
remediation could be required under any federal, state or local law or
regulation and if, as a result of any such action, the Trustee on behalf of the
Noteholders would be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or "operator" of such
Mortgaged Property or Resort within the meaning of the Comprehensive
Environmental Responsibility Cleanup and Liability Act of 1980, as amended from
time to time, or any other similar state or local environmental statute unless
otherwise agreed to by all Noteholders and indemnity or other security
satisfactory to the Trustee has been furnished to the Trustee for the
reimbursement of all expenses to which it may be put and to protect it against
all liability to which it may become subject.
(d) Notwithstanding anything to the contrary contained herein,
in the event that a default has occurred and is continuing with respect to any
Mortgage Loan and the Servicer has determined in good faith that such Mortgage
Loan will become subject to foreclosure proceedings in the event that a
deed-in-lieu is not received from the Mortgagor, the Company may, at its option,
prepay a Defaulted Mortgage Loan at a price equal to the greater of (i) fair
market value of such Defaulted Mortgage Loan as determined in good faith by the
Servicer and (ii) the applicable Seller's inventory cost for Vacation Intervals
substantially similar to the Vacation Interval securing such Defaulted Mortgage
Loan, provided that the delinquency with respect to such Mortgage Loan has
continued for at least 120 consecutive days and the Company shall purchase such
Mortgage Loans in the order in which they became Defaulted Mortgage Loans. The
amount of any such Mortgage Loan prepayment shall be deposited into the
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Collection Account, and the Trustee, shall release or cause to be released to
the Company or its designee the related Mortgage File, and shall execute and
deliver such instruments of transfer or assignment, in each case without
recourse, as shall be necessary to vest in the Company or its designee title to
such Mortgage Loan. On any date of determination, the aggregate Outstanding
Principal Balance of such prepaid Defaulted Mortgage Loans shall not exceed 15%
of the Outstanding Pool Balance as of the Cut-off-Date.
2.9 Modifications. Notwithstanding anything to the contrary in
this Servicing Agreement, none of the Servicer, the Trustee, the Back-up
Servicer or the Company shall modify, waive or amend the terms of any Mortgage
Loan unless a default on such Mortgage Loan has occurred or is imminent or
unless such modification, amendment or waiver shall not (i) alter the interest
rate on or the principal amount of such Mortgage Loan, (ii) alter the final
maturity of, or any other terms of, such Mortgage Loan which would have a
material adverse affect on Noteholders, (iii) materially impair the Mortgaged
Property underlying such Mortgage Loan or (iv) reduce materially the likelihood
that payments of interest and principal on such Mortgage Loan shall be made when
due; provided, however, the Servicer may grant an extension of the final
maturity of a Mortgage Loan if the Servicer, in its sole discretion, determines
that (a) such Mortgage Loan is in default or default on such Mortgage Loan is
likely to occur in the foreseeable future, and (b) that the value of the
Mortgage Loan will be enhanced by such extension; provided, further, that the
Servicer shall not (1) make more than one modification per calendar year with
respect to a Mortgage Loan or (2) grant an extension for more than one calendar
month with respect to a Mortgage Loan. Notwithstanding anything to the contrary
in this Servicing Agreement, the Servicer shall upon the request of any
Mortgagor, adjust the Due Date of payment on its Mortgage Loan to another date
that is not more than 30 days earlier than and not more than 30 days later than
the original Due Date; provided, however, any such modification shall be in
accordance with Section 2.1 hereof.
2.10 Assumptions. In connection with any transfer of ownership
of a Mortgaged Property by a Mortgagor to another Person, the Servicer may
consent to the assumption by such Person of the Mortgage Loan related to such
Mortgaged Property, provided, after such assumption, the related Mortgage Loan
will be in compliance with the related Seller's underwriting guidelines. In
connection with any such assumption, the rate of interest borne by, the maturity
date of, the principal amount of, the timing of payments of principal and
interest in respect of, and all other material terms of, the related Mortgage
Loan shall not be changed.
2.11 Records. The Servicer shall maintain all data (including,
without limitation, computerized tapes or disks) relating directly to or
maintained in connection with the servicing of the Mortgage Loans (which data
and records shall be clearly marked to reflect that the Mortgage Loans have been
Granted to and constitute property of the Trustee on behalf of the Noteholders)
at the address of the Servicer set forth in Section 6.4 hereof or, upon 15 days'
notice to the Trustee, at such other place where any Servicing Officer of the
Servicer is located, and shall give the Trustee or its authorized agents access
to all such information at all reasonable times, upon reasonable notice.
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2.12 Indemnification; Third Party Claim. The Servicer agrees
to indemnify and hold the Trustee, the Back-up Servicer and the Noteholders
harmless against any and all claims, losses, penalties, fines, forfeitures,
reasonable attorneys' fees and related costs, judgments, and any other costs,
fees and expenses that the Trustee, the Back-up Servicer or the Noteholders may
sustain because of the failure of the Servicer to service the Mortgage Loans or
otherwise perform its obligation and duties hereunder in compliance with the
terms of this Servicing Agreement, or because of any act or omission by the
Servicer in connection with its maintenance and custody of any funds, documents
and records under this Servicing Agreement, or its release thereof except as
contemplated by this Servicing Agreement. Except with respect to property tax
liens, the Servicer shall immediately notify the Trustee and the Back-up
Servicer if a claim is made by a third party with respect to the Mortgage Loans,
and assume, with the consent of the Trustee and the Back-up Servicer, the
defense of any such claim and pay all expenses in connection therewith,
including counsel fees, and promptly pay, discharge and satisfy any judgment or
decree which may be entered against it, the Trustee or the Back-up Servicer.
2.13 Fidelity Bond and Errors and Omissions Insurance; Hazard
Insurance. The Servicer shall maintain or cause to be maintained errors and
omissions insurance with respect to the Servicer, its employees and agents and a
fidelity bond in such form and amount as is customary for institutions acting as
custodian of funds in respect of mortgage loans or receivables on behalf of
institutional investors. Any such fidelity bond and errors and omissions
insurance shall protect and insure the Servicer and the Trustee on behalf of the
Noteholders against losses, including forgery, theft, embezzlement, fraud,
errors and omissions and negligent acts of such persons and shall be maintained
in a form and amount that would meet the requirements of prudent institutional
mortgage loan servicers. No provision of this Section 2.13 requiring such
fidelity bond and errors and omissions insurance shall diminish or relieve the
Servicer from its duties and obligations as set forth in this Servicing
Agreement. The Servicer shall be deemed to have complied with this provision if
one of its respective Affiliates has such fidelity bond and errors and omissions
policy coverage and, by the terms of such fidelity bond and errors and omissions
policy, the coverage afforded thereunder extends to the Servicer and the Trustee
on behalf of the Noteholders. The Servicer shall cause each and every
sub-servicer for it to maintain a policy of insurance covering errors and
omissions and a fidelity bond which would meet such requirements. The Trustee,
on behalf of the noteholders, shall be named an additional insured and upon a
request of the Trustee, the Servicer shall cause to be delivered to the Trustee
a certification evidencing coverage under such fidelity bond and insurance
policy. Any such fidelity bond or insurance policy shall not be canceled or
modified in a materially adverse manner without ten days' prior written notice
to the Trustee and DCR.
The Servicer shall cause each homeowners' association at each
Resort to maintain for the related Mortgaged Property on each Mortgage Loan
liability and casualty insurance and business interruption insurance covering
$100 million per occurrence, which related policy shall name the Trustee on
behalf of the noteholder as an additional insured. In cases in which Mortgaged
Property securing any Mortgage Loan is located in a federally designated flood
area, the hazard insurance to be maintained for such Mortgage Loan shall include
flood insurance.
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Insurance proceeds received with respect to the business interruption insurance
shall be used as directed by the Servicer to minimize any damage to the Trust
Estate.
2.14 Servicing Compensation and Trustee Expenses As
compensation for the performance of its obligations under this Servicing
Agreement, the Servicer shall be entitled to receive the Servicing Fee, from
amounts on deposit in the Collection Account in accordance with Section 13.1 of
the Indenture. Any fees due and owing to a Subservicer, shall be payable by the
Servicer out of the Servicing Fee. The Servicer shall pay all expenses incurred
by it in connection with its servicing activities hereunder. In addition, on
each Distribution Date, the Servicer shall reimburse the Trustee for any
expenses described in Section 7.7(b) of the Indenture, provided, the Trustee has
submitted to the Servicer a written request for such reimbursement at least five
Business Days prior to the related Distribution Date.
2.15 No Offset. Prior to the termination of this Servicing
Agreement, the obligations of the Servicer under this Servicing Agreement shall
not be subject to any defense, counterclaim or right of offset which the
Servicer has or may have against the Trustee or the Noteholders, whether in
respect of this Servicing Agreement, any Mortgage Loan or otherwise.
ARTICLE III.
ACCOUNTINGS; STATEMENTS AND REPORTS
3.1 Monthly Servicer Report. On each Servicer Report Date, the
Servicer will deliver the Servicer Report to the Trustee. The Trustee will
deliver such Servicer Report to DCR, the Company and each Noteholder. The
Servicer Report shall be completed with the information specified therein for
the related Collection Period and shall contain such other information as may be
reasonably requested by the Trustee in writing at least five Business Days prior
to such Servicer Report Date. Each such Servicer Report shall be accompanied by
an Officer's Certificate certifying the accuracy of the computations reflected
in such Servicer Report. In the event that the Trustee shall have actual
knowledge that a default, event of servicing termination or event which would,
with the passage of time, constitute a default or event of servicing termination
has occurred during the period covered by the related Servicer Report, the
Trustee shall provide DCR and the Noteholders with an Officer's Certificate
indicating any of the foregoing events known to the Trustee at such time.
3.2 Certification as to Compliance; Notice of Default. The
Servicer shall deliver to DCR, the Trustee, the Back-up Servicer and the
Noteholders, an Officers' Certificate (i) on or before the 45th day next
succeeding each March 31, June 30, September 30 and December 31 of each year and
(ii) on or before April 15 of each year commencing in 1999:
(a) to the effect that a review of the activities of the
Servicer during the preceding three-month period, or, in the case of the
Officers' Certificate delivered on or before each April 15, during the preceding
calendar year, and of its performance under this Servicing Agreement during such
period has been made under the supervision of the officers executing such
Officers' Certificate with a view to determining whether during such period the
Servicer had performed and observed all of its obligations under this Servicing
Agreement, and either (i)
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stating that based on such review no Servicer Event of Default under this
Servicing Agreement has occurred and is continuing, or (ii) if such a Servicer
Event of Default has occurred and is continuing, specifying such Servicer Event
of Default and the nature and status thereof; and
(b) describing in reasonable detail to their knowledge any
occurrence in respect of any Mortgage Loan which would be of material
significance to a Person owning such Mortgage Loan.
3.3 Annual Accountants' Reports. On or before the sixth month
anniversary of the Closing Date and on each yearly anniversary thereafter unless
more frequently required by DCR, the Servicer at its own expense shall cause a
firm of independent public accountants to furnish a certificate or statement to
the Trustee, DCR, the Back-up Servicer and the Noteholders, to the effect that
(a) such firm has read the Indenture and this Servicing Agreement, (b) has
examined, in accordance with the uniform Single Attestation Program for Mortgage
Bankers and with certain procedures specified in such certificate or opinion,
the records and calculations set forth in the Servicer Reports delivered by the
Servicer during the reporting period and certain specified documents and records
relating to the servicing of the Mortgage Loans and the reporting requirements
with respect thereto and (c) on the basis of such examination, certifies that:
(i) nothing came to their attention which caused them
to believe that the information set forth in such Servicer Reports was
not correct except for such exceptions as such firm shall believe to be
immaterial and such other exceptions as shall be set forth in such
statement; and
(ii) the servicing and reporting requirements have
been conducted in compliance with the Indenture and this Servicing
Agreement.
For purposes of this Section 3.3, the term "firm of
independent public accountants" shall refer to any of (A) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co.,
(B) Deloitte & Touche, (C) PRICEWATERHOUSECOOPERS, (D) Ernst & Young and (E)
KPMG Peat Marwick; provided, that such firm is independent with respect to the
Servicer within the meaning of the 1933 Act.
3.4 Financial and Business Information. The Servicer shall
deliver to the Company, the Trustee, DCR, the Back-up Servicer or any Noteholder
(and, upon the request of any Noteholder, to any prospective transferee of any
Notes):
(a) Quarterly Statements -- within 45 days after the end of
each of the first three quarterly fiscal periods in each fiscal year of the
Servicer:
(i) a consolidated balance sheet of the Servicer and
its consolidated subsidiaries as at the end of such quarter and as at
the end of the corresponding quarter in the most recently completed
fiscal year, and
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(ii) consolidated statements of income, retained
earnings and cash flow of the Servicer and its consolidated
subsidiaries for that quarter and for the portion of the fiscal year
ending with such quarter, and for the corresponding periods in the
prior fiscal year, accompanied by a certificate signed by a principal
financial officer of the Servicer stating that such financial
statements present fairly the financial condition of the Servicer and
its consolidated subsidiaries and have been prepared in accordance with
generally accepted accounting principles consistently applied;
(b) Annual Statements -- within 120 days after the end of each
fiscal year of the Servicer:
(i) a consolidated balance sheet of the Servicer and
its consolidated subsidiaries, at the end of that year, and
(ii) consolidated statements of income, retained
earnings and cash flow of the Servicer and its consolidated
subsidiaries for that year, setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable detail
and accompanied by an opinion of a firm of independent certified public
accountants of recognized national standing stating that such financial
statements present fairly the financial condition of the Servicer and
its consolidated subsidiaries and have been prepared in accordance with
generally accepted accounting principles consistently applied (except
for changes in application in which such accountants concur and
footnote), and that the examination of such accountants in connection
with such financial statements has been made in accordance with
generally accepted auditing standards, and accordingly included such
tests of the accounting records and such other auditing procedures as
were considered necessary in the circumstances;
(c) Accountants' Certificates -- with each set of annual
financial statements delivered pursuant to Section 3.4(b), a certificate of the
accountants who certify such financial statements, stating that they have
reviewed this Servicing Agreement insofar as it relates to accounting matters,
and whether, in making their audit, they have become aware of any Servicer Event
of Default, and, if a Servicer Event of Default exists, describing its nature;
(d) SEC and Other Reports -- promptly upon their becoming
available, one copy of each report (including the Servicer's annual report to
shareholders and reports on Form 8-K, 10-K, and 10-Q), proxy statement,
registration statement, prospectus and notice filed with or delivered to any
securities exchange, the Securities and Exchange Commission or any successor
agencies;
(e) Report on Proceedings and Servicer Event of Default -- (i)
promptly upon the Servicer's becoming aware of
any proposed or pending investigation of it by any
governmental authority or agency, or
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any court or administrative proceeding which involves or may
involve the possibility of materially and adversely affecting the properties,
business, prospects, profits or conditions (financial or otherwise) of the
Servicer and subsidiaries, as a whole,
a written notice specifying the nature of such investigation
or proceeding and what action the Servicer is taking or proposes to take with
respect thereto and evaluating its merits, or
(ii) immediately upon becoming aware of the existence
of any condition or event which constitutes a Servicer Event of
Default, a written notice describing its nature and period of existence
and what action the Servicer is taking or proposes to take with respect
thereto; and
(f) Requested Information -- with reasonable promptness, any
other data and information which may be reasonably requested from time to time
by the Trustee, any Noteholder or DCR, including without limitation any
information required to be made available at any time to any prospective
transferee of any Notes in order to satisfy the requirements of Rule 144A under
the 1933 Act.
ARTICLE IV.
THE SERVICER AND BACK-UP SERVICER
4.1 Representations, Warranties and Certain Covenants of the
Servicer. The Servicer represents and warrants as of the Closing Date and
covenants to the Trustee for the benefit of the Noteholders as follows:
(a) Due Incorporation; Valid Existence and Good Standing. The
Servicer is, and at all times during the term of this Servicing Agreement will
be, a corporation duly organized and validly existing in good standing under the
laws of the jurisdiction of its incorporation; and is, and at all times during
the term of this Servicing Agreement will be, duly qualified to do business as a
foreign corporation and in good standing under the laws of each jurisdiction
where the character of its property, the nature of its business or the
performance of its obligations under this Servicing Agreement makes such
qualification necessary except where the failure to be so qualified will not
have a material adverse effect on the business of the Servicer or its ability to
perform its obligations under this Servicing Agreement or any other documents or
transactions contemplated hereunder or the validity or enforceability of the
Mortgage Loans.
(b) Possession of Licenses, Certificates, Franchises and
Permits. The Servicer at all times during the origination or acquisition of the
Mortgage Loans held, currently holds, and at all times during the term of this
Servicing Agreement will hold, all material licenses, certificates, franchises
and permits from all governmental authorities necessary for the conduct of its
business and has received no notice of proceedings relating to the revocation of
any such license, certificate, franchise or permit, which singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
materially adversely affect (i) its business, finances or prospects or (ii) its
ability to perform its obligations under this Servicing Agreement
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or any other documents or transactions contemplated hereunder or the validity or
enforceability of the Mortgage Loans.
(c) Corporate Authority and Power. The Servicer has, and at
all times during the term of this Servicing Agreement will have, all requisite
corporate power and authority to service the Mortgage Loans, own its properties,
to conduct its business, to execute and deliver this Servicing Agreement and all
documents and transactions contemplated under this Servicing Agreement and to
perform all of its obligations under this Servicing Agreement and any other
documents or transactions contemplated hereunder.
(d) Authorization, Execution and Delivery; Valid and Binding.
This Servicing Agreement and all other documents and instruments required or
contemplated hereby to be executed and delivered by the Servicer have been duly
authorized, executed and delivered by the Servicer and, assuming the due
execution and delivery by the other party or parties hereto and thereto,
constitute legal, valid and binding agreements enforceable against the Servicer
in accordance with their respective terms subject, as to the enforcement of
remedies, to bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting the enforceability of creditors' rights generally
applicable in the event of the bankruptcy, insolvency or reorganization of the
Servicer and to general principles of equity.
(e) No Violation of Law, Rule, Regulation, etc. The execution,
delivery and performance by the Servicer of this Servicing Agreement and any
other documents and transactions in connection herewith to which the Servicer is
party do not and will not (i) violate any of the provisions of the articles of
incorporation or by-laws of the Servicer, (ii) violate any provision of any law,
governmental rule or regulation currently in effect applicable to the Servicer
or its properties or by which the Servicer or its properties may be bound or
affected, (iii) violate any judgment, decree, writ, injunction, award,
determination or order currently in effect applicable to the Servicer or its
properties or by which the Servicer or its properties are bound or affected,
(iv) conflict with, or result in a breach of, or constitute a default under, any
of the provisions of any material indenture, mortgage, deed of trust, contract
or other instrument to which the Servicer is a party or by which it is bound or
(v) result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, mortgage, deed of trust, contract
or other instrument.
(f) Governmental Consent. No consent, approval, order or
authorization by, and no filing with or notice to, any court or other
governmental authority in respect of the Servicer is required in connection with
the authorization, execution, delivery or performance by the Servicer of this
Servicing Agreement or any of the other documents or transactions contemplated
hereunder.
(g) Defaults. The Servicer is not in default under any
agreement, contract, instrument or indenture to which the Servicer is a party or
by which it or its properties is or are bound, or with respect to any order of
any court, administrative agency, arbitrator or governmental body which would
have a material adverse effect on the transactions contemplated hereunder; and
no event has occurred which with notice or lapse of time or both would
constitute
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such a material default with respect to any such agreement, contract, instrument
or indenture, or with respect to any such order of any court, administrative
agency, arbitrator or governmental body.
(h) No Adverse Change. As of the Closing Date, there has been
no change in the business, operations, financial condition, properties or assets
of the Servicer since December 31, 1997 which would have a material adverse
effect on the Servicer's ability to perform its obligations under this Servicing
Agreement or any other documents or transactions contemplated hereunder.
(i) Pending Litigation or Other Proceedings. There is no
pending or, to the best of the Servicer's knowledge, threatened action, suit,
proceeding or investigation before any court, administrative agency, arbitrator
or governmental body against or affecting the Servicer which, if decided
adversely, would materially and adversely affect (i) the condition (financial or
otherwise), business or operations of the Servicer or (ii) the ability of the
Servicer to perform its obligations under, or the validity or enforceability of,
this Servicing Agreement or any other documents or transactions contemplated
hereunder, (iii) any Mortgaged Property or title of any Mortgagor to any
Mortgaged Property or (iv) the Trustee's ability to foreclose or otherwise
enforce the liens of the Mortgage Loans.
(j) Impairment of Insurance Coverage. The Servicer has not
taken (or omitted to take), and has no notice that the related Mortgagor has
taken (or omitted to take), any action that would impair or invalidate the
coverage provided by any hazard, title or other insurance policy relating to
such Mortgage Loan or the related Mortgaged Property.
(k) Financial Information. The Servicer has previously
delivered to the initial Noteholders the audited balance sheets and statements
of income for its fiscal year ended December 31, 1997. All such financial
information is correct and complete and presents fairly in all material respects
the financial condition of the Servicer and the results of its operations as of
the dates and for the periods referred to therein.
(l) Resale Units. Subject to Section 2.8, the Servicer agrees,
to the extent that it may reasonably do so and subject to local laws and
regulations, to sell or cause to be sold any Mortgaged Property obtained by it
for any reason whatsoever, including, without limitation, from a foreclosure,
judicial sale or deed-in-lieu of foreclosure ("Resale Units"), in a manner
consistent with its sale practices with respect to timeshare estates owned for
its own account and consistent with industry standards.
(m) Custodial Arrangements. The Servicer shall hold any
Mortgage Files in the same manner as it holds similar documents for its own
account, or as servicer for others and in accordance with customary and usual
procedures employed by institutions servicing mortgage loans secured by vacation
ownership intervals, which institutions are considered prudent by the Servicer.
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(n) Collection and Servicing Practices. The collection and
servicing practices used by the Servicer with respect to each Mortgage Loan have
been in all respects legal, proper and prudent, and consistent with those
customarily employed by institutions servicing mortgage loans secured by
vacation ownership intervals, which institutions are considered prudent by the
Servicer.
(o) Year 2000. The Servicer is currently modifying its
computer systems and applications with the intention of being Year 2000
compliant by August 31, 1999.
(p) Servicer Not to Become Mortgagor. Neither the Servicer nor
an Affiliate thereof shall become a Mortgagor.
4.2 Corporate Existence; Status as Servicer; Merger.
(a) Except as otherwise permitted by Section 4.2(b), the
Servicer shall keep in full effect its existence, rights and franchises as a
corporation under the laws of the state of its incorporation and shall obtain
and preserve its qualification to do business as a foreign corporation, in each
case to the extent necessary to protect the validity and enforceability of the
Mortgage Loans and this Servicing Agreement.
(b) The Servicer shall not consolidate with or merge into any
other Person or convey, transfer or lease all or substantially all of its assets
as an entirety to any Person unless the Person formed by such consolidation or
into which the Servicer has been merged or the Person which acquires all or
substantially all the assets of the Servicer as an entirety is a corporation
organized under the laws of a state in the United States, can lawfully perform
the obligations of the Servicer hereunder and executes and delivers to the
Trustee (i) an agreement, in form and substance reasonably satisfactory to the
Trustee and the Noteholders, which contains an assumption by such successor
entity of the due and punctual performance and observance of each covenant and
condition to be performed or observed by the Servicer under this Servicing
Agreement and (ii) an Opinion of Counsel as to the enforceability of such
agreement, provided, however, that DCR confirms in writing, at the expense of
the Servicer and prior to any such action, that such action will not cause a
downgrade or withdrawal of the then-current rating of the Notes. Upon such
merger or consolidation, the Servicer shall deliver to the successor servicer
all documents, statements, records, all funds and accounts held by it under this
Servicing Agreement and shall execute and deliver such instruments and do such
other things as may be reasonably required for fully transferring its rights,
powers, duties and obligations.
4.3 Performance of Obligations. The Servicer shall not take
any action or, to the extent within the Servicer's control, permit any action to
be taken by others, which would excuse any Person from any of its covenants or
obligations under any Mortgage Note or Mortgage, or under any other instrument
relating thereto, or which would result in the amendment, hypothecation,
subordination, termination or discharge of, or impair the validity or
effectiveness of, any Mortgage Note or Mortgage or any such instrument, without
the written consent of the Trustee and the Noteholders, except as expressly
provided herein and therein.
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4.4 The Servicer's Resignation.
(a) Subject to Section 4.2(b), the Servicer shall not resign
from the duties and obligations hereby imposed on it under this Servicing
Agreement unless and until a new servicer, reasonably acceptable to the Trustee,
the Majority Holders, DCR and the Company, enters into an agreement, in form and
substance reasonably satisfactory to the Trustee, which contains an assumption
by such successor Servicer of the due and punctual performance and observance of
each covenant and condition to be performed or observed by the Servicer under
this Servicing Agreement and the Trustee has also received an Opinion of Counsel
as to the enforceability of such agreement, provided, however, that DCR confirms
in writing, at the expense of the Servicer and prior to any such transfer, that
such transfer of servicing will not cause a downgrade or withdrawal of the
then-current rating of the Notes. No such resignation by the Servicer shall
affect the obligation of the Company to cause the repurchase of any Mortgage
Loan pursuant to Section 12.6 of the Indenture. Upon the resignation or
termination of the Servicer, the Servicer shall deliver to the successor
servicer all documents, statements, records, all funds and accounts held by it
under this Servicing Agreement and shall execute and deliver such instruments
and do such other things as may be reasonably required for fully transferring
its rights, powers, duties and obligations. No successor servicer shall be
responsible for, or shall have any liability with respect to, the acts or
omissions of the Servicer or any prior servicer occurring prior to the time that
the successor servicer becomes the successor servicer hereunder.
(b) Except as provided in subsection (a) above or Section 5.1,
the duties and obligations of the Servicer under this Servicing Agreement shall
continue until this Servicing Agreement shall have been terminated as provided
herein and shall survive the exercise by the Trustee of any right or remedy
under this Servicing Agreement or the enforcement by the Trustee or any
Noteholder of any provision of the Notes or this Servicing Agreement.
4.5 Liability of the Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Servicing Agreement.
4.6 Representations and Warranties of the Back-up Servicer.
The Back-up Servicer hereby makes the following representations and warranties
on which the Company, the Servicer, the Sellers and Noteholders shall be
entitled to rely:
(a) The Back-up Servicer is a national banking association
duly organized, validly existing, and in good standing under the laws of the
United States of America.
(b) The Back-up Servicer has full power, authority and legal
right to execute, deliver, and perform this Servicing Agreement, and has taken
all necessary action to authorize the execution, delivery, and performance by it
of this Servicing Agreement.
(c) The execution, delivery and performance by the Back-up
Servicer of this Servicing Agreement (a) does not violate any provision of any
law or any order, writ, judgment, or decree of any court, arbitrator, or
governmental authority applicable to the Back-up Servicer
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or any of its assets, (b) does not violate any provision of the corporate
charter or by-laws of the Back-up Servicer, and (c) does not violate any
provision of, or constitute, with or without notice or lapse of time, a default
under, or result in the creation or imposition of any Lien on, any of its
properties pursuant to the provisions of any mortgage, indenture, contract,
agreement, or other undertaking to which the Back-up Servicer is a party, which
violation or default could reasonably be expected to materially and adversely
affect the Back-up Servicer's performance or ability to perform its duties under
this Servicing Agreement or the transactions contemplated in this Servicing
Agreement.
(d) The execution, delivery and performance by the Back-up
Servicer of this Servicing Agreement does not require the authorization,
consent, or approval of, the giving of notice to, the filing or registration
with, or the taking of any other action in respect of, any governmental
authority or agency regulating the banking and corporate trust activities of the
Back-up Servicer.
(e) This Servicing Agreement has been duly executed and
delivered by the Back-up Servicer and constitutes the legal, valid, and binding
agreement of the Back-up Servicer, enforceable in accordance with its terms.
(f) There is no pending or, to the best of the Back-up
Servicer's knowledge, threatened action, suit, proceeding or investigation
before any court, administrative agency, arbitrator or governmental body against
or affecting the Back-up Servicer which, if decided adversely, would materially
and adversely affect (i) the condition (financial or otherwise), business or
operations of the Back-up Servicer or (ii) the ability of the Back-up Servicer
to perform its obligations under, or the validity or enforceability of, this
Servicing Agreement or any other documents or transactions contemplated
hereunder, (iii) any Mortgaged Property or title of any Mortgagor to any
Mortgaged Property or (iv) the Trustee's ability to foreclose or otherwise
enforce the liens of the Mortgage Loans.
4.7 Performance of Back-up Servicer's Duties. In the event
that the Back-up Servicer shall become the Servicer hereunder, the Back-up
Servicer shall service and administer the Mortgage Loans and perform all of its
duties hereunder in accordance with customary and usual procedures employed by
institutions servicing mortgage loans secured by vacation ownership intervals,
which institutions are considered prudent by the Back-up Servicer, and in
accordance with the Back-up Servicer's own customary practices, or if a higher
standard, the highest degree of skill and attention that the Back-up Servicer
exercises with respect to comparable mortgage loans secured by vacation
ownership intervals that the Back-up Servicer services for itself.
ARTICLE V.
DEFAULT
5.1 Servicer Events of Default. If any one of the following
events ("Servicer Events of Default") shall occur and be continuing:
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(i) Any failure by the Servicer to deposit in or
credit to the Collection Account or the Lock-Box Accounts any amount
required under this Servicing Agreement to be so deposited or credited
by the Servicer and such failure continues unremedied for a period of
three Business Days;
(ii) Any failure by the Servicer to deliver to the
Trustee a Servicer Report in accordance with Section 3.1 by 4:00 p.m.,
New York City time, on the Servicer Report Date;
(iii) Any failure by the Servicer to comply with any
provision of Section 4.2;
(iv) Any failure by the Servicer to deliver to the
Trustee an accountant's report in accordance with Section 3.3 or 3.4,
which non-delivery shall continue unremedied for ten Business Days;
(v) A Trigger Event shall have occurred which has not
been cured by a Trigger Event Cure within 120 days after such Trigger
Event has occurred;
(vi) Any failure by the Servicer duly to observe or
to perform in any material respect any other covenants or agreements of
the Servicer set forth in this Servicing Agreement, which failure shall
have continued for a period of fifteen days after the earlier of (A)
written notice thereof shall have been given to the Servicer by the
Trustee or to the Servicer and the Trustee by a Noteholder or (B)
discovery of such failure by the Servicer;
(vii) Any representation, warranty or statement of
the Servicer made in this Servicing Agreement shall prove to be
incorrect in any material respect as of the time when the same shall
have been made and such incorrectness shall have a material adverse
effect on the collectibility of the Mortgage Loans or the ability of
the Servicer to perform its obligations hereunder, and, within thirty
days after the earlier of (A) written notice thereof shall have been
given to the Servicer by the Trustee or to the Servicer and the Trustee
by a Noteholder or (B) discovery of such inaccuracy by the Servicer,
the circumstance or condition in respect of which such representation,
warranty or statement was incorrect shall not have been eliminated or
otherwise cured in all material respects;
(viii) The entry of a decree or order for relief by a
court or regulatory authority having jurisdiction in respect of the
Servicer in an involuntary case under the federal bankruptcy laws, as
now or hereafter in effect, or any other present or future federal or
state bankruptcy, insolvency, rehabilitation or similar law; the
appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Servicer in respect of
any substantial part of their property, or the entering of an order for
the winding up or liquidation of the affairs of the Servicer and the
continuance of any such decree or order unstayed and in effect for a
period of sixty consecutive days, or the commencement of an involuntary
case under the federal bankruptcy laws with respect to
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the Servicer which within sixty days of the date of commencement shall
not be stayed or dismissed;
(ix) The commencement by the Servicer of a voluntary
case under the federal bankruptcy laws, as now or hereafter in effect,
or any other present or future federal or state bankruptcy, insolvency,
rehabilitation or similar law, or the consent by the Servicer to the
appointment of or the taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of
the Servicer or of any substantial part of its property, or the making
by the Servicer of an assignment for the benefit of creditors, or the
failure by the Servicer generally to pay its debts as such debts become
due or the taking of corporate action by the Servicer in furtherance of
any of the foregoing;
then, and in each and every case, so long as such Servicer Event of Default
shall not have been remedied, the Trustee may, and at the direction of the
Holders of 66 2/3% of the aggregate Outstanding Note Balance of the Notes the
Trustee shall, by written notice to the Servicer terminate all of the rights and
obligations of the Servicer under this Servicing Agreement and in and to the
Mortgage Loans and the proceeds thereof. On or after the receipt by the Servicer
of such written notice, all authority and power of the Servicer under this
Servicing Agreement, whether with respect to the Notes or the Mortgage Loans or
otherwise, shall pass to and be vested in LaSalle National Bank as Back-up
Servicer pursuant to and under this Section 5.1; and, without limitation,
LaSalle National Bank, in its capacity as Back-up Servicer, is hereby authorized
and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate, to effect
the purposes of such notice of termination. The Servicer shall cooperate with
LaSalle National Bank, in its capacity as Back-up Servicer, in effecting the
termination of the responsibilities and rights of the Servicer under this
Servicing Agreement, including the transfer to LaSalle National Bank, in its
capacity as Back-up Servicer for administration by it of all cash amounts which
at the time are or would be required to be deposited by the Servicer in the
Lock-Box Accounts and the subsequent transfer of any other such amounts
thereafter received with respect to a Mortgage Loan within one Business Day of
receipt thereof by the Servicer. In addition, upon the Servicer's receipt of
notice of termination pursuant to this Section 5.1, the Servicer shall, promptly
upon the demand, and in any event no later than five Business Days after such
demand, of LaSalle National Bank, in its capacity as Back-up Servicer, deliver
to LaSalle National Bank, in its capacity as Back-up Servicer, all data
(including, without limitation, computerized records and software) necessary for
the servicing of the Mortgage Loans. In addition to delivering such monies and
data, the Servicer shall use its best efforts to effect the orderly and
efficient transfer of the servicing of the Mortgage Loans to LaSalle National
Bank, in its capacity as Back-up Servicer, including, without limitation,
directing Mortgagors to remit all payments in respect of the Mortgage Loans to
an account or address designated by LaSalle National Bank, in its capacity as
Back-up Servicer, or such new servicer, as the case may be.
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5.2 Trustee to Act as Back-up Servicer; Appointment of
Successor; Limitations on Liability.
(a) Upon the Servicer's receipt of notice of termination
pursuant to Section 5.1 or the Servicer's resignation pursuant to Section 4.4,
the Back-up Servicer shall be the successor in all respects to the Servicer in
its capacity as servicer under this Servicing Agreement (including the right to
withdraw funds from the Lock-Box Accounts), and shall be subject to all the
responsibilities, duties and liabilities of the Servicer pursuant to this
Servicing Agreement; provided, however, that LaSalle National Bank, in its
capacity as Back-up Servicer, shall not be responsible for, and shall have no
liability with respect to, the acts or omissions of the Servicer or any prior
servicer occurring prior to the time that LaSalle National Bank becomes the
Servicer hereunder; and, provided further, that before becoming subject to all
the responsibilities, duties and liabilities of the Servicer hereunder, the
Trustee may require that satisfactory indemnity or other security be furnished
to protect it against all liability, except liability which is adjudicated to
have resulted from its negligence or willful misconduct. As compensation
therefor, the Back-up Servicer shall be entitled to such compensation, payable
out of the Collection Account, as the Servicer would have been entitled to under
this Servicing Agreement if no such notice of termination had been given.
(b) Notwithstanding subsection (a) above, LaSalle National
Bank may, if for any reason LaSalle National Bank shall be unwilling to act as
Back-up Servicer, or shall, if it shall be legally unable so to act, appoint, or
petition a court of competent jurisdiction to appoint, any established financial
institution reasonably acceptable to the Majority Holders, whose regular
business shall include the servicing of mortgage loans secured by timeshare
estates and the appointment of which will not cause a downgrade in the ratings
assigned by DCR to the Notes, as the successor to the Servicer under this
Servicing Agreement. LaSalle National Bank shall act as Back-up Servicer until a
successor is appointed in accordance herewith. In connection with such
appointment, the Trustee may make such arrangements for the compensation of such
successor, out of payments on the Mortgage Loans, as it and such successor shall
agree; provided, however, that the Servicing Fee Percent shall not be in excess
of 1% per annum unless approved in writing by the Holders of 66 2/3 percent of
the aggregate Outstanding Note Balance of the Notes, and DCR. Pending
appointment of a successor to the Servicer hereunder, LaSalle National Bank
shall act in such capacity, subject to the protections afforded LaSalle National
Bank in subsections (a) and (c) of this Section 5.2. The Trustee and such
successor shall take such action, consistent with this Servicing Agreement, as
shall be necessary to effectuate any such succession.
(c) Notwithstanding any other provision of this Servicing
Agreement, in the event that LaSalle National Bank acts as the servicer in
accordance with this Section 5.2, it shall be entitled to terminate any existing
Subservicing Agreements and perform the duties required of the Servicer by
entering into one or more Subservicing Agreements with a Subservicer selected by
it with reasonable care. The Trustee shall pay any subservicing fees to any such
Subservicer engaged by it with the Servicing Fee.
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5.3 Notification to Noteholders and DCR. Upon any termination
of, or appointment of a successor to, the Servicer pursuant to this Article 5,
the Trustee shall give prompt written notice thereof to the Noteholders at their
respective addresses appearing in the Note Register and to DCR.
5.4 No Effect on Other Parties. Upon any termination of the
rights and powers of the Servicer from time to time pursuant to Section 5.1 or
upon any appointment of a successor to the Servicer, all the rights, powers,
duties and obligations of the Trustee, in its capacity as the Trustee hereunder,
shall remain unaffected by such termination or appointment and shall remain in
full force and effect thereafter, except as otherwise expressly provided in this
Servicing Agreement.
5.5 Rights Cumulative. All rights and remedies from time to
time conferred upon or reserved to the Trustee or the Noteholders are
cumulative, and none is intended to be exclusive of another or any right or
remedy which any such Persons may have at law or in equity. No delay or omission
in insisting upon the strict observance or performance of any provision of this
Servicing Agreement, or in exercising any right or remedy, shall be construed as
a waiver or relinquishment of such provision, nor shall it impair such right or
remedy. Every right and remedy may be exercised from time to time and as often
as deemed expedient.
5.6 Directions by Noteholders and Duties of Trustee During
Servicer Event of Default. The Holders of 66 2/3 percent of the aggregate
Outstanding Note Balance of the Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee under this
Servicing Agreement.
ARTICLE VI.
MISCELLANEOUS PROVISIONS
6.1 Effectiveness and Termination of Agreement.
(a) The provisions of this Servicing Agreement shall become
effective on the Closing Date upon the issuance of the Notes in accordance with
the provisions of the Note Purchase Agreement.
(b) Absent a termination pursuant to Section 5.1, the
respective duties and obligations of the Servicer (except as hereinafter
provided), the Company and the Trustee created by this Servicing Agreement shall
terminate upon the final payment to the Noteholders of all amounts due on the
Notes and the discharge of the lien under the Indenture. Upon the termination of
this Servicing Agreement pursuant to this Section 6.1(b), the Servicer shall pay
(if to any Noteholder, by wire transfer in immediately available funds) any
moneys with respect to the Mortgage Loans held by the Servicer and to which the
Servicer is not entitled to the Company or any other Person entitled thereto.
(c) This Servicing Agreement shall not be automatically
terminated as a result of a Servicer Event of Default under the Indenture or any
action taken by the Trustee thereafter
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with respect thereto, and any liquidation or preservation of the Trust Estate by
the Trustee thereafter shall be subject to the rights of the Servicer to service
the Mortgage Loans and to collect servicing compensation as provided hereunder.
6.2 Amendments.
(a) This Servicing Agreement may be amended from time to time
by the Company, the Trustee, the Back-up Servicer and the Servicer, without the
consent of any of the Noteholders, to cure any ambiguity, to correct or
supplement any provisions herein which may be inconsistent with any other
provisions herein, or to make any other provisions with respect to matters or
questions arising under this Servicing Agreement which are not inconsistent with
the provisions of this Servicing Agreement, provided that such action shall not
adversely affect in any material respect the interests of any Noteholders, the
Back-up Servicer or the Trustee, and the Trustee shall have been provided with
an Opinion of Counsel to such effect and DCR shall have confirmed in writing
that such action shall not result in a reduction or withdrawal of the then
current rating on the Class A-1, Class A-2 and Class A-3 Notes. The Trustee
shall enter into any such amendment if it has received such Opinion of Counsel
and confirmation of DCR.
(b) This Servicing Agreement may also be amended from time to
time by the Company, the Trustee, the Servicer and the Back-up Servicer, with
the consent of the Noteholders holding more than 50% of the Outstanding Note
Balance of each class of Notes, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Servicing
Agreement or of modifying in any manner the rights of the Noteholders, provided,
however, that no such amendment shall, without the consent of Noteholders
holding 100% of the Outstanding Note Balance of each class of Notes affected
thereby, (i) reduce in any manner the amount of, or delay the timing of,
payments received on the related Mortgage Loans which are required to be
deposited in the Collection Account; (ii) alter the priorities with which any
allocation of funds shall be made under this Servicing Agreement; (iii) permit
the creation of any lien on the Trust Estate (other than the lien of the
Indenture) or any portion thereof or deprive any such Noteholder of the benefit
of this Servicing Agreement with respect to the Trust Estate or any portion
thereof; or (iv) modify this Section 6.2 or Section 2.14, 4.2, 4.3 or 4.5 and
provided further that such amendment shall not result in a reduction or
withdrawal of the then current rating of the Notes as confirmed in writing by
DCR.
(c) Promptly after the execution of any amendment, the
Servicer shall send to the Trustee, the Noteholders, the Back-up Servicer and
DCR a conformed copy of each such amendment, but the failure to do so shall not
impair or affect its validity.
(d) It shall be necessary, in any consent of Noteholders under
this Section 6.2, to approve the particular form of any proposed amendment. The
manner of obtaining such consent and of evidencing the authorization of the
execution thereof by Noteholders shall be subject to such reasonable regulations
as the Trustee may prescribe.
(e) Any amendment or modification effected contrary to the
provisions of this Section 6.2 shall be void.
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6.3. Governing Law. This Servicing Agreement 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.
6.4. Notices. All demands, notices and communications
hereunder shall be in writing and shall be delivered or mailed by first class
United States mail, postage prepaid, and addressed, in each case as follows:
The Company:
Sunterra Finance L.L.C.
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇-▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to:
▇▇▇▇ ▇▇▇▇▇▇
The Servicer:
Signature Resorts, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CFO
With a copy to:
▇▇▇▇ ▇▇▇▇▇▇, Corporate Counsel
The Sellers (except All Seasons Resorts, Inc., an Arizona
corporation and All Seasons Resorts, Inc., a Texas
corporation):
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CFO
With a copy to:
▇▇▇▇ ▇▇▇▇▇▇, Corporate Counsel
All Seasons Resorts, Inc., an Arizona corporation
All Seasons Resorts, Inc., a Texas corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
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The Trustee and Back-up Servicer:
LaSalle National Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Asset-Backed Securities
Trust Services, Signature Resorts, Inc.
1998-A
DCR:
Duff & ▇▇▇▇▇▇ Credit Rating Co.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Asset-Backed Monitoring Group
and if to any Noteholder, at its address for notices specified in the Register
for the Notes. Any of the Persons whose address is set forth above may change
the address for notices hereunder by giving notice of such change to the other
Persons. Any change of address shown on the Note Register shall, after the date
of such change, be effective to change the address for such Noteholder
hereunder. All notices and demands shall be deemed to have been given either at
the time of the delivery thereof to any officer of the Person entitled to
receive such notices and demands at the address of such Person for notices
hereunder, or on the third day after the mailing thereof to such address, as the
case may be.
6.5 Severability of Provisions. If one or more of the
provisions of this Servicing Agreement shall be for any reason whatever held
invalid, such provisions shall be deemed severable from the remaining covenants,
agreements and provisions of this Servicing Agreement and shall in no way affect
the validity or enforceability of such remaining provisions, the rights of any
parties hereto, or the rights of the Trustee or any Noteholders. To the extent
permitted by law, the parties hereto hereby waive any provision of law which
renders any provision of this Servicing Agreement prohibited or unenforceable in
any respect.
6.6 Inspection and Audit Rights. The Servicer and the Back-up
Servicer, on reasonable prior notice, shall permit any representative of the
Trustee, the Company, a Seller or any Holder of at least 10% of the Outstanding
Notes of any class, during the Servicer's normal business hours, to examine all
the books of account, records, reports and other papers of the Servicer or the
Back-up Servicer relating to the Mortgage Loans, to make copies and extracts
therefrom, to cause such books to be audited by independent certified public
accountants selected by the Trustee or the Company, as the case may be, and to
discuss its affairs, finances and accounts relating to the Mortgage Loans with
its officers, employees and independent public accountants (and by this
provision the Servicer and Back-up Servicer hereby authorizes said accountants
to discuss with such representatives such affairs, finances and accounts), all
at such reasonable times and as often as may be reasonably requested. Any
expense incident to the exercise by the Trustee, the Back-up Servicer, or the
Company of any right under this Section 6.6
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shall be borne by the Company, provided that if an audit is made during the
continuance of a Servicer Event of Default, the expense incident to such audit
shall be borne by the Servicer.
6.7 Binding Effect. All provisions of this Servicing Agreement
shall be binding upon and inure to the benefit of the respective successors and
assigns of the parties hereto, and all such provisions shall inure to the
benefit of the Noteholders.
6.8 Article Headings. The article headings herein are for
convenience of reference only, and shall not limit or otherwise affect the
meaning hereof.
6.9 Legal Holidays. In the case where the date on which any
action required to be taken, document required to be delivered or payment
required to be made is not a Business Day, such action, delivery or payment need
not be made on such date, but may be made on the next succeeding Business Day.
6.10 Counterparts. This Servicing Agreement may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
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IN WITNESS WHEREOF, the Company, the Servicer and the Trustee
have caused this Servicing Agreement to be duly executed by their respective
officers thereunto duly authorized as of the date and year first above written.
SUNTERRA FINANCE L.L.C.
By: Sunterra Mortgage, Inc., its Managing Member
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
SERVICER:
SIGNATURE RESORTS, INC. as Servicer
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
LASALLE NATIONAL BANK, as Trustee and Back-up
Servicer
By /s/
------------------------------------------------
Name:
Title:
30
EXHIBIT A
Form of Monthly Servicer Report
A-1