SALE AND SERVICING
AGREEMENT
AMONG
SILVERLEAF FINANCE IV, LLC, AS
PURCHASER,
SILVERLEAF RESORTS, INC., AS
SELLER AND SERVICER,
AND
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION, AS
BACKUP SERVICER, TRUSTEE AND ACCOUNT INTERMEDIARY
DATED AS OF
MARCH 2, 2006
TABLE OF CONTENTS
Page
Article I DEFINITIONS..........................................................1
Section 1.1 Definitions..................................................1
Section 1.2 Other Definitional Provisions................................1
Section 1.3 Calculations.................................................2
Section 1.4 Material Adverse Effect......................................2
Article II CONVEYANCE OF RECEIVABLES...........................................2
Section 2.1 Conveyance of Receivables....................................2
Section 2.2 Transfers Intended as Sale...................................5
Section 2.3 Further Encumbrance of Receivables
and Other Conveyed Property..................................5
Article III THE RECEIVABLES....................................................5
Section 3.1 Representations, Warranties and Certain
Covenants of Seller..........................................5
Section 3.2 Repurchases and Substitutions................................9
Section 3.3 Custody of Timeshare Loan Files.............................11
Section 3.4 Trustee to Obtain Fidelity Insurance........................11
Article IV ADMINISTRATION AND SERVICING OF RECEIVABLES........................11
Section 4.1 Duties of the Servicer......................................11
Section 4.2 Collection of Receivable Payments; Lockbox Agreements;
Other Duties of the Servicer................................12
Section 4.3 Realization Upon Receivables................................14
Section 4.4 [RESERVED]..................................................15
Section 4.5 Maintenance of Security Interests...........................15
Section 4.6 Additional Covenants of Servicer............................16
Section 4.7 Purchase of Receivables Upon Breach of Covenant.............17
Section 4.8 Servicing Fee...............................................17
Section 4.9 Servicer's Certificate......................................18
Section 4.10 Annual Statement as to Compliance, Notice
of Servicer Termination Event...............................18
Section 4.11 Independent Accountants' Reports............................18
Section 4.12 Independent Accountants' Review of Receivables File.........19
Section 4.13 Report on Proceedings and Servicer Termination Event........19
Section 4.14 Access to Certain Documentation and Information
Regarding Receivables.......................................19
Section 4.15 Verification of Servicer's Certificate......................19
Section 4.16 [RESERVED]..................................................21
Section 4.17 Fidelity Bond...............................................21
Section 4.18 Lien Searches; Opinions as to Transfers and
Security Interests..........................................21
Section 4.19 Subservicing Arrangements...................................22
Article V ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO THE NOTEHOLDER...............22
Section 5.1 Establishment of Pledged Accounts...........................22
Section 5.2 [RESERVED]..................................................24
Section 5.3 Certain Reimbursements to the Servicer......................24
Section 5.4 [RESERVED]..................................................24
Section 5.5 Reserve Account.............................................24
Section 5.6 Additional Deposits.........................................25
Section 5.7 Distributions...............................................25
Section 5.8 Note Distribution Account...................................26
Section 5.9 Statements to the Noteholder................................27
i
Article VI [RESERVED].........................................................28
Article VII THE PURCHASER.....................................................28
Section 7.1 Representations of Purchaser................................28
Article VIII THE SELLER.......................................................29
Section 8.1 Representations of Seller...................................29
Section 8.2 Additional Covenants of the Seller..........................32
Section 8.3 Liability of Seller; Indemnities............................34
Section 8.4 Merger or Consolidation of Seller...........................35
Section 8.5 Limitation on Liability of Seller and Others................35
Article IX THE SERVICER.......................................................35
Section 9.1 Representations of Servicer.................................35
Section 9.2 Liability of Servicer; Indemnities..........................38
Section 9.3 Merger or Consolidation of the Servicer or Backup
Servicer and Assumption of the Obligations
of the Backup Servicer......................................39
Section 9.4 [RESERVED]..................................................39
Section 9.5 [RESERVED]..................................................39
Section 9.6 Servicer and Backup Servicer Not to Resign..................40
Section 9.7 Reporting Requirements......................................40
Article X DEFAULT.............................................................40
Section 10.1 Servicer Termination Events.................................40
Section 10.2 Consequences of a Servicer Termination Event................42
Section 10.3 Appointment of Successor....................................43
Section 10.4 Notification of Termination and Appointment.................44
Section 10.5 Waiver of Past Defaults.....................................44
Section 10.6 Action Upon Certain Failures of the Servicer................44
Section 10.7 Continued Errors............................................44
Article XI MISCELLANEOUS PROVISIONS...........................................44
Section 11.1 Amendment...................................................44
Section 11.2 Protection of Title to Property.............................45
Section 11.3 Notices.....................................................46
Section 11.4 Assignment..................................................47
Section 11.5 Limitations on Rights of Others.............................47
Section 11.6 Severability................................................47
Section 11.7 Separate Counterparts.......................................47
Section 11.8 Headings....................................................47
Section 11.9 Governing Law...............................................47
Section 11.10 Assignment to Trustee. .....................................47
Section 11.11 Nonpetition Covenants.......................................47
Section 11.12 Limitation of Liability of Trustee..........................48
Section 11.13 Independence of the Servicer................................48
Section 11.14 No Joint Venture............................................48
Section 11.15 Intention of Parties Regarding Delaware
Securitization Act..........................................48
Section 11.16 Special Supplemental Agreement..............................48
Section 11.17 Limited Recourse............................................48
Section 11.18 Acknowledgement of Roles....................................49
Section 11.19 Termination.................................................49
Section 11.20 Submission to Jurisdiction..................................49
Section 11.21 Waiver of Trial by Jury.....................................49
Section 11.22 Process Agent...............................................49
ii
Section 11.23 No Set-Off..................................................50
Section 11.24 No Waiver; Cumulative Remedies..............................50
Section 11.25 Merger and Integration......................................50
iii
SCHEDULES
Schedule A - [Intentionally Omitted]
Schedule B - Location for Delivery of Timeshare Loan Files
Schedule C - Form of Trial Balance Report/Delinquency Report
EXHIBITS
Exhibit A - Form of Servicer's Certificate
Exhibit B - Eligibility Criteria
Exhibit C - Form of Assignment
Exhibit D - Form of Addition Notice
Exhibit E - ACH Form
Exhibit F - List of Silverleaf Executive Management
Exhibit G - Record Layout
Exhibit H - Servicer's Monthly Representation Certificate
Exhibit I - Escrow Agent Wiring Instructions
Exhibit J - Form of Waiver Letter
Exhibit K - Credit Policy/Collection Policy
ANNEXES
Annex A - Definitions
iv
SALE AND SERVICING AGREEMENT (as amended, supplemented or otherwise modified
from time to time, this "Agreement") dated as of March 2, 2006, among SILVERLEAF
FINANCE IV, LLC, a Delaware limited liability company (the "Purchaser"),
SILVERLEAF RESORTS, INC., a Texas corporation (in its capacities as Seller, the
"Seller" and as Servicer, the "Servicer," respectively), ▇▇▇▇▇ FARGO BANK,
NATIONAL ASSOCIATION, a national banking association (in its capacities as
Backup Servicer, the "Backup Servicer," as Trustee, the "Trustee," and as
Account Intermediary, the "Account Intermediary").
WHEREAS, the Purchaser desires to purchase, from time to time, a portfolio of
receivables arising in connection with the sales of vacation ownership interests
by Silverleaf Resorts, Inc.;
WHEREAS, the Purchaser intends to finance such purchases by issuing the Note,
secured by the Receivables and the Other Conveyed Property, pursuant to the
Indenture (as defined below);
WHEREAS, the Seller is willing to sell such Receivables and the Other Conveyed
Property to the Purchaser from time to time; and
WHEREAS, the Servicer is willing to service all such Receivables and related
Other Conveyed Property.
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
Section 1.1 Definitions. Capitalized terms used in this Agreement and not
otherwise defined in this Agreement, shall have the meanings set forth in Annex
A attached hereto.
Section 1.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any instrument governed hereby and in any
certificate or other document made or delivered pursuant hereto unless
otherwise defined therein.
(b) Accounting terms used but not defined or partly defined in this
Agreement, in any instrument governed hereby or in any certificate or
other document made or delivered pursuant hereto, to the extent not
defined, shall have the respective meanings given to them under U.S.
generally accepted accounting principles as in effect on the date of this
Agreement or any such instrument, certificate or other document, as
applicable. To the extent that the definitions of accounting terms in this
Agreement or in any such instrument, certificate or other document are
inconsistent with the meanings of such terms under U.S. generally accepted
accounting principles, the definitions contained in this Agreement or in
any such instrument, certificate or other document shall control.
(c) The words "hereof," "herein," "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.
(d) Section, Schedule and Exhibit references contained in this
Agreement are references to Sections, Schedules and Exhibits in or to this
Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation."
(e) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as the same may from
time to time be amended, modified or supplemented and includes (in the
case of agreements or instruments) references to all attachments and
instruments associated therewith; all references to a Person include its
permitted successors and assigns.
Annex-1
Section 1.3 Calculations. Other than as expressly set forth herein or in
any of the other Basic Documents, all calculations of the amount of the
Servicing Fee, Backup Servicing Fee and the Trustee Fee shall be made on the
basis of a 360-day year consisting of twelve 30-day months. All calculations of
the Commitment Fee and the Noteholder's Monthly Interest Distributable Amount
shall be made on the basis of the actual number of days in the Accrual Period or
Interest Period, as applicable, and 360 days in the calendar year. All
references to the Principal Balance of a Receivable as of any day shall refer to
the close of business on such day.
Section 1.4 Material Adverse Effect. Whenever a determination is to be
made under this Agreement whether a breach of a representation, warranty or
covenant has or could have a material adverse effect on a Receivable, Other
Conveyed Property or the interest therein of the Purchaser and the Noteholder
(or any similar or analogous determination), such determination shall be made by
the Noteholder in its sole and reasonable discretion.
ARTICLE II
----------
CONVEYANCE OF RECEIVABLES
-------------------------
Section 2.1 Conveyance of Receivables
(a) In consideration of the Purchaser's delivery to or upon the
order of the Seller on any Funding Date of the Purchase Price therefor,
the Seller does hereby sell, transfer, assign, set over and otherwise
convey to the Purchaser, without recourse (subject to the obligations set
forth herein) all right, title and interest of the Seller, whether now
existing or hereafter arising, in, to and under:
(i) the Receivables listed in the Schedule of Receivables from
time to time;
(ii) Timeshare Loans relating to the Receivables and all
monies received under the Receivables and the Timeshare Loans on and
after the related Cutoff Date and all Net Liquidation Proceeds
received with respect to the Receivables and the Timeshare Loans
after the related Cutoff Date;
(iii) with respect to any Timeshare Loan, all of the Seller's
interest in the Timeshare Property arising under or in connection
with the related Mortgage, Financing Agreement, Oak N' Spruce
Certificate and the related Timeshare Loan Documents;
(iv) all other security interests or liens and property
subject thereto from time to time purporting to secure payment of
such Timeshare Loan, together with all mortgages, assignments and
financing statements signed by an Obligor describing any collateral
securing such Timeshare Loan;
(v) all guarantees, insurance and other agreements or
arrangements of whatever character from time to time supporting or
securing payment of such Timeshare Loan and all proceeds thereof
(including, but not limited to, any insurance proceeds to the extent
they are not used to rebuild or repair a Unit);
(vi) Reserved;
(vii) the Timeshare Loan File related to each Receivable and
all other security and books, records and computer tapes relating to
the foregoing;
(viii) all amounts and property from time to time held in or
credited to the Collection Account or the Lockbox Account;
Annex-2
(ix) all property (including the right to receive future Net
Liquidation Proceeds) that secures a Receivable that has been
acquired by or on behalf of the Purchaser pursuant to a liquidation
of such Receivable; and
(x) all present and future claims, demands, causes and choses
in action in respect of any or all of the foregoing and all payments
on or under and all proceeds of every kind and nature whatsoever in
respect of any or all of the foregoing, including all proceeds of
the conversion, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit accounts,
insurance proceeds, condemnation awards, rights to payment of any
and every kind and other forms of obligations and receivables,
instruments and other property which at any time constitute all or
part of or are included in the proceeds of any of the foregoing.
(b) The Seller shall transfer to the Purchaser the Receivables and
the other property and rights related thereto described in paragraph (a)
above only upon the satisfaction of each of the conditions set forth below
on or prior to the related Funding Date. In addition to constituting
conditions precedent to any purchase hereunder and under each Assignment,
the following shall also be conditions precedent to any Advance on any
Funding Date under the terms of the Note Purchase Agreement:
(i) the Seller shall have provided the Purchaser, the Trustee
and the Noteholder with an Addition Notice substantially in the form
of Exhibit D hereto (which shall include supplements to the Schedule
of Receivables) not later than three Business Days prior to such
Funding Date and shall have provided any information reasonably
requested by any of the foregoing with respect to the Related
Receivables;
(ii) the Seller shall, to the extent required by Section 4.2
of this Agreement, have deposited in the Collection Account all
collections received after the Cutoff Date in respect of the Related
Receivables to be purchased on such Funding Date;
(iii) as of each Funding Date, (A) the Seller shall not be
insolvent and shall not become insolvent as a result of the transfer
of Related Receivables on such Funding Date, (B) the Seller shall
not intend to incur or believe that it shall incur debts that would
be beyond its ability to pay as such debts mature, (C) such transfer
shall not have been made with actual intent to hinder, delay or
defraud any Person and (D) the assets of the Seller shall not
constitute unreasonably small capital to carry out its business as
then conducted;
(iv) the Facility Termination Date shall not have occurred;
(v) the Servicer shall have established one or more Lockbox
Accounts acceptable to the Noteholder;
(vi) each of the representations and warranties made by the
Seller pursuant to Section 3.1 and the other Basic Documents with
respect to the Related Receivables to be purchased on such Funding
Date shall be true and correct as of the related Funding Date and
the Seller shall have performed all obligations to be performed by
it hereunder or in any Assignment on or prior to such Funding Date;
(vii) the Seller shall, at its own expense, on or prior to the
Funding Date, indicate in its computer files that the Related
Receivables to be purchased on such Funding Date have been sold to
the Purchaser pursuant to this Agreement or an Assignment, as
applicable;
(viii) the Seller shall have taken any action required to
maintain (i) the first priority perfected ownership interest of the
Purchaser in the Related Receivables and Other Conveyed Property and
(ii) the first priority perfected security interest of the Trustee
in the Collateral;
Annex-3
(ix) no selection procedures adverse to the interests of the
Noteholder shall have been utilized in selecting the Related
Receivables to be sold on such Funding Date;
(x) the addition of any such Related Receivables to be
purchased on such Funding Date shall not result in a material
adverse tax consequence to the Noteholder or the Purchaser;
(xi) the Seller shall have delivered to the Noteholder and the
Trustee an Officers' Certificate confirming the satisfaction of each
condition precedent specified in this paragraph (b);
(xii) no Funding Termination Event, Servicer Termination
Event, Event of Default or any event that, with the giving of notice
or the passage of time, would constitute a Funding Termination
Event, or Servicer Termination Event or Event of Default, shall have
occurred and be continuing;
(xiii) the Custodian shall have confirmed receipt of the
related Timeshare Loan File (with the exception of the original
lender's title insurance policy or master policy referencing each
Timeshare Loan and covering the Trustee for the benefit of the
Noteholder, which shall be delivered by the Escrow Agent within 60
days of the related Funding Date), for each Related Receivable
included in the Borrowing Base calculation and shall have delivered
a copy to the Noteholder, the Servicer and the Trustee of a Trust
Receipt with respect to the Timeshare Loan Files related to the
Related Receivables to be purchased on such Funding Date;
(xiv) the Seller shall have filed or caused to be filed all
necessary UCC-l financing statements (or amendments thereto)
necessary to maintain (in each case assuming for purposes of this
clause (xiv) that such perfection may be achieved by making the
appropriate filings), or taken any other steps necessary to
maintain, (1) the first, priority, perfected ownership interest of
Purchaser and (2) the first priority, perfected security interest of
the Trustee, with respect to the Related Receivables and Other
Conveyed Property and the Collateral, respectively to be transferred
on such Funding Date;
(xv) the Seller shall have executed and delivered to the
Purchaser and the Noteholder an Assignment in the form of Exhibit C;
(xvi) the Noteholder Excess Principal Event Date shall not
have occurred;
(xvii) each of the Escrow Agent and Custodian shall have
delivered its respective certifications in accordance with the
Escrow Agreement; and
(xviii) each of the conditions precedent to such Advance set
forth in the Indenture and the Note Purchase Agreement shall have
been satisfied.
Unless waived by the Noteholder in writing, the Seller covenants that in the
event any of the foregoing conditions precedent are not satisfied with respect
to any Related Receivable on the date required as specified above, the Seller
will immediately repurchase such Related Receivable from the Purchaser, at a
price equal to the Purchase Amount thereof, in the manner specified in Section
3.2 and Section 4.7. The Trustee may rely on the accuracy of the Officers'
Certificate delivered pursuant to item (xi) above without independent inquiry or
verification.
(c) Payment of Purchase Price. In consideration for the sale of the
Related Receivables and Other Conveyed Property described in Section
2.1(a) or the related Assignment, the Purchaser shall, on each Funding
Date on which Related Receivables are transferred hereunder, pay to or
upon the order of the Seller the applicable Purchase Price in the
following manner: (i) cash in an amount equal to the amount of the Advance
received by the Purchaser under the Note on such Funding Date and (ii) to
the extent the Purchase Price for the related Receivables and Other
Conveyed Property exceeds the amount of cash described in (i), such excess
shall be treated as a capital contribution by the Seller to the Purchaser.
On any Funding Date on which funds are on deposit in the Principal Funding
Account, the Purchaser may direct the Trustee to withdraw therefrom an
amount equal to the lesser of (i) the Purchase Price to be paid to the
Seller for Related Receivables and Other Conveyed Property to be conveyed
to the Purchaser and pledged to the Trustee on such Funding Date (or a
portion thereof) and (ii) the amount on deposit in the Principal Funding
Account, and, subject to the satisfaction of the conditions set forth in
Section 2.1(b) after giving effect to such withdrawal, in consideration
for the sale of the Related Receivables and Other Conveyed Property on
such Funding Date, pay such amount to the Escrow Agent pursuant to the
wiring instructions set forth on Exhibit I (which wiring instructions may
be updated from time to time by the Escrow Agent), which amount will be
disbursed by the Escrow Agent in accordance with the Escrow Agreement.
Annex-4
Section 2.2 Transfers Intended as Sale. It is the intention of the Seller
that each transfer and assignment contemplated by this Agreement and each
Assignment shall constitute a sale of the Related Receivables and Other Conveyed
Property from the Seller to the Purchaser free and clear of all liens and rights
of others and it is intended that the beneficial interest in and title to the
Related Receivables and Other Conveyed Property shall not be part of the
Seller's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy law. In the event that, notwithstanding
the intent of the Seller, the transfer and assignment contemplated hereby or by
any Assignment is held not to be a sale, this Agreement and each Assignment
shall constitute a security agreement and a grant of a security interest in the
property referred to in Section 2.1 and each Assignment to the Purchaser, which
security interest has been assigned to the Trustee, acting on behalf of the
Noteholder.
Section 2.3 Further Encumbrance of Receivables and Other Conveyed
Property.
(a) Immediately upon the conveyance to the Purchaser by the Seller
of the Related Receivables and any item of the related Other Conveyed
Property pursuant to Section 2.1 and the related Assignment, all right,
title and interest of the Seller in and to such Related Receivables and
Other Conveyed Property shall terminate, and all such right, title and
interest shall vest in the Purchaser.
(b) Immediately upon the vesting of any Related Receivables and the
related Other Conveyed Property in the Purchaser, the Purchaser shall have
the sole right to pledge or otherwise encumber such Related Receivables
and the related Other Conveyed Property. Pursuant to the Indenture, the
Purchaser shall grant a security interest in the Collateral to secure the
repayment of the Note.
(c) The Trustee shall, at such time as (i) the Facility Termination
Date has occurred, (ii) there is no Note outstanding and (iii) all sums
due to the Trustee and the Noteholder pursuant to the Basic Documents have
been paid, release any remaining portion of the Receivables and the Other
Conveyed Property to the Purchaser.
ARTICLE III
-----------
THE RECEIVABLES
---------------
Section 3.1 Representations, Warranties and Certain Covenants of Seller.
(a) The Seller makes the following representations and warranties as
to the Receivables and the Other Conveyed Property to the Purchaser and to
the Trustee for the benefit of the Noteholder on which the Purchaser
relies in acquiring the Receivables and the Other Conveyed Property and on
which the Noteholder has relied in purchasing the Note and will rely in
paying the Advance Amount to the Purchaser. Such representations and
warranties speak as of the Closing Date and as of each Funding Date;
provided that to the extent such representations and warranties relate to
the Related Receivables -------- conveyed on any Funding Date, such
representations and warranties shall speak as of the related Funding Date,
but shall survive the sale, transfer and assignment of such Related
Receivables to the Purchaser and the pledge thereof by the Purchaser to
the Trustee for the benefit of the Noteholder pursuant to the Indenture.
(i) Characteristics of Receivables. Each Receivable is related
to, and payable pursuant to, an Eligible Timeshare Loan.
Annex-5
(ii) Additional Receivables Characteristics. As of the related
Funding Date, as applicable:
(A) after the pledge of each Related Receivable pursuant
to the Indenture, the Net Spread shall not be less than 5.0%;
and
(B) after the pledge of each Related Receivable pursuant
to the Indenture, the weighted average Timeshare Loan Rate of
all the Eligible Timeshare Loans shall be no less than 15% and
the weighted average original term to maturity of all the
Eligible Timeshare Loans shall not exceed 108 months.
(iii) Schedule of Receivables. The information with respect to
the Related Receivables set forth in Schedule A to the related
Assignment is true and correct in all material respects as of the
close of business on the related Cutoff Date, and no selection
procedures adverse to the Noteholder have been utilized in selecting
the Related Receivables to be sold hereunder.
(iv) No Government Obligor. None of the Related Receivables
are due from the United States of America or any State or from any
agency, department, or instrumentality of the United States of
America or any State.
(v) Security Interest. Immediately subsequent to the sale,
assignment and transfer thereof to the Purchaser, each Related
Receivable shall be secured by a validly perfected first priority
security interest in the related Timeshare Property in favor of the
Seller as secured party which has been validly assigned to the
Purchaser, and such assigned security interest is prior to all other
liens upon and security interests in such Timeshare Property which
now exist or may hereafter arise or be created.
(vi) Servicemembers. No Related Receivable has been modified
as a result of application of the Servicemembers Civil Relief Act,
as amended.
(vii) Title. It is the intention of the Seller that each
transfer and assignment herein contemplated constitutes a sale of
the Related Receivables and the related Other Conveyed Property from
the Seller to the Purchaser and that the beneficial interest in and
title to such Related Receivables and related Other Conveyed
Property not be part of the Seller's estate in the event of the
filing of a bankruptcy petition by or against the Seller under any
bankruptcy law. No Related Receivable or related Other Conveyed
Property has been sold, transferred, assigned, or pledged by the
Seller to any Person other than the Purchaser and by the Purchaser
to any Person other than the Trustee. Immediately prior to each
transfer and assignment herein contemplated, the Seller had good and
marketable title to each Related Receivable and related Other
Conveyed Property and was the sole owner thereof, free and clear of
all liens, claims, encumbrances, security interests, and rights of
others, and, immediately upon the transfer thereof to the Purchaser
and the concurrent pledge to the Trustee under the Indenture, the
Trustee for the benefit of the Noteholder shall have a valid and
enforceable first priority security interest in the Collateral, free
and clear of all liens, encumbrances, security interests, and rights
of others, and such transfer has been perfected under the UCC and
all other applicable law.
(viii) Lawful Assignment. No Related Receivable has been
originated in, or is subject to the laws of, any jurisdiction under
which the sale, transfer, and assignment of such Related Receivable
under this Agreement or pursuant to transfers of the Note shall be
unlawful, void, or voidable. None of the Seller or any Affiliate
thereof has entered into any agreement with any account debtor that
prohibits, restricts or conditions the assignment of any portion of
the Related Receivables.
Annex-6
(ix) All Filings Made. All filings (including, without
limitation, UCC filings or other actions) necessary in any
jurisdiction to give: (a) the Purchaser a first priority perfected
ownership interest in the Receivables and the Other Conveyed
Property, including, without limitation, the proceeds of the
Receivables (to the extent that the Purchaser can obtain such first
priority perfected security interest pursuant to one or more
filings) and (b) the Trustee, for the benefit of the Noteholder, a
first priority perfected security interest in the Collateral have
been made, taken or performed.
(x) Timeshare Loan File; One Original. The Seller has
delivered to the Trustee, at the location specified in Schedule B
hereto, a complete Timeshare Loan File with respect to each Related
Receivable, and the Custodian has delivered to the Trustee, the
Servicer, the Purchaser and the Noteholder a copy of the Trust
Receipt therefor. There is only one original executed copy of each
Timeshare Loan Document.
(xi) Post-Office Box. On or prior to the next billing period
after the related Cutoff Date, the Servicer will notify each Obligor
to make payments with respect to its respective Related Receivables
after the related Cutoff Date directly to the Post-Office Box, and
will provide each Obligor with a monthly statement in order to
enable such Obligor to make payments directly to the Post-Office
Box.
(xii) No Impairment. Neither Seller nor the Purchaser has done
anything to convey any right to any Person that would result in such
Person having a right to payments due under any Related Receivables,
related Other Conveyed Property or otherwise to impair the rights of
the Purchaser, the Trustee or the Noteholder in any Related
Receivable, related Other Conveyed Property or the proceeds thereof.
(xiii) Creation of Security Interest. This Agreement creates a
valid and continuing security interest (as defined in the UCC) in
the Receivables and the Other Conveyed Property in favor of the
Purchaser, which security interest is prior to all other Liens and
is enforceable as such as against creditors of and purchasers from
the Seller.
(xiv) Perfection of Security Interest in the Receivables and
Other Conveyed Property. The Seller has caused the filing of all
appropriate financing statements in the proper filing office in the
appropriate jurisdictions under applicable law in order to perfect
the security interest in the Receivables and the Other Conveyed
Property granted to the Purchaser hereunder pursuant to Section 2.1
and the related Assignment.
(xv) No Other Security Interests. Other than the security
interest granted to the Purchaser pursuant to Section 2.1 and the
related Assignment, the Seller has not pledged, assigned, sold,
granted a security interest in, or otherwise conveyed any of the
Receivables or the Other Conveyed Property, other than such security
interests as are released at or before the conveyance thereof. The
Seller has not authorized the filing of and is not aware of any
financing statements filed against the Seller that include a
description of collateral covering any portion of the Receivables
and the Other Conveyed Property other than any financing statement
relating to the security interest granted to the Purchaser hereunder
or that has been terminated or released as to the Receivables and
the Other Conveyed Property. The Seller is not aware of any judgment
or tax lien filings against the Seller.
(xvi) Notations on Contracts; Financing Statement Disclosure.
The Timeshare Loan Files that constitute or evidence the Receivables
do not have any marks or notations indicating that they have been
pledged, assigned or otherwise conveyed to any Person other than the
Purchaser and/or the Trustee for the benefit of the Noteholder. All
financing statements filed or to be filed against the Seller in
favor of the Purchaser in connection herewith describing the
Receivables and the Other Conveyed Property contain a statement to
the following effect: "A purchase of or security interest in any
collateral described in this financing statement will violate the
rights of the secured party."
Annex-7
(xvii) Records. On or prior to each Funding Date, the Seller
will have caused its records (including electronic ledgers) relating
to each Related Receivable and Other Conveyed Property to be
conveyed by it on such Funding Date to be clearly and unambiguously
marked to reflect that such Related Receivable and Other Conveyed
Property was conveyed by it to the Purchaser.
(xviii) Computer Information. The computer diskette, computer
tape or other electronic transmission made available by the Seller
to the Purchaser on each Funding Date is, as of the related Cutoff
Date, complete and accurate and includes a description of the same
Receivables described in Schedule A to the related Assignment.
(xix) Timeshare Loan Documents. All of the documents
evidencing each of the Receivables and the Other Conveyed Property
are in a form determined to be valid, binding and enforceable in the
applicable state by the corresponding local counsel opinion issued
by (I) ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.C. dated as of March 2, 2006 pertaining
to Georgia law matters, (II) ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, LLP
dated as of March 2, 2006 pertaining to Massachusetts law matters,
(III) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP dated as of March 2, 2006
pertaining to Missouri law matters, (IV) Mayer, Brown, ▇▇▇▇ & Maw
LLP dated as of March 2, 2006 pertaining to Illinois law matters,
(V) Meadows, Owens, Collier, Reed, Cousins & Blau, L.L.P. dated as
of March 2, 2006 pertaining to Texas law matters and (VI) Holland &
Knight LLP dated as of March 2, 2006 pertaining to Florida law
matters (collectively, the "Local Counsel Opinions").
(xx) Timeshare Marketing Materials and Disclosure Statements.
The Seller has provided each of the law firms issuing the Local
Counsel Opinions all of the existing marketing materials and
disclosure statements in connection with the respective Resort.
Moreover, no other marketing materials and disclosure statements
exist except for those provided to the respective law firm issuing
the Local Counsel Opinion.
(xxi) Local Counsel Opinions. The facts regarding the Seller,
the Resorts, the Receivables, the Timeshare Loans, the Other
Conveyed Property and related matters set forth or assumed in the
Local Counsel Opinions are true and correct in all material
respects.
(xxii) Bankruptcy Opinion. The facts regarding the Seller, the
Issuer, the Resorts, the receivables, the Timeshare Loans, the Other
Conveyed Property and related matters set forth or assumed in the
opinion issued by Mayer, Brown, ▇▇▇▇ & Maw LLP dated as of March 2,
2006 pertaining to bankruptcy law matters are true and correct in
all material respects.
(xxiii) Custodial Files. The Seller shall, prior to the
Closing Date and each Funding Date, in accordance with this
Agreement and the Custodial Agreement, have delivered or caused the
delivery to the Custodian a Timeshare Loan File for each Timeshare
Loan, which Timeshare Loan File shall be complete and verified by
the Custodian in accordance with the Custodial Agreement.
(xxiv) No Conveyance. The Seller agrees not to convey and to
ensure no party under its control conveys any interest in a Resort
relating to a Receivable without obtaining the written consent of
the Noteholder prior to such conveyance if such conveyance is
reasonably likely to have a material adverse effect on the
performance or value of such Receivable or related Timeshare Loan.
Annex-8
(xxv) Escrow Documents and Oak N' Spruce Financing Documents.
Originator shall, on or prior to the ninetieth day following the
date of the Escrow Agreement and on or prior to the ninetieth day
following each Funding Date, deliver or cause the delivery to the
Custodian the following: (I) with respect to a Mortgage Loan, an
original recorded Assignment of Mortgage (which may be a part of a
blanket assignment of more than one Mortgage Loan), showing a
complete chain of title from the Seller to the Trustee on behalf of
the Noteholder signed by an Authorized Officer of the Seller and
each intervening party with evidence of proper recordation; (II)
with respect to an Oak N' Spruce Loan (pre-July 2004), an original
recorded Mortgage and Assignment of Beneficial Interest with
Property Description Addendum or Assignment of Beneficial Interest
with Property Description Addendum (which may be a part of a blanket
assignment of more than one Oak N' Spruce Loan), showing a complete
chain of title from the Seller to the Trustee on behalf of the
Noteholder signed by an Authorized Officer of the Seller and each
intervening party with evidence of proper recordation or evidence
from a third party that submitted such assignment for recording that
such assignment has been submitted for recordation; (III) with
respect to an Oak N' Spruce Loan (post-July 2004), a file stamped
Oak N' Spruce Financing Statement evidencing the security interest
of the Trustee and its assigns in the Receivables and related other
Conveyed Property in respect of such Oak N' Spruce Loan by naming
the Obligor with respect to the related Oak N' Spruce Loan as debtor
and by naming the Trustee on behalf of the Noteholder as the secured
party/assignee, which document is authorized and completed; (IV)
Title Policies (as defined in the Escrow Agreement); and (V) all
other recorded and/or filed documents provided under the Escrow
Agreement.
(xxvi) Prior Secured Parties' Documents. In accordance with
the Escrow Agreement, the Seller shall deliver or cause the delivery
of (I) the Escrow Documents for each of the respective Prior Secured
Parties to the Escrow Agent and (II) the Oak N' Spruce Financing
Documents for each of the respective Prior Secured Parties to the
Custodian.
Section 3.2 Repurchases and Substitutions.
(a) Mandatory Repurchases and Substitutions for Breach of
Representations and Warranties.
(i) The Seller, the Servicer, the Noteholder or the Trustee,
as the case may be, shall inform the other parties to this Agreement
(and the Noteholder, if it is not the notifying party) promptly, in
writing, upon the discovery of any breach of the Seller's
representations, warranties or covenants made pursuant to Section
3.1 (without regard to any limitations therein as to the Seller's
knowledge). Unless the breach shall have been cured by the last day
of the next Accrual Period following the earlier of the discovery
thereof by the Seller or receipt by the Seller of notice of such
breach, if the value of such Receivable is materially and adversely
affected by the breach the Seller shall, on or prior to such last
day of the next Accrual Period, either (i) repurchase such
Receivable and related Other Conveyed Property from the Purchaser or
its assignee at the Purchase Amount or (ii) provide one or more
Qualified Substitute Timeshare Receivables and related Other
Conveyed Property and pay the related Substitution Shortfall
Amounts, if any. In consideration of the repurchase or substitution
of any such Receivable, the Seller shall remit the Purchase Amount
or the Substitution Shortfall Amount, as applicable, in the manner
specified in Section 5.6. The sole remedy of the Purchaser, the
Trustee or the Noteholder with respect to a breach of
representations, warranties or covenants pursuant to Section 3.1
shall be to enforce the Seller's obligation to purchase or
substitute such Receivables; provided, however, that the Seller
shall indemnify the Trustee, the Backup Servicer, the Purchaser and
the Noteholder against all costs, expenses, losses, damages, claims
and liabilities, including reasonable fees and expenses of counsel,
arising out of the events or facts giving rise to such breach. Upon
receipt of the Purchase Amount or a Qualified Substitute Timeshare
Receivable and the related Substitution Shortfall Amount, as
applicable, in respect of any Defective Receivables and written
instructions from the Servicer, the Trustee shall release to the
Seller or its designee the related Timeshare Loan File and shall
execute and deliver all reasonable instruments of transfer or
assignment, without recourse, as are prepared by the Seller and
delivered to the Trustee and necessary to vest in the Seller or such
designee title to such Defective Receivables.
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(ii) Prior to the related date of substitution (the
"Substitution Date") in accordance with clause (a) above, the
Purchaser hereby directs and the Seller hereby agrees to deliver or
to cause the delivery of the Timeshare Loan Files of the related
Qualified Substitute Timeshare Receivables to the Custodian, in
accordance with the provisions of the Indenture, the Custodial
Agreement and the Escrow Agreement, as applicable. As of such
related Substitution Date, the Seller does hereby sell, transfer,
assign, set over and otherwise convey to the Issuer, without
recourse (subject to the obligation set forth herein), all right,
title and interest of the Seller, whether then existing or
thereafter arising, in, to and under (i) each Qualified Substitute
Timeshare Receivable conveyed to the Purchaser on such Substitution
Date and all amounts due thereunder after the related Cutoff Date,
(ii) the related Qualified Substitute Timeshare Loans, (iii) the
related Timeshare Loan Documents (excluding any rights as developer
or declarant under the Timeshare Declaration, the Timeshare Program
Consumer Documents or the Timeshare Program Governing Documents),
(iv) all Other Conveyed Property in respect of such Qualified
Substitute Timeshare Receivables, and (v) all income, payments,
proceeds and other benefits and rights related to any of the
foregoing. Upon such sale and/or contribution, the ownership of each
Qualified Substitute Timeshare Receivable and all collections
allocable to principal and interest thereon since the related Cutoff
Date and all other property interests or rights conveyed pursuant to
and referenced in this Section 3.2(a) shall immediately vest in the
Purchaser, its successors and assigns. The Seller shall not take any
action inconsistent with such ownership nor claim any ownership
interest in any Qualified Substitute Timeshare Receivable or related
Other Conveyed Property for any purpose whatsoever other than
consolidated financial and federal and state income tax reporting.
The Seller agrees that such Qualified Substitute Timeshare
Receivables shall be subject to the provisions of this Agreement.
(iii) The Seller shall, on each related Substitution Date,
certify in writing to the Purchaser and the Trustee that each new
Timeshare Loan meets all the criteria of the definition of
"Qualified Substitute Timeshare Loan" and that (i) the Timeshare
Loan Files for such Qualified Substitute Timeshare Loans have been
delivered to the Custodian, and (ii) the Timeshare Loan Servicing
Files for such Qualified Substitute Timeshare Loans have been
delivered to the Servicer.
(b) Mandatory Repurchases of Upgraded Timeshare Loans. With respect
to Upgraded Timeshare Loans, on any date, the Seller shall prepay such
Upgraded Timeshare Loan on behalf of the related Obligor by depositing the
related Upgrade Purchase Price in the Collection Account as set forth in
Section 5.6 hereof.
(c) Optional Purchases of Defaulted Timeshare Loans. With respect to
any Defaulted Timeshare Loans, on any date, the Seller shall have the
option, but not the obligation, to purchase the Defaulted Timeshare Loan
at the Default Purchase Price for such Defaulted Timeshare Loan; provided,
however, that the option to purchase a Defaulted Timeshare Loan is limited
on any date to the Optional Purchase Limit. If the Seller shall purchase
Defaulted Timeshare Loans as provided herein, the Seller shall deposit the
related Default Purchase Price in the Collection Account as set forth in
Section 5.6 hereof. The Seller may irrevocably waive the Seller's option
to purchase a Defaulted Timeshare Loan by delivering or causing to be
delivered to the Trustee a Waiver Letter in the form of Exhibit J attached
hereto. The Noteholder may at any time direct the Trustee, in connection
with any subsequent purchases of Defaulted Timeshare Loans by the Seller,
to require the Seller to conduct a public auction in respect of any such
Defaulted Timeshare Loan in accordance with the provisions of Section
4.3(d)-(f) below. Upon receipt of the Default Purchase Price in respect of
any Defaulted Timeshare Loan and written instructions from the Servicer,
the Trustee shall release to the Seller or its designee the related
Timeshare Loan File and shall execute and deliver all reasonable
instruments of transfer or assignment, without recourse, as are prepared
by the Seller and delivered to the Trustee and necessary to vest in the
Seller or such designee title to such Defaulted Timeshare Loan and to
release the security interest of the Trustee in such Defaulted Timeshare
Loan and all related collateral.
(d) Optional Sales of Timeshare Loans by Purchaser. In addition to
the provisions providing for repurchase, substitution, and optional
purchase contained in Sections 3.2(a)-(c) above, the Purchaser, acting
through the Servicer, shall have the right at any time to sell any
Timeshare Loans which are neither Defaulted Timeshare Loans nor relate to
Delinquent Receivables to either an unrelated third party or to the
Seller, for a cash purchase price that is no less than the Upgrade
Purchase Price; provided, however, that (x) the Purchaser may not sell any
Timeshare Loans to the Seller if the cash purchase price to be paid for
the Timeshare Loans, when added to the cash purchase price paid for all
other Timeshare Loans previously sold by the Purchaser to the Seller under
this Section 3.2(d) exceeds the lesser of 7.5% of the Maximum Invested
Amount or 10% of the average monthly Aggregate Principal Balance of all
Receivables held in the Trust Estate during the twelve month period
immediately preceding the proposed date of sale and (y) the Seller shall
Annex-10
be under no obligation to purchase any Timeshare Loans which the Purchaser
determines to sell under this Section 3.2(d). If the Purchaser sells any
Timeshare Loans as provided herein, the Purchaser shall deposit the
related purchase price in the Collection Account as set forth in Section
5.6 hereof. Notwithstanding the foregoing, the Issuer may only exercise
its right pursuant to this Section 3.2(d) so long as immediately prior to
each such sale and immediately after such sale, no Event of Default,
Servicer Termination Event or Noteholder Excess Principal Event shall have
occurred and be continuing and no Borrowing Base Deficiency shall exist.
Upon receipt of the Upgrade Purchase Price in respect of any Timeshare
Loan sold by the Purchaser, and written instructions from the Servicer,
the Trustee shall release to the purchaser the related Timeshare Loan File
and shall execute and deliver all reasonable instruments of transfer or
assignment, without recourse, as are prepared by the Servicer and
delivered to the Trustee and necessary to vest in such purchaser title to
such Timeshare Loan and to release the security interest of the Trustee in
such Timeshare Loan and all related collateral.
Section 3.3 Custody of Timeshare Loan Files.
(a) In connection with each sale, transfer and assignment of
Receivables and related Other Conveyed Property to the Purchaser pursuant
to this Agreement and each Assignment, and each pledge thereof by the
Purchaser to the Trustee pursuant to the Indenture, the Purchaser shall
deliver the related Timeshare Loan Files to the Custodian before the
Closing Date or the related Funding Date in accordance with the Custodial
Agreement.
(b) Upon payment in full of any Receivable, the Servicer will notify
the Trustee and the Custodian pursuant to a certificate of a Servicing
Officer and shall request delivery of the related Timeshare Loan File to
the Servicer in accordance with the Custodial Agreement.
Section 3.4 Trustee to Obtain Fidelity Insurance. The Trustee shall
maintain a fidelity bond in the form and amount as is customary for entities
acting as a trustee of funds and documents in respect of consumer contracts on
behalf of institutional investors.
ARTICLE IV
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ADMINISTRATION AND SERVICING OF RECEIVABLES
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Section 4.1 Duties of the Servicer. The Servicer, as agent for the
Purchaser and the Noteholder shall manage, service, administer and make
collections on the Receivables and the Other Conveyed Property in accordance
with the Servicing Standard. In performing such duties, the Servicer shall
comply with its current servicing policies and procedures, as such servicing
policies and procedures may be amended from time to time, so long as such
amendments will not materially adversely affect the interests of the Noteholder,
or otherwise with the prior written consent of the Noteholder (which consent
shall not be unreasonably withheld), and notice of such amendments is given to
the Noteholder prior to the effectiveness thereof. The Servicer's duties shall
include collection and posting of all payments, responding to inquiries of
Obligors on such Receivables, investigating delinquencies, sending payment
statements to Obligors, reporting tax information to Obligors, accounting for
collections, furnishing monthly and annual statements to the Trustee and the
Noteholder with respect to distributions. Without limiting the generality of the
foregoing, and subject to the servicing standards set forth in this Agreement
including, without limitation, the restrictions set forth in Section 4.6, the
Servicer is authorized and empowered by the Purchaser to execute and deliver, on
behalf of itself, the Purchaser or the Noteholder, any and all instruments of
satisfaction or cancellation, or partial or full release or discharge, and all
other comparable instruments, with respect to such Receivables. If the Servicer
shall commence a legal proceeding to enforce a Receivable, the Purchaser shall
thereupon be deemed to have automatically assigned, solely for the purpose of
collection, such Receivable to the Servicer. If in any enforcement suit or legal
proceeding it shall be held that the Servicer may not enforce a Receivable on
the ground that it shall not be a real party in interest or a holder entitled to
enforce such Receivable, the Purchaser shall, at the Servicer's expense and
direction, take steps to enforce such Receivable, including bringing suit in its
name or the name of the Noteholder. The Servicer shall prepare and furnish, and
the Trustee shall execute, any powers of attorney and other documents reasonably
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder.
Annex-11
Section 4.2 Collection of Receivable Payments; Lockbox Agreements; Other
Duties of the Servicer.
(a) Consistent with the Servicing Standard, the Servicer shall collect all
payments called for under the terms and provisions of the Receivables and the
related Other Conveyed Property as and when the same shall become due; provided,
however, that promptly after the Closing Date (or the related Funding Date, as
applicable) the Servicer shall notify and direct each Obligor to make all
payments with respect to the Receivables to the applicable Post-Office Box. The
Servicer shall provide each Obligor with a monthly statement in order to notify
such Obligors to make payments directly to the applicable Post-Office Box.
(b) The Servicer shall establish a Lockbox Account in the name of the
Purchaser for the benefit of the Trustee, acting on behalf of the Noteholder.
Pursuant to a Lockbox Agreement, the Trustee has authorized the Servicer to
direct dispositions of funds on deposit in the Lockbox Account to the Collection
Account (but not to any other account), and no other Person, except the Lockbox
Processor and the Trustee, shall have authority to direct disposition of funds
on deposit in the Lockbox Account. However, the Lockbox Agreement shall provide
that the Lockbox Bank will comply with instructions originated by the Trustee
relating to the disposition of the funds in the Lockbox Account without further
consent by the Seller, the Servicer or the Purchaser. The Trustee shall have no
liability or responsibility with respect to the Lockbox Processor's directions
or activities as set forth in the preceding sentence. The Lockbox Account shall
be established pursuant to and maintained in accordance with the Lockbox
Agreement and shall be a demand deposit account initially established and
maintained with JPMorgan Chase Bank, N.A., or at the request of the Noteholder
an Eligible Account satisfying clause (i) of the definition thereof; provided,
however, that the Trustee shall give the Servicer prior written notice of any
change made at the request of the Noteholder in the location of the Lockbox
Account. The Trustee shall establish and maintain each Post-Office Box at a
United States Post Office Branch in the name of the Purchaser for the benefit of
the Noteholder.
(c) Notwithstanding the Lockbox Agreement, or any of the provisions of
this Agreement relating to the Lockbox Agreement, the Servicer shall remain
obligated and liable to the Purchaser, the Trustee and the Noteholder for
servicing and administering the Receivables and the Other Conveyed Property in
accordance with the provisions of this Agreement without diminution of such
obligation or liability by virtue thereof.
(d) In the event the Seller shall for any reason no longer be acting as
the Servicer hereunder, the Backup Servicer or a successor Servicer shall
thereupon assume all of the rights and obligations of the outgoing Servicer
under the Lockbox Agreement. In such event, the Backup Servicer or a successor
Servicer shall be deemed to have assumed all of the outgoing Servicer's interest
therein and to have replaced the outgoing Servicer as a party to the Lockbox
Agreement to the same extent as if the Lockbox Agreement had been assigned to
the Backup Servicer or a successor Servicer, except that the outgoing Servicer
shall not thereby be relieved of any liability or obligations on the part of the
outgoing Servicer to the Lockbox Bank under the Lockbox Agreement. The outgoing
Servicer shall, upon request of the Trustee, but at the expense of the outgoing
Servicer, deliver to the Backup Servicer or a successor Servicer all documents
and records relating to the Lockbox Agreement and an accounting of amounts
collected and held by the Lockbox Bank and otherwise use its best efforts to
effect the orderly and efficient assignment of the Lockbox Agreement to the
Backup Servicer or a successor Servicer. In the event that the Noteholder shall
elect to change the identity of the Lockbox Bank, the Servicer, at its expense,
shall cause the Lockbox Bank to deliver, at the direction of the Noteholder, to
the Trustee or a successor Lockbox Bank, all documents and records relating to
the Receivables and all amounts held (or thereafter received) by the Lockbox
Bank (together with an accounting of such amounts) and shall otherwise use its
best efforts to effect the orderly and efficient transfer of the Lockbox
arrangements.
Annex-12
(e) On each Business Day, pursuant to the Lockbox Agreement, the Lockbox
Processor will transfer any payments from Obligors received in the Post-Office
Box to the Lockbox Account. The Servicer shall cause the Lockbox Bank to
transfer all collections in respect of the Receivables and the Other Conveyed
Property from the Lockbox Account to the Collection Account within two Business
Days after receipt thereof. In addition, the Servicer shall remit all payments
by or on behalf of the Obligors received by the Servicer with respect to the
Receivables (other than Purchased Receivables) and the Other Conveyed Property,
all Net Liquidation Proceeds, Liquidation Expenses as provided in Section 4.3
hereof, any amounts in respect of any insurance policies which are not payable
to the Obligor and any amounts remitted to the Servicer by the Hedge
Counterparty pursuant to the Hedge Agreement no later than two Business Days
following receipt directly (without deposit into any intervening account) into
the Lockbox Account or the Collection Account. The Servicer shall not commingle
its assets and funds with those on deposit in the Lockbox Account.
(f) In addition to any other customary services which the Servicer may
perform or may be required to perform hereunder, the Servicer shall perform or
cause to be performed through sub-servicers, the following servicing and
collection activities in accordance with the Servicing Standard:
(i) perform standard accounting services and general record keeping
services with respect to the Timeshare Loans;
(ii) respond to telephone or written inquiries of Obligors
concerning the Timeshare Loans;
(iii) keep Obligors informed of the proper place and method for
making payment with respect to the Timeshare Loans;
(iv) contact Obligors to effect collections and to discourage
delinquencies in the payment of amounts owed under the Timeshare Loans and
doing so by any lawful means;
(v) report tax information to Obligors and taxing authorities to the
extent required by law;
(vi) 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 Trustee for deposit into the Collection Account all
payments received by the Servicer or remitted to the Lockbox Account in
respect of the Timeshare 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 Agreement;
(vii) arranging for Liquidations of Timeshare Properties related to
Defaulted Timeshare Loans and the remarketing of such Timeshare Properties
as provided in Section 4.3 below;
(viii) use reasonable best efforts to enforce the purchase and
substitution obligations of the Seller under this Agreement;
(ix) refrain from modifying, waiving or amending the terms of
any Timeshare Loan; provided, however, the Servicer may modify,
waive or amend a Timeshare Loan for which a default on such
Timeshare Loan has occurred or is imminent and such modification,
amendment or waiver will not (i) materially alter the interest rate
on or the principal balance of such Timeshare Loan, (ii) shorten the
final maturity of, lengthen the timing of payments of either
principal or interest, or any other terms of, such Timeshare Loan in
any manner which would have a material adverse effect on the
Noteholders, (iii) adversely affect the Timeshare Property
underlying such Timeshare Loan or (iv) reduce materially the
likelihood that payments of interest and principal on such Timeshare
Loan shall be made when due; provided, further, the Servicer may
grant extensions of the final maturity of any Timeshare Loan if the
Servicer, in its good faith reasonable discretion, determines that
(A) such Timeshare Loan is in default or a default on such Timeshare
Loan is likely to occur in the foreseeable future and (B) the value
of such Timeshare Loan will be enhanced by such extension; provided,
however, that no more than two (2) such extensions may be granted
during the term of such Timeshare Loan and no more than one (1) such
extension may be granted during any twelve (12) month period; and
provided, further, the Servicer shall not be permitted to modify,
waive or amend the terms of any Timeshare Loan if the sum of the
Principal Balance of the related Receivable as of the related Cutoff
Date and the Principal Balances of all other Receivables as of their
related Cutoff Dates for which the Servicer has modified, waived or
amended the terms thereof exceeds 10% of the Aggregate Principal
Balance as of any date of determination.
Annex-13
(x) work with Obligors in connection with any transfer of
ownership of a Timeshare Property by an Obligor to another Person
(to the extent permitted), whereby the Servicer may consent to the
assumption by such Person of the Timeshare Loan related to such
Timeshare Property (to the extent permitted); provided, however, 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 Timeshare Loan shall not be changed
other than as permitted in clause (ix) above;
(xi) deliver such information and data to the Backup Servicer
as is required pursuant to this Agreement;
(xii) deliver any new or amended ACH Forms executed by an
Obligor to the Custodian to be held as part of the related Timeshare
Loan File;
(xiii) (A) to cause each Resort to be insured in the event of
fire, earthquake, or other casualty for the full replacement value
thereof and if the Resort is located in a designated flood plain, to
maintain flood insurance in an amount not less than the maximum
level available under the National Flood Insurance Act of 1968, as
amended; (B) in respect of each Resort, to maintain general
liability insurance in such amounts generally acceptable in the
industry; (C) to cause each Resort's insurance policies to remain in
full force and effect with a generally acceptable insurance carrier;
and (D) to monitor the maintenance of the insurance coverage
described in (A), (B), and (C) above with respect to each Resort and
promptly obtain notice and otherwise acquire Knowledge of any lapse,
cessation, decrease or other change in any such insurance coverage;
and
(xiv) to the extent it receives any amounts in respect of any
insurance policies which are not payable to the Obligor or any other
collections relating to the Receivables or the Other Conveyed
Property, it shall deposit such amounts to the Collection Account
within two (2) Business days of receipt thereof (unless otherwise
expressly provided herein).
Section 4.3 Realization Upon Receivables. Upon a Receivable becoming a
Defaulted Receivable, the Servicer shall, in accordance with the Servicing
Standard, promptly institute collection procedures, which may include, but are
not limited to, cancellation, forfeiture, termination or foreclosure proceedings
or obtaining a deed-in-lieu of foreclosure in respect of the related Timeshare
Property (each, a "Foreclosure Property"). Upon the Timeshare Property becoming
a Foreclosure Property, the Servicer shall promptly attempt to liquidate such
Foreclosure Property. The Servicer shall select the liquidation option
reasonably anticipated to produce the highest Net Liquidation Proceeds, giving
effect to the gross price obtainable, broker's commissions, foreclosure costs,
fees and marketing expenses and other factors. The Servicer shall be entitled to
reimbursement of Liquidation Expenses out of Liquidation Proceeds. Any
Liquidation Expenses later recovered by the Servicer shall be deposited by the
Servicer in the Collection Account in accordance with Section 4.2(e) hereof.
(a) To the extent that the Seller or an Affiliate thereof is
selected to remarket a Foreclosure Property, the Servicer shall cause the
Seller or Affiliate thereof to agree that it will remarket such
Foreclosure Property in accordance with the Servicing Standard.
(b) The Servicer (if Silverleaf or its Affiliate is acting as
Servicer) on behalf of the Purchaser and the Trustee shall take all
necessary steps to have the record title of the applicable Timeshare
Properties subject to the Defaulted Timeshare Loans relating to such
Defaulted Receivables continue to be held by the Trustee. In such event,
the Servicer shall exercise, directly or through its agents, the remedies
provided for in the Oak N' Spruce Trust Agreement, in the Mortgage Note or
in the other documents with respect to such Defaulted Timeshare Loans and
the Obligors thereunder, and the related Timeshare Property shall be
remarketed with the purpose of obtaining the maximum Net Liquidation
Proceeds in respect of such Defaulted Timeshare Loans.
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(c) The Servicer shall reserve its rights under the Oak N' Spruce
Trust Agreement and/or the applicable Mortgages to obtain, at any time,
record title and all beneficial interests in respect of the Timeshare
Properties related to Defaulted Timeshare Loans. All actions taken by the
Servicer in respect of any Defaulted Timeshare Loans shall, at all times,
be carried out in a manner such that none of the Purchaser, the Trustee or
the Noteholder shall, under applicable law, be deemed to be the developer
or declarant of any Resort.
(d) The Servicer may elect to liquidate at a public auction any
Defaulted Timeshare Loans or related Timeshare Properties foreclosed upon
or otherwise reacquired on behalf of the Trustee from the Obligors of the
Defaulted Timeshare Loans. In the event the Servicer elects to so
liquidate Defaulted Timeshare Loans or the related Timeshare Properties
securing these Defaulted Timeshare Loans, the Seller may bid on such
Defaulted Timeshare Loans or related Timeshare Properties so long as the
Seller pays an amount at least equal to the net fair market value of each
related Timeshare Property, as determined by the Seller in its
commercially reasonable judgment, which shall in no event be less than
fifteen percent (15%) of the original acquisition price paid for the
Timeshare Property by the Obligor under the Defaulted Timeshare Loan.
Publication of notice of such auction in a newspaper published daily in
Dallas, Texas shall be sufficient notice of such auction.
(e) The Servicer agrees that it shall require that any Liquidation
Proceeds be in the form of cash only.
(f) The Servicer may not sell any of the Defaulted Receivables and
the related Defaulted Timeshare Loans that are included in the Collateral
except for or as specifically permitted by this Agreement.
Section 4.4 [RESERVED]
Section 4.5 Maintenance of Security Interests.
(a) Each of the Seller, the Servicer and the Purchaser agrees that,
from time to time, it shall promptly execute and deliver all further
instruments and documents, and take all further action, that may be
necessary or appropriate, or that the Noteholder may request, in order to
perfect, protect or more fully evidence the security interest in the
Receivables and the Other Conveyed Property or to enable the Trustee to
exercise or enforce any of its rights hereunder. Without limiting the
generality of the foregoing, the Purchaser will, or will cause the
Servicer to, without the necessity of a request and upon the request of
the Trustee at the direction of the Noteholder, execute or authorize and
file or record (or cause to be executed or authorized and filed or
recorded) such Assignments of Mortgage, financing or continuation
statements, or amendments hereto or assignments thereof, and such other
instruments or notices, as may be necessary or appropriate to create and
maintain in the Trustee a first priority perfected security interest, at
all times, in the Collateral, including, without limitation, recording and
filing UCC-1 financing statements, amendments or continuation statements
prior to the effective date of any change of the name, identity or
structure or relocation of its chief executive office or any change which
could affect the perfection pursuant to any financing statement or
continuation statement or assignment previously filed or make any UCC-1 or
continuation statement previously filed pursuant to this Agreement or the
Indenture seriously misleading within the meaning of applicable provisions
of the UCC (and the Purchaser shall, or shall cause the Servicer to, give
the Trustee at least thirty (30) Business Days prior notice of the
expected occurrence of any such circumstance). The Issuer shall, or shall
cause the Servicer to, deliver promptly to the Trustee file-stamped copies
of any such filings.
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(b) (i) The Purchaser hereby grants to each of the Servicer and the
Trustee a power of attorney to execute all documents including, but not
limited to, Assignments of Mortgage, UCC-l financing statements,
amendments or continuation statements, on behalf of the Issuer as may be
necessary or desirable to effectuate the foregoing and (ii) the Servicer
hereby grants to the Trustee a power of attorney to execute all documents
on behalf of the Servicer as may be necessary or desirable to effectuate
the foregoing; provided, however, that such grant shall not create a duty
on the part of the Trustee to file, prepare, record or monitor, or any
responsibility for the contents or adequacy of, any such documents.
(c) Upon the occurrence of a Servicer Termination Event, the Trustee
and the Servicer, at the direction of the Noteholder, shall take or cause
to be taken such action as may be reasonably necessary or otherwise
desirable to perfect or re-perfect the security interests in the
Receivables and the Other Conveyed Property in the name of the Trustee on
behalf of the Noteholder. The Seller hereby agrees to pay all expenses
related to such perfection or re-perfection and to take all action
necessary therefor.
Section 4.6 Additional Covenants of Servicer.
(a) The Servicer shall not release the Timeshare Property securing
each Receivable from the security interest granted by such Receivable in
whole or in part except in the event of payment in full by the Obligor
thereunder or liquidation of the Timeshare Property, nor shall the
Servicer impair the rights of the Noteholder in such Receivables or
related Other Conveyed Property, nor shall the Servicer amend or otherwise
modify a Receivable or any of the related Other Conveyed Property, except
as permitted in accordance with Section 4.2.
(b) The Servicer shall obtain and/or maintain all necessary
licenses, approvals, authorizations, orders or other actions of any
person, corporation or other organization, or of any court, governmental
agency or body or official, required in connection with the execution,
delivery and performance of this Agreement and the other Basic Documents.
(c) The initial Servicer shall not make any material changes to its
Collection Policy unless the Noteholder expressly consents in writing
prior to such changes (which consent shall not be unreasonably withheld).
(d) The Servicer shall provide written notice to the Noteholder and
the Trustee of any Default, Event of Default or Servicer Termination Event
under this transaction or a similar event under any other warehouse
financing facility or securitization that has occurred and which Default,
Event of Default or Servicer Termination Event (or similar event) shall
not have been waived or otherwise cured within the applicable cure period.
(e) For so long as Silverleaf or any of its Affiliates controls the
Resorts, the Servicer shall use commercially reasonable efforts to
maintain or cause the Resorts to be maintained in good repair, working
order and condition (ordinary wear and tear excepted).
(f) For so long as Silverleaf or any of its Affiliates controls the
Association for a Resort, and Silverleaf or an Affiliate thereof is the
manager, the related management contract may not be amended or modified if
such amendment or modification is reasonably likely to have a material
adverse effect on the interests of the Noteholder, except with the prior
written consent of the Noteholder, which consent shall not be unreasonably
withheld or delayed.
(g) In the event any Lien (other than a Permitted Lien) attaches to
any Receivable or Other Conveyed Property or related collateral from any
Person claiming from or through Silverleaf or one of its Affiliates which
materially adversely affects the Purchaser's or the Noteholder's interest
in such Receivable or Other Conveyed Property, Silverleaf shall, within
the earlier to occur of ten (10) Business Days after such attachment or
the respective lienholders' action to foreclose on such lien, either (a)
cause such Lien to be released of record, (b) provide the Trustee with a
bond in accordance with the applicable laws of the state in which the
Timeshare Property is located, issued by a corporate surety acceptable to
the Trustee, in an amount and in form reasonably acceptable to the Trustee
or (c) provide the Trustee with such other security as the Trustee may
reasonably require.
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(h) The Servicer shall: (a) promptly notify the Trustee of (i) any
claim, action or proceeding which may be reasonably expected to have a
material adverse effect on the Receivables or any Other Conveyed Property,
or any material part thereof, and (ii) any action, suit, proceeding, order
or injunction of which the Servicer becomes aware after the date hereof
pending or threatened against or affecting the Servicer or any Affiliate
which may be reasonably expected to have a material adverse effect on the
Receivables or any Other Conveyed Property or the Servicer's ability to
service the same; (b) at the request of Trustee with respect to a claim or
action or proceeding which arises from or through the Servicer or one of
its Affiliates, appear in and defend, at Servicer's expense, any such
claim, petition or proceeding which would have a material adverse effect
on the Receivables or any Other Conveyed Property or the Servicer's
ability to service the same; and (c) comply in all respects, and shall
cause all Affiliates to comply in all respects, with the terms of any
orders imposed on such Person by any governmental authority the failure to
comply with which would have a material adverse effect on the Receivables
or any Other Conveyed Property or the Servicer's ability to service the
same.
(i) Except as contemplated by the Basic Documents, the Servicer (for
so long as Silverleaf or any Affiliate thereof is the Servicer hereunder,
otherwise Silverleaf in its individual capacity) shall not, and shall not
permit the Managing Entity to, encumber, pledge or otherwise ▇▇▇▇▇ ▇ ▇▇▇▇
or security interest in and to the Reservation System (including, without
limitation, all hardware, software and data in respect thereof) and
furthermore agrees, and shall cause the Managing Entity, to use
commercially reasonable efforts to keep the Reservation System
operational, not to dispose of the same and to allow the members of each
Association the use of, and access to, the Reservation System in
accordance with the terms of the Management Agreement.
(j) For so long as Silverleaf or any Affiliate thereof is the
Servicer, it shall comply in all material respects with the Collection
Policy in effect on the Closing Date (or, as amended from time to time
with the consent of the Noteholder) and with the terms of the Timeshare
Loans.
(k) With respect to any Receivable (including but not limited to any
Receivable which becomes a Defaulted Receivable) and its related Timeshare
Loan, the Servicer shall, in accordance with the Servicing Standard,
promptly institute collection procedures, which may include, but are not
limited to, cancellation, forfeiture, termination or foreclosure
proceedings or obtaining a deed-in-lieu of foreclosure in respect of the
related Timeshare Property, prior to the initiation of any proceedings in
respect of such Receivable and related Timeshare Loan by any other Person,
including but not limited to the Managing Entity.
Section 4.7 Purchase of Receivables Upon Breach of Covenant. Upon
discovery by any of the Servicer, the Purchaser or the Trustee of a breach of
any of the covenants of the Servicer set forth in Sections 4.2(a), 4.2(f), 4.4,
4.5 or 4.6, the party discovering such breach shall give prompt written notice
to the others and the Noteholder; provided, however, that the failure to give
any such notice shall not affect any obligation of the Servicer under this
Section 4.7. Unless the breach shall have been cured by the last day of the next
Accrual Period following such discovery, the Servicer shall, on or prior to such
last day of the next Accrual Period, purchase any Receivable materially and
adversely affected by such breach and the related Other Conveyed Property. In
consideration of the purchase of such Receivable, the Servicer shall remit the
Purchase Amount for such Receivable in the manner specified in Section 5.6. The
sole remedy of the Trustee, the Purchaser or the Noteholder with respect to a
breach of Sections 4.2(a), 4.2(f), 4.4, 4.5 or 4.6 shall be to require the
Servicer to repurchase Receivables and the related Other Conveyed Property
pursuant to this Section 4.7; provided, however, that the Servicer shall
indemnify the Trustee, the Backup Servicer, the Purchaser and the Noteholder
against all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, arising out of the events or facts
giving rise to such breach.
Section 4.8 Servicing Fee. The "Servicing Fee" for each Settlement Date
shall be equal to the product of (i) one twelfth, (ii) the Servicing Fee
Percentage and (iii) the daily average of the Net Eligible Receivable Balance
during the related Accrual Period. The Servicing Fee shall also include all late
fees, prepayment charges, and other administrative fees or similar charges
allowed by applicable law with respect to Receivables, collected (from whatever
source) on the Receivables. If the Backup Servicer becomes the successor
Servicer, it shall be entitled to receive the Servicing Fee and not the Backup
Servicing Fee.
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Section 4.9 Servicer's Certificate. No later than 12:00 noon New York City
time on each Determination Date, the Servicer shall deliver (facsimile delivery
being acceptable) to the Trustee, the Rating Agency, the Noteholder and the
Purchaser, a certificate substantially in the form of Exhibit A hereto (a
"Servicer's Certificate") containing among other things, (i) all information
necessary to enable the Trustee to make any withdrawal and deposit required by
Section 5.5 and to make the distributions required by Section 5.7, (ii) all
information necessary for the Trustee to send or make available statements to
the Noteholder pursuant to Section 5.8(b) and 5.9, (iii) a listing of all
Purchased Receivables purchased as of the related Accounting Date, identifying
the Receivables so purchased, (iv) the calculation of the Borrowing Base, and
(v) all information necessary to enable the Backup Servicer to verify the
information specified in Section 4.15(e) and to complete the accounting required
by Section 5.9. Each such Servicer's Certificate shall be accompanied by an
Officer's Certificate of the Servicer in the form of Exhibit H hereto,
certifying the accuracy of the computations reflected in such Servicer's
Certificate.
Section 4.10 Annual Statement as to Compliance, Notice of Servicer
Termination Event.
(a) The Servicer shall deliver to the Purchaser, to the Trustee for
delivery to the Noteholder, the Backup Servicer and each Rating Agency, on
or before March 31 of each year beginning March 31, 2007, an Officer's
Certificate, dated as of December 31 of the preceding year, stating that
(i) a review of the activities of the Servicer during the preceding
12-month period (or, in the case of the first such certificate, the period
from the Cutoff Date with respect to Receivables transferred to the
Purchaser on the initial Funding Date to December 31, 2006) and of its
performance under this Agreement has been made under such officer's
supervision and (ii) to the best of such officer's knowledge, based on
such review, the Servicer has fulfilled all its obligations under this
Agreement throughout such year (or, in the case of the first such
certificate, such shorter period), or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof.
(b) The Servicer shall deliver to the Trustee, the Noteholder, the
Backup Servicer and each Rating Agency, promptly after having obtained
Knowledge thereof, but in no event later than two (2) Business Days
thereafter, written notice in an Officer's Certificate of any event which
with the giving of notice or lapse of time, or both, would become a
Servicer Termination Event under Section 10.1.
Section 4.11 Independent Accountants' Reports. The Servicer shall cause a
firm of nationally recognized independent certified public accountants (the
"Independent Accountants"), who may also render other services to the Servicer
or to the Purchaser, to deliver to the Trustee, the Backup Servicer, the
Noteholder and each Rating Agency, on or before April 30 of each year beginning
April 30, 2007, a report dated as of December 31 of the preceding year in form
and substance reasonably acceptable to the Noteholder (the "Accountants'
Report") and reviewing the Servicer's activities during the preceding 12-month
period (or, in the case of the first such report, the period from the Cutoff
Date with respect to Receivables transferred to the Purchaser on the initial
Funding Date to December 31, 2006), addressed to the Board of Directors of the
Servicer, to the Trustee, the Backup Servicer and to the Noteholder, to the
effect that such firm has examined the financial statements of the Servicer and
issued its report therefor and that such examination (1) was made in accordance
with generally accepted auditing standards, and accordingly included such tests
of the accounting records and such other auditing procedures as such firm
considered necessary in the circumstances; (2) included tests relating to
timeshare loans serviced for others in accordance with the requirements of the
Uniform Single Attestation Program for Mortgage Bankers (the "Program"), to the
extent the procedures in the Program are applicable to the servicing obligations
set forth in this Agreement; (3) included an examination of the delinquency and
loss statistics relating to the Servicer's portfolio; and (4) except as
described in the report, disclosed no exceptions or errors in the records
relating to timeshare loans serviced for others that, in the firm's opinion,
paragraph four of the Program requires such firm to report. The accountant's
report shall further state that (1) such firm has examined and audited the
Servicer's servicing controls and procedures for the previous calendar year and
that such independent public accountants have examined certain documents and
records (including computer records) and servicing procedures of the Servicer
relating to the Receivables and the Other Conveyed Property, (2) they have
examined the most recent Servicer's Certificate prepared by the Servicer and
three other Servicer's Certificates chosen at random by such firm and compared
such Servicer's Certificates with the information contained in such documents
and records, (3) their examination included such tests and procedures as they
considered necessary in the circumstances, (4) their examinations and
comparisons described under clauses (1) and (2) above disclosed no exceptions
which, in their opinion, were material, relating to such Receivables and Other
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Conveyed Property or such Servicer's Certificates, or, if any such exceptions
were disclosed thereby, setting forth such exceptions which, in their opinion,
were material, (5) on the basis of such examinations and comparison, such firm
is of the opinion that the Servicer has, during the relevant period, serviced
the Receivables and Other Conveyed Property in compliance with this Agreement
and the other Basic Documents in all material respects and that such documents
and records have been maintained in accordance with this Agreement and the other
Basic Documents in all material respects, except in each case for (A) such
exceptions as such firm shall believe to be immaterial and (B) such other
exceptions as shall be set forth in such written report. In the event such firm
requires the Trustee and/or the Backup Servicer to agree to the procedures
performed by such firm, the Servicer shall direct the Trustee and/or the Backup
Servicer, as applicable, in writing to so agree; it being understood and agreed
that the Trustee and/or the Backup Servicer will deliver such letter of
agreement in conclusive reliance upon the direction of the Servicer, and neither
the Trustee nor the Backup Servicer makes any independent inquiry or
investigation as to, and shall have no obligation or liability in respect of,
the sufficiency, validity or correctness of such procedures. The Report will
also indicate that the firm is independent of the Servicer within the meaning of
the Code of Professional Ethics of the American Institute of Certified Public
Accountants.
Section 4.12 Independent Accountants' Review of Receivables File.
Commencing on January 31, 2007 and thereafter each year on or before January 31
(or upon the date of the closing of Seller's next occurring term securitization
transaction, provided that such review is not made more than 365 days after the
immediately preceding review) prior to the Final Scheduled Settlement Date, the
Seller at its own expense shall cause Independent Accountants reasonably
acceptable to the Noteholder to conduct a post-funding review of the Seller's
compliance with its stated underwriting policies and verify certain
characteristics of the Receivables and the Other Conveyed Property as of each
Funding Date. If the cost to the Seller of any such review is greater than
$30,000 (other than a review conducted in connection with a securitization
transaction, as described above), the Noteholder in its sole discretion may
elect to pay the amount in excess of $30,000 or to waive the performance of such
review. If such review is performed in connection with a securitization
transaction, the Seller shall pay the entire cost of the review, including any
amount in excess of $30,000. The Independent Accountants shall within ten
Business Days complete such physical inspection and limited review and execute
and deliver to Seller, the Servicer, the Trustee and the Noteholder a report
summarizing the findings, which report shall be delivered in any case within 365
days of the previous report delivered in accordance with this Section 4.12. If
such review reveals, in the Noteholder's reasonable opinion, an unsatisfactory
number of exceptions, the Noteholder, in its reasonable discretion, may require
a full review of a larger sample of the Receivables and the Other Conveyed
Property by the Independent Accounts at the expense of the Seller.
Section 4.13 Report on Proceedings and Servicer Termination Event. (i)
Promptly upon a Responsible Officer of the Servicer's obtaining Knowledge of any
proposed or pending investigation of it by any Governmental Authority or any
court or administrative proceeding which involves or is reasonably likely to
involve the possibility of materially and adversely affecting the properties,
business, prospects, profits or conditions (financial or otherwise) of the
Servicer and its subsidiaries, as a whole, the Servicer shall send 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 obtaining Knowledge of the existence of any
condition or event which constitutes a Servicer Termination Event, the Servicer
shall send written notice to the Purchaser, the Trustee and the Noteholder
describing its nature and period of existence and what action the Servicer is
taking or proposes to take with respect thereto.
Section 4.14 Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to representatives of the Trustee, the
Backup Servicer and the Noteholder reasonable access to the documentation
regarding the Receivables and the Other Conveyed Property. In each case, such
access shall be afforded without charge but only upon reasonable request and
during normal business hours. Nothing in this Section shall derogate from the
obligation of the Servicer to observe any applicable law prohibiting disclosure
of information regarding the Obligors, and the failure of the Servicer to
provide access as provided in this Section as a result of such obligation shall
not constitute a breach of this Section.
Section 4.15 Verification of Servicer's Certificate. (a) On Friday of each
week (or, if such day is not a Business Day, then on the next Business Day), the
Servicer shall prepare and deliver to the Backup Servicer the following:
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(i) a computer file or files stored on diskette, magnetic
tape, or provided electronically to Backup Servicer prepared in
accordance with the four-page "Record Layout" for data conversion
attached hereto as Exhibit G and made a part hereof. Such files
shall contain all information with respect to the Receivables and
the Other Conveyed Property as of the close of business on the prior
Business Day of Servicer necessary to store the appropriate data in
Backup Servicer's system from which Backup Servicer will be capable
of preparing a weekly trial balance relating to the data; and
(ii) together with the file(s) described above, an initial
trial balance showing balances of the Receivables as of the last
Business Day corresponding to the date of the aforesaid initial
file.
(b) In the event the Servicer modifies its Record Layout after the
initial conversion, Servicer shall advise Backup Servicer in writing and
agrees to pay Backup Servicer for any additional programming and other
work required as a result of such changes.
(c) The Backup Servicer shall use the aforesaid files and initial
trial balance described above to store the data thereon in its computer
system and run a weekly trial balance report and shall provide such report
to the Trustee, the Servicer and the Noteholder. The Backup Servicer shall
receive data on diskette, tape or other acceptable electronic medium on
Friday of each week (or, if such day is not a Business Day, then on the
next Business Day), perform conversion of data onto its system on a weekly
basis to produce a weekly trial balance report and a summary delinquency
report in the form attached hereto as Schedule C, and shall provide such
report to the Trustee, the Servicer and the Noteholder no later than 3
Business Days after receiving the required data from the Servicer,
provided the data described in the diskettes or tapes is in a form that
enables the Backup Servicer to do so.
(d) Concurrently with the delivery by the Servicer of the Servicer's
Certificate each month, the Servicer will deliver to the Trustee, the
Noteholder and the Backup Servicer a computer diskette (or other
electronic transmission) in a format acceptable to the Trustee, the
Noteholder and the Backup Servicer containing information with respect to
the Receivables and the Other Conveyed Property as of the close of
business on the last day of the preceding Interest Period which
information is necessary for preparation of the Servicer's Certificate.
The Backup Servicer shall use such computer diskette (or other electronic
transmission) to verify certain information specified in Section 4.15(e)
contained in the Servicer's Certificate delivered by the Servicer, and the
Backup Servicer shall notify the Servicer and the Noteholder of any
discrepancies on or before the second Business Day following the
Determination Date. In the event that the Backup Servicer reports any
discrepancies, the Servicer and the Backup Servicer shall attempt to
reconcile such discrepancies by the related Settlement Date, but in the
absence of a reconciliation, the Servicer's Certificate shall control for
the purpose of calculations and distributions with respect to the related
Settlement Date. In the event that the Backup Servicer and the Servicer
are unable to reconcile discrepancies with respect to a Servicer's
Certificate by the related Settlement Date, the Backup Servicer shall
notify the Noteholder thereof in writing and the Servicer shall cause a
firm of Independent Accountants, at the Servicer's expense, to audit the
Servicer's Certificate and, prior to the fifth day of the following
calendar month, reconcile the discrepancies. The effect, if any, of such
reconciliation shall be reflected in the Servicer's Certificate for such
next succeeding Determination Date. Other than the duties specifically set
forth in this Agreement, the Backup Servicer shall have no obligations
hereunder, including, without limitation, to supervise, verify, monitor or
administer the performance of the Servicer. The Backup Servicer shall have
no liability for any actions taken or omitted by the Servicer. The duties
and obligations of the Backup Servicer shall be determined solely by the
express provisions of this Agreement and no implied covenants or
obligations shall be read into this Agreement against the Backup Servicer.
(e) The Backup Servicer shall review each Servicer's Certificate
delivered pursuant to Section 4.15(d) and shall:
(i) confirm that such Servicer's Certificate is complete on
its face;
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(ii) load the computer diskette (which shall be in a format
acceptable to the Backup Servicer) received from the Servicer
pursuant to Section 4.15(d) hereof, confirm that such computer
diskette is in a readable form and calculate and confirm the
Aggregate Principal Balance of the Receivables for the most recent
Settlement Date and reconcile (A) the number of accounts currently
being serviced comprising the Receivables and (B) the trial balance
and summary delinquency information with the corresponding
information in the Servicer's Certificate; and
(iii) confirm that Available Funds, the Noteholder's Principal
Distributable Amount, the Noteholder's Interest Distributable
Amount, the Servicing Fee, the Backup Servicing Fee, the Trustee
Fee, Leverage Ratio, Delinquency Ratio, Serviced Receivables
Delinquency Ratio, Default Ratio, Serviced Receivables Default
Ratio, the Net Spread, the Three Month Rolling Average of
Delinquency Ratios, the Three Month Rolling Average of Serviced
Receivables Delinquency Ratios, the Three Month Rolling Average of
Default Ratios, the Three Month Rolling Average of Serviced
Receivables Default Ratios and the Three Month Rolling Average of
Net Spread in the Servicer's Certificate are accurate based solely
on the recalculation of the Servicer's Certificate.
(f) Within 90 days of the Closing Date, the Backup Servicer will
data map to its servicing system all servicing/loan file information,
including all relevant borrower contact information such as address and
phone numbers as well as loan balance and payment information, including
comment histories and collection notes. On or before the fifth calendar
day of each month, the Servicer will provide to the Backup Servicer an
electronic transmission of all servicing/loan information, including all
relevant borrower contact information such as address and phone numbers as
well as loan balance and payment information, including comment histories
and collection notes, and the Backup Servicer will review each file to
ensure that it is in readable form and verify that the data balances
conform to the trial balance reports received from the Servicer.
Additionally, the Backup Servicer shall store each such file.
Section 4.16 [RESERVED].
Section 4.17 Fidelity Bond. The Servicer shall maintain a fidelity bond in
such form and amount as is customary for entities acting as custodian of funds
and documents in respect of consumer contracts on behalf of institutional
investors; provided that such insurance shall be in a minimum amount of
$1,000,000 per policy and shall name the Trustee as an additional insured. No
provision of this Section 4.17 requiring such fidelity bond or errors and
omissions insurance shall diminish or relieve the Servicer from its duties and
obligations as set forth in this Agreement. Upon a request of the Trustee or the
Noteholder, the Servicer shall deliver to the Trustee, a certification
evidencing coverage under such fidelity bond and the errors and omissions
insurance. Any such fidelity bond or errors and omissions insurance policy shall
not be canceled or modified in a materially adverse manner without ten (10)
Business Days' prior written notice to the Trustee and the Noteholder.
Section 4.18 Lien Searches; Opinions as to Transfers and Security
Interests. The Servicer shall, as a condition precedent to the extension of the
Scheduled Maturity Date and renewal of the Indenture by the Noteholder pursuant
to Section 2.3 thereof, deliver (or cause to be delivered) to the Trustee and
the Noteholder an Opinion of Counsel, in form and substance satisfactory to the
Noteholder, with respect to (a) the "true sale" nature of the transfers of
Receivables and, to the extent applicable, related Other Conveyed Property
hereunder and under each related Assignment, (b) the "backup security interest"
with respect to the transfers of Receivables and, to the extent applicable,
related Other Conveyed Property hereunder and under each related Assignment, (c)
the validity of the security interest in connection with the pledge of
Collateral to the Trustee under the Indenture on each Funding Date and (d) the
perfection and first priority of the transfers and pledges referred to in
clauses (a)-(c) above. To the extent each such Opinion of Counsel is in any
manner reliant on UCC lien searches, each such UCC lien search shall be dated no
earlier than ten Business Days prior to the date of each such related Opinion of
Counsel, and shall be accompanied by officer's certificates from the appropriate
parties certifying that no filings subsequent to the date of such lien searches
have been made. Such Opinion of Counsel shall state, among other things, that,
in the opinion of such counsel, either (A) all financing statements and
continuation statements have been authorized and filed that are necessary to
perfect the interest of the Purchaser and the Trustee in the Receivables, and
reciting the details of such filings or referring to prior Opinions of Counsel
in which such details are given, or (B) no such action shall be necessary to
preserve and protect such interest. The Opinion of Counsel referred to in this
Section 4.18 shall specify any action necessary (as of the date of such opinion)
to be taken to preserve and protect such interest.
Annex-21
Section 4.19 Subservicing Arrangements. The Servicer may arrange for the
subservicing of all or any portion of the Receivables and the Other Conveyed
Property by a subservicer; provided, however, that such subservicing arrangement
must provide for the servicing of such Receivables and Other Conveyed Property
in a manner consistent with the servicing arrangements contemplated hereunder;
provided, further, that any such subservicing arrangement with a Person that is
not an Affiliate of Silverleaf shall require the prior written consent of the
Noteholder. Unless the context otherwise requires, references in this Agreement
to actions taken or to be taken by the Servicer in servicing the Receivables
include actions taken or to be taken by a subservicer on behalf of the Servicer.
Notwithstanding the provisions of any subservicing agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a subservicer or reference to actions taken through a subservicer
or otherwise, the Servicer shall remain obligated and liable to the Purchaser,
the Trustee, the Backup Servicer and the Noteholder for the servicing and
administration of the Receivables and the Other Conveyed Property in accordance
with the provisions of this Agreement without diminution of such obligation or
liability by virtue of such subservicing agreements or arrangements or by virtue
of indemnification from the subservicer and to the same extent and under the
same terms and conditions as if the Servicer alone were servicing and
administering the Receivables and the Other Conveyed Property. All actions of
each subservicer performed pursuant to a subservicing arrangement shall be
performed as an agent of the Servicer with the same force and effect as if
performed directly by the Servicer. The subservicer under each subservicing
arrangement shall be engaged by the Servicer upon terms consistent with the
engagement of the Servicer hereunder. Each subservicer shall be simultaneously
terminated in the event that the Servicer is terminated hereunder. The fees paid
by the Servicer to the related subservicer under each subservicing arrangement
shall not exceed the Servicing Fees paid to the Servicer hereunder.
ARTICLE V
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ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO THE NOTEHOLDER
-----------------------------------------------------
Section 5.1 Establishment of Pledged Accounts.
(a) The Trustee, on behalf of the Noteholder, shall establish and
maintain in its own name an Eligible Account (the "Collection Account"),
bearing a designation clearly indicating that the funds deposited therein
are held for the benefit of the Trustee on behalf of the Noteholder. The
Collection Account shall initially be established with the Trustee.
(b) The Trustee, on behalf of the Noteholder, shall establish and
maintain in its own name an Eligible Account (the "Note Distribution
Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Trustee on behalf of the
Noteholder. The Note Distribution Account shall initially be established
with the Trustee.
(c) The Trustee, on behalf of the Noteholder shall establish and
maintain in its own name an Eligible Account (the "Principal Funding
Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Trustee on behalf of the
Noteholder. The Principal Funding Account shall initially be established
with the Trustee.
(d) The Trustee, on behalf of the Noteholder shall establish and
maintain in its own name an Eligible Account (the "Reserve Account"),
bearing a designation clearly indicating that the funds deposited therein
are held for the benefit of the Trustee on behalf of the Noteholder. The
Reserve Account shall initially be established with the Trustee.
(e) Funds on deposit in the Collection Account, the Principal
Funding Account, the Reserve Account and the Note Distribution Account
(collectively, the "Pledged Accounts") shall be invested by the Trustee
(or any custodian with respect to funds on deposit in any such account) in
Eligible Investments selected in writing by the Servicer or, after the
resignation or termination of Silverleaf as Servicer, by the Noteholder
(pursuant to standing instructions or otherwise). All such Eligible
Investments shall be held by or on behalf of the Trustee for the benefit
of the Noteholder. Other than as permitted by the Rating Agency and the
Noteholder, funds on deposit in any Pledged Account shall be invested in
Eligible Investments that will mature so that such funds will be available
at the close of business on the Business Day immediately preceding the
following Settlement Date. Funds deposited in a Pledged Account on the day
immediately preceding a Settlement Date upon the maturity of any Eligible
Investments are not required to be invested overnight. All Eligible
Investments will be held to maturity.
Annex-22
(f) All investment earnings of moneys deposited in the Pledged
Accounts shall be deposited (or caused to be deposited) by the Trustee in
the Collection Account for distribution pursuant to Section 5.7(a), and
any loss resulting from such investments shall be charged to such account.
The Servicer shall not direct the Trustee to make any investment of any
funds held in any of the Pledged Accounts unless the security interest
granted and perfected in such account will continue to be perfected in
such investment, in either case without any further action by any Person,
and, in connection with any direction to the Trustee to make any such
investment, if requested by the Trustee, the Servicer shall deliver to the
Trustee an Opinion of Counsel, acceptable to the Trustee, to such effect.
(g) The Trustee shall not in any way be held liable by reason of any
insufficiency in any of the Pledged Accounts resulting from any loss on
any Eligible Investment included therein except for losses attributable to
the Trustee's negligence, bad faith or willful misconduct or its failure
to make payments on such Eligible Investments issued by the Trustee, in
its commercial capacity as principal obligor and not as Trustee, in
accordance with their terms.
(h) If (i) the Servicer or the Noteholder, as applicable, shall have
failed to give investment directions for any funds on deposit in the
Pledged Accounts to the Trustee by 1:00 p.m. Eastern Time (or such other
time as may be agreed by the Purchaser and Trustee) on any Business Day;
or (ii) an Event of Default shall have occurred and be continuing with
respect to the Note but the Note shall not have been declared due and
payable, or, if the Note shall have been declared due and payable
following an Event of Default, amounts collected or receivable from the
Receivables and the Other Conveyed Property are being applied as if there
had not been such a declaration; then the Trustee shall, to the fullest
extent practicable, invest and reinvest funds in the Pledged Accounts in
an Eligible Investment described in paragraph (f) of the definition
thereof.
(i) The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Pledged Accounts and in all
proceeds thereof (including all Investment Earnings on the Pledged
Accounts) and all such funds, investments, proceeds and income shall be
part of the Other Conveyed Property. Except as otherwise provided herein,
the Pledged Accounts shall be under the sole dominion and control of the
Trustee for the benefit of the Noteholder. If at any time any of the
Pledged Accounts ceases to be an Eligible Account, the Servicer with the
consent of the Noteholder shall within five Business Days establish a new
Pledged Account as an Eligible Account and shall transfer any cash and/or
any investments to such new Pledged Account. The Servicer shall promptly
notify the Rating Agency, the Trustee and the Noteholder of any change in
the location of any of the aforementioned accounts. In connection with the
foregoing, the Servicer agrees that, in the event that any of the Pledged
Accounts are not accounts with the Trustee, the Servicer shall notify the
Trustee and the Noteholder in writing promptly upon any of such Pledged
Accounts ceasing to be an Eligible Account.
(j) The parties agree that each Pledged Account is a "securities
account" within the meaning of Article 8 of the UCC and that all property
(including without limitation all uninvested funds, securities and other
investment property) at any time deposited in or carried in or credited to
the Pledged Accounts shall be treated as "financial assets" within the
meaning of Article 8 of the UCC. The Account Intermediary agrees that (i)
it is a "securities intermediary" within the meaning of Article 8 of the
UCC and will at all times act in such capacity with respect to the Pledged
Accounts and (B) the Trustee is the entitlement holder of the Pledged
Accounts. The parties agree that the Account Intermediary shall follow all
"entitlement orders" (as such term is defined in Article 8 of the UCC)
originated by the Trustee with respect to the Pledged Accounts and all
financial assets deposited or carried in or credited to any Pledged
Account. Notwithstanding anything to the contrary herein or in any other
document relating to a Pledged Account, the "securities intermediary's
jurisdiction" (within the meaning of Section 8-110 of the UCC) with
respect to each Pledged Account and any security entitlements to financial
assets credited thereto shall be the State of New York.
Annex-23
(k) With respect to the Pledged Account Property, the Trustee agrees
that:
(i) any Pledged Account Property that is held in deposit
accounts shall be held solely in an Eligible Account; and, except as
otherwise provided herein, each such Eligible Account shall be
subject to the exclusive custody and control of the Trustee and the
Trustee shall have sole signature authority with respect thereto;
(ii) any Pledged Account Property shall be delivered to the
Trustee in accordance with the definition of "Delivery"; and
(iii) the Servicer shall have the power, revocable by the
Noteholder to instruct the Trustee to make withdrawals and payments
from the Pledged Accounts for the purpose of permitting the Servicer
and the Trustee to carry out their respective duties hereunder.
Section 5.2 [RESERVED]
Section 5.3 Certain Reimbursements to the Servicer. The Servicer will be
entitled to be reimbursed from amounts on deposit in the Collection Account with
respect to an Accrual Period for amounts previously deposited in the Collection
Account but later determined by the Servicer to have resulted from mistaken
deposits or postings or checks returned for insufficient funds. The amount to be
reimbursed hereunder shall be paid to the Servicer on the related Settlement
Date pursuant to Section 5.7(a)(iv) upon certification by the Servicer of such
amounts and the provision of such information to the Trustee and the Noteholder
as may be necessary in the opinion of the Noteholder to verify the accuracy of
such certification; provided, however, that the Servicer must provide such
certification within three months of it becoming aware of such mistaken deposit,
posting or returned check. In the event that the Noteholder has not received
evidence satisfactory to it of the Servicer's entitlement to reimbursement
pursuant to this Section, the Noteholder shall give the Trustee notice to such
effect, following receipt of which the Trustee shall not make a distribution to
the Servicer in respect of such amount pursuant to Section 5.7, or if prior
thereto the Servicer has been reimbursed pursuant to Section 5.7, the Trustee
shall withhold such amounts from amounts otherwise distributable to the Servicer
on the next succeeding Settlement Date.
Section 5.4 [RESERVED]
Section 5.5 Reserve Account.
(a) The Reserve Account will be held for the benefit of the
Noteholder. On or prior to the Closing Date, the Purchaser shall deposit
or cause to be deposited into the Reserve Account an amount equal to the
Required Reserve Account Amount. On each Funding Date, the Purchaser shall
deposit a portion of the related Advance into the Reserve Account until
the amount on deposit in the Reserve Account equals the Required Reserve
Account Amount.
(b) In the event that the Servicer's Certificate with respect to any
Determination Date shall state that the Available Funds with respect to
the related Settlement Date are insufficient to make the payments required
to be made on the related Settlement Date pursuant to Sections 5.7(a)(i)
through (ix) (such deficiency being a "Deficiency Claim Amount"), then on
the Deficiency Claim Date, the Trustee shall deliver to the Noteholder and
the Servicer, by hand delivery or facsimile transmission, a written notice
(a "Deficiency Notice") specifying the Deficiency Claim Amount for such
Settlement Date. The Trustee shall withdraw an amount equal to such
Deficiency Claim Amount from the Reserve Account (to the extent of the
funds available on deposit therein) for deposit in the Collection Account
on the related Settlement Date and distribution pursuant to Sections
5.7(a)(i) through (ix), as applicable.
Annex-24
(c) Any Deficiency Notice shall be delivered by 10:00 a.m., New York
City time, on the Deficiency Claim Date. The amounts distributed to the
Trustee pursuant to a Deficiency Notice shall be deposited by the Trustee
into the Collection Account pursuant to Section 5.6.
(d) Following the Facility Termination Date, all amounts, or any
portion thereof, on deposit in the Reserve Account will be deposited into
the Collection Account for distribution pursuant to Section 5.7.
(e) On any Settlement Date prior to the Facility Termination Date on
which, after all distributions required to be made on such Settlement Date
pursuant to Section 5.7(a) have been made, the amount on deposit in the
Reserve Account exceeds the Required Reserve Account Amount, the Trustee
shall withdraw such excess (as indicated on the Servicer's Certificate)
and distribute the same to the Purchaser or its designee in accordance
with Section 5.7(a)(xiv).
Section 5.6 Additional Deposits. The Servicer or the Seller, as the case
may be, shall deposit or cause to be deposited in the Collection Account (i) the
aggregate Purchase Amount with respect to Purchased Receivables, (ii) the
Upgrade Purchase Price with respect to the prepayment of any Upgraded Timeshare
Loan, (iii) the Upgrade Purchase Price with respect to the sale of any Timeshare
Loan pursuant to Section 3.2(d) hereof, (iv) the Default Purchase Price with
respect to the optional purchase of any Defaulted Timeshare Loan, and (v) all
Substitution Shortfall Amounts with respect to substituted Receivables. All such
deposits shall be made, in immediately available funds, on the Business Day
preceding the related Determination Date. On the Deficiency Claim Date, the
Trustee shall remit to the Collection Account any amounts withdrawn from the
Reserve Account pursuant to Section 5.5.
Section 5.7 Distributions.
(a) On each Settlement Date, the Trustee (based on the information
contained in the Servicer's Certificate delivered on the related
Determination Date) shall make the following distributions in the
following order of priority from amounts on deposit in the Collection
Account:
(i) to the Noteholder, any payments from the Hedge
Counterparty to the extent they are due and payable in an amount
equal to the excess, if any, of the Noteholder's Monthly Interest
Distributable Amount over Capped Monthly Interest, in respect of the
Noteholder's Interest Distributable Amount;
(ii) to the Hedge Counterparty, from Available Funds and any
amounts deposited in the Collection Account pursuant to Section
5.5(b) and Section 5.5(d) in respect of Hedge Counterparty Scheduled
Fees;
(iii) to the Trustee, from Available Funds and any amounts
deposited in the Collection Account pursuant to Section 5.5(b) and
Section 5.5(d), the Trustee Fee, any accrued and unpaid Trustee Fees
from prior Settlement Dates and all reasonable out-of-pocket
expenses (including reasonable counsel fees and expenses) from prior
Accrual Periods; provided however, that any reasonable out-of-pocket
expenses payable to the Trustee pursuant to this clause (iii) that
are incurred and not reimbursed in connection with the Trustee's
obligations and duties under the Basic Documents shall be limited to
$10,000 per Settlement Date;
(iv) to the Servicer, from Available Funds and any amounts
deposited in the Collection Account pursuant to Section 5.5(b) and
Section 5.5(d), in respect of the Servicing Fee and all unpaid
Servicing Fees from prior Accrual Periods, all reimbursements to
which the Servicer is entitled pursuant to Section 5.3 and, if the
Servicer is a successor Servicer, to the extent not previously paid
by the predecessor Servicer pursuant to this Agreement, reasonable
transition expenses (up to a maximum of $100,000 in the aggregate
over the term of this Agreement) incurred in becoming the successor
Servicer;
Annex-25
(v) to the Backup Servicer, from Available Funds and any
amounts deposited in the Collection Account pursuant to Section
5.5(b) and Section 5.5(d), in respect of the Backup Servicing Fee
(so long as the Backup Servicer is not acting as successor
Servicer), and all reasonable out-of-pocket expenses (other than
expenses incurred in connection with transitioning the servicing to
the Backup Servicer) thereof (including reasonable counsel fees and
expenses) and all accrued and unpaid Backup Servicing Fees (so long
as the Backup Servicer is not acting as successor Servicer) from
prior Settlement Dates; provided, however, that any reasonable
out-of-pocket expenses payable to the Backup Servicer pursuant to
this clause (v) that are incurred and not reimbursed in connection
with the Backup Servicer's obligations and duties under the Basic
Documents shall be limited to a total of $10,000 per annum;
(vi) to the extent not paid by the Servicer, to the Custodian,
the Custodian Fee, plus any accrued and unpaid Custodian Fees with
respect to prior Settlement Dates; (vii) to the extent not paid by
the Servicer, to the Lockbox Bank, the Lockbox Fee, plus any accrued
and unpaid Lockbox Fees from prior Settlement Dates;
(viii) to the Note Distribution Account, from Available Funds
and any amounts deposited in the Collection Account pursuant to
Section 5.5(b) and Section 5.5(d), the remaining Noteholder's
Interest Distributable Amount after giving effect to Section
5.7(a)(i) hereof and the unused facility fee payable pursuant to
Section 3.02(b) of the Note Purchase Agreement;
(ix) to the Note Distribution Account, from Available Funds
and any amounts deposited in the Collection Account pursuant to
Section 5.5(b) and Section 5.5(d), the Noteholder's Principal
Distributable Amount for such Accrual Period;
(x) to the Trustee, for deposit in the Reserve Account, from
Available Funds, an amount equal to the excess of (A) the Required
Reserve Account Amount for such Settlement Date over (B) the amount
on deposit in the Reserve Account;
(xi) to the Note Distribution Account, from Available Funds,
to the Noteholder in respect of any amounts owed to the Noteholder
pursuant to Sections 3.03 and 3.04 of the Note Purchase Agreement;
(xii) to the Hedge Counterparty, from Available Funds and any
amounts deposited in the Collection Account pursuant to Section
5.5(d), in respect of Hedge Counterparty Termination Fees;
(xiii) to the Trustee and the Backup Servicer from Available
Funds and any amounts deposited in the Collection Account pursuant
to Section 5.5(d), in respect of reasonable out-of-pocket expenses
thereof (including reasonable counsel fees and expenses) and
reasonable out-of-pocket expenses (including reasonable counsel fees
and expenses) from prior Accrual Periods to the extent not paid
thereto pursuant to Section 5.7(a)(iii) and (v) above; and
(xiv) to the Purchaser, the remaining Available Funds, if any,
and any amounts deposited in the Collection Account pursuant to
Section 5.5(d) and any amounts released from the Reserve Account
pursuant to Section 5.5(e).
(b) In the event that the Collection Account is maintained
with an institution other than the Trustee, the Servicer shall
instruct and cause such institution to make all deposits and
distributions pursuant to Section 5.7(a) on the related Settlement
Date.
Section 5.8 Note Distribution Account.
Annex-26
(a) On each Settlement Date (based solely on the information
contained in the Servicer's Certificate), the Trustee shall distribute all
amounts on deposit in the Note Distribution Account to the Noteholder in
respect of the Note to the extent of amounts due and unpaid on the Note
for principal and interest in the following amounts and in the following
order of priority:
(i) to the Noteholder, the Noteholder's Interest Distributable
Amount; provided that if there are not sufficient funds in the Note
Distribution Account to pay the entire amount then due on the Note,
the amount in the Note Distribution Account shall be applied to the
payment of such interest pro rata among the Holders of the Note;
(ii) to the Noteholder, in reduction of the Invested Amount,
the Noteholder's Principal Distributable Amount to pay principal on
the Note until the outstanding principal amount of the Note has been
reduced to zero; provided that if there are not sufficient funds in
the Note Distribution Account to pay the entire amount then due on
the Note, the amount in the Note Distribution Account shall be
applied to the payment of such principal pro rata among the Holders
of the Note;
(iii) to the Noteholder, any other amounts due the Noteholder
pursuant to the Basic Documents.
(b) On each Settlement Date, the Trustee shall provide or make
available electronically in accordance with Section 5.9(c) (or, upon
written request, by first class mail or facsimile) to the Noteholder the
statement or statements provided to the Trustee by the Servicer pursuant
to Section 5.9 hereof on such Settlement Date; provided however, the
Trustee shall have no obligation to provide such information described in
this Section 5.8(b) until it has received the requisite information from
the Servicer.
Section 5.9 Statements to the Noteholder.
(a) On each Determination Date (in accordance with Section 4.9), the
Servicer shall provide to the Trustee, the Rating Agency and the
Noteholder as of the related Record Date a copy of the Servicer's
Certificate substantially in the form attached hereto as Exhibit A.
(b) Within 60 days after the end of each calendar year, commencing
February 28, 2007, the Servicer shall deliver to the Trustee, and the
Trustee shall, provided it has received the necessary information from the
Servicer, promptly thereafter furnish to the Noteholder (a) a report
(prepared by the Servicer) as to the aggregate of the amounts reported
pursuant to [ ] of the Servicer's Certificate for such preceding calendar
year, and (b) such information as may be reasonably requested by the
Noteholder or required by the Code and regulations thereunder, to enable
the Noteholder to prepare its Federal and State income tax returns. The
obligation of the Trustee set forth in this paragraph shall be deemed to
have been satisfied to the extent that substantially comparable
information shall be provided by the Servicer to the Noteholder pursuant
to any requirements of the Code.
(c) The Trustee may make available to the Noteholder and the Rating
Agency via the Trustee's Internet Website, all statements described herein
and, with the consent or at the direction of the Seller, such other
information regarding the Note and/or the Receivables as the Trustee may
have in its possession, but only with the use of a password provided by
the Trustee. The Trustee will make no representation or warranties as to
the accuracy or completeness of such documents and will assume no
responsibility therefore. The Trustee's Internet Website shall be
initially located at ▇▇▇.▇▇▇▇▇▇▇.▇▇▇ or at such other address as shall be
specified by the Trustee from time to time in writing to the Noteholder.
In connection with providing access to the Trustee's Internet Website, the
Trustee may require registration and the acceptance of a disclaimer. The
Trustee shall not be liable for the dissemination of information in
accordance with this Agreement.
Annex-27
ARTICLE VI
----------
[RESERVED]
----------
ARTICLE VII
-----------
THE PURCHASER
-------------
Section 7.1 Representations of Purchaser. The Purchaser makes the
following representations on which the Noteholder shall be deemed to have relied
in purchasing the Note. The representations speak as of the execution and
delivery of this Agreement, as of the Closing Date and as of each Funding Date,
and shall survive the sale of the Receivables and the Other Conveyed Property to
the Purchaser and the pledge thereof by the Purchaser to the Trustee pursuant to
the Indenture.
(a) Organization and Good Standing. The Purchaser has been duly
formed and is validly existing as a limited liability company solely under
the laws of the state of Delaware and is in good standing under the laws
of the State of Delaware, with power and authority to own its properties
and to conduct its business as such properties are currently owned and
such business is currently conducted, and had at all relevant times, and
now has, power, authority and legal right to acquire, own and pledge the
Receivables and the Other Conveyed Property pledged to the Trustee.
(b) Due Qualification. The Purchaser is duly qualified to do
business as a foreign limited liability company in good standing, and has
obtained all necessary licenses and approvals in all jurisdictions in
which the ownership or lease of property or the conduct of its business
shall require such qualifications.
(c) Power and Authority. The Purchaser has the power (corporate and
other) and authority to execute and deliver this Agreement and the other
Basic Documents to which it is a party and to carry out its terms and
their terms, respectively; the Purchaser has full power and authority to
pledge the Collateral to be pledged to the Trustee by it pursuant to the
Indenture and has duly authorized such pledge to the Trustee by all
necessary corporate action; and the execution, delivery and performance of
this Agreement and the Basic Documents to which the Purchaser is a party
have been duly authorized by the Purchaser by all necessary action.
(d) Valid Sale; Binding Obligations. This Agreement effects a valid
sale of the Receivables and the Other Conveyed Property, enforceable
against the Seller and creditors of and purchasers from the Seller, and
this Agreement and the other Basic Documents to which the Purchaser is a
party, when duly executed and delivered, shall constitute legal, valid and
binding obligations of the Purchaser enforceable in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement
of creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) No Violation. The consummation of the transactions contemplated
by this Agreement and the other Basic Documents and the fulfillment of the
terms of this Agreement and the other Basic Documents shall not conflict
with, result in any breach of any of the terms and provisions of or
constitute (with or without notice, lapse of time or both) a default under
the Limited Liability Company Agreement of the Purchaser, or any
indenture, agreement, mortgage, deed of trust or other instrument to which
the Purchaser is a party or by which it is bound, or result in the
creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement, mortgage, deed of trust or
other instrument, other than the Basic Documents, or violate any law,
order, rule or regulation applicable to the Purchaser of any court or of
any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Purchaser or any
of its properties.
Annex-28
(f) No Proceedings. There are no proceedings or investigations
pending or, to the Purchaser's knowledge, threatened against the
Purchaser, before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality having jurisdiction over
the Purchaser or its properties (A) asserting the invalidity of this
Agreement, the Note or any of the Basic Documents, (B) seeking to prevent
the issuance of the Note or the consummation of any of the transactions
contemplated by this Agreement or any of the Basic Documents, (C) seeking
any determination or ruling that might materially and adversely affect the
performance by the Purchaser of its obligations under, or the validity or
enforceability of, this Agreement or any of the Basic Documents, or (D)
relating to the Purchaser and which might adversely affect the federal or
state income, excise, franchise or similar tax attributes of the Note.
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required for the
issuance or sale of the Note or the consummation of the other transactions
contemplated by this Agreement, except such as have been duly made or
obtained or as may be required by the Basic Documents.
(h) Tax Returns. The Purchaser has filed all federal and state tax
returns which are required to be filed and paid all taxes, including any
assessments received by it, to the extent that such taxes have become due.
Any taxes, fees and other governmental charges payable by the Purchaser in
connection with consummation of the transactions contemplated by this
Agreement and the other Basic Documents to which the Purchaser is a party
and the fulfillment of the terms of this Agreement and the other Basic
Documents to which the Purchaser is a party have been paid or shall have
been paid at or prior to the Closing Date and as of each Funding Date.
(i) Chief Executive Office. The chief executive office of the
Purchaser is at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
ARTICLE VIII
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THE SELLER
----------
Section 8.1 Representations of Seller. The Seller makes the following
representations on which the Purchaser is deemed to have relied in acquiring the
Receivables and the Other Conveyed Property and on which the Noteholder is
deemed to have relied in purchasing the Note. The representations speak as of
the execution and delivery of this Agreement, as of the Closing Date and as of
each Funding Date, and shall survive the sale of the Receivables and the Other
Conveyed Property to the Purchaser and the pledge thereof by the Purchaser to
the Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation solely under the laws
of the State of Texas and is in good standing under the laws of the State
of Texas, with power and authority to own its properties and to conduct
its business as such properties are currently owned and such business is
currently conducted, and had at all relevant times, and now has, power,
authority and legal right to acquire, own and sell the Receivables and the
Other Conveyed Property transferred to the Purchaser and to perform its
other obligations under this Agreement and any other Basic Documents to
which it is a party.
(b) Due Qualification. The Seller is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the
origination, sale and servicing of the Receivables and the Other Conveyed
Property as required by this Agreement) shall require such qualifications.
(c) Power and Authority. The Seller has the power (corporate and
other) and authority to execute and deliver this Agreement and the other
Basic Documents to which it is a party and to carry out its terms and
their terms, respectively; the Seller has full power and authority to sell
and assign the Receivables and the Other Conveyed Property to be sold and
assigned to and deposited with the Purchaser by it and has duly authorized
such sale and assignment to the Purchaser by all necessary corporate
action; and the execution, delivery and performance of this Agreement and
the other Basic Documents to which the Seller is a party have been duly
authorized by the Seller by all necessary corporate action.
Annex-29
(d) Valid Sale; Binding Obligations. This Agreement effects a valid
sale, transfer and assignment of the Receivables and the Other Conveyed
Property to the Purchaser, is enforceable against the Seller and creditors
of and purchasers from the Seller; and this Agreement and the other Basic
Documents to which the Seller is a party, when duly executed and
delivered, shall constitute legal, valid and binding obligations of the
Seller enforceable in accordance with their respective terms, except as
enforceability may be limited, by bankruptcy, insolvency, reorganization
or other similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(e) No Violation. The consummation of the transactions contemplated
by this Agreement and the other Basic Documents and the fulfillment of the
terms of this Agreement and the other Basic Documents does not and will
not conflict with, result in any breach of any of the terms and provisions
of or constitute (with or without notice, lapse of time or both) a default
under the certificate of incorporation or by-laws of the Seller, or any
indenture, agreement, mortgage, deed of trust or other instrument to which
the Seller is a party or by which it is bound, or result in the creation
or imposition of any Lien upon any of its properties pursuant to the terms
of any such indenture, agreement, mortgage, deed of trust or other
instrument, other than the Basic Documents, or violate any law (including
any bulk transfer laws), judgment, decree, writ, injunction, award,
determination, order, rule or regulation applicable to the Seller of any
court or of any federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Seller or
any of its properties.
(f) No Proceedings. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller,
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Seller or its
properties (A) asserting the invalidity of this Agreement, the Note or any
of the other Basic Documents, (B) seeking to prevent the issuance of the
Note or the consummation of any of the transactions contemplated by this
Agreement or any of the other Basic Documents, (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Seller of its obligations under, or the validity or
enforceability of, this Agreement or any of the other Basic Documents, (D)
relating to the Seller and which might adversely affect the federal or
state income, excise, franchise or similar tax attributes of the Note, or
(E) that if decided adversely, would materially and adversely affect its
ability to foreclose or otherwise enforce the Liens of the Timeshare
Loans, or any Timeshare Loan or title of any Obligor to any related
Timeshare Property.
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required for the
issuance or sale of the Note or the consummation of the other transactions
contemplated by this Agreement and the other Basic Documents or the
execution and delivery thereof, except such as have been duly made or
obtained.
(h) Financial Condition. The Seller has a positive net worth and is
able to and does pay its liabilities as they mature. The Seller is not in
default under any obligation to pay money to any Person except for matters
being disputed in good faith which do not involve an obligation of the
Seller on a promissory note. The Seller will not use the proceeds from the
transactions contemplated by the Basic Documents to give any preference to
any creditor or class of creditors, and this transaction will not render
the Seller insolvent and will not leave the Seller with remaining assets
which are unreasonably small compared to its ongoing operations.
(i) Fraudulent Conveyance. The Seller is not selling the Receivables
and the Other Conveyed Property to the Purchaser with any intent to
hinder, delay or defraud any of its creditors; the Seller will not be
rendered insolvent as a result of the sale of the Receivables and the
Other Conveyed Property to the Purchaser.
Annex-30
(j) Tax Returns. The Seller has filed all material federal and state
tax returns which are required to be filed and paid all material taxes,
including any assessments received by it, to the extent that such taxes
have become due (other than taxes, the amount or validity of which are
currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided
on the books of the Seller). Any taxes, fees and other governmental
charges payable by the Seller in connection with consummation of the
transactions contemplated by this Agreement and the other Basic Documents
to which the Seller is a party and the fulfillment of the terms of this
Agreement and the other Basic Documents to which the Seller is a party
have been paid or shall have been paid as of each Funding Date.
(k) Chief Executive Office. The Seller has more than one place of
business, and the chief executive office of the Seller is at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and its organizational number
is ▇▇-▇▇▇▇▇▇▇.
(l) Certificate, Statements and Reports. The officer's certificates,
statements, reports and other documents prepared by Seller and furnished
by Seller to the Purchaser, the Trustee or the Noteholder pursuant to this
Agreement or any other Basic Document to which it is a party, and in
connection with the transactions contemplated hereby or thereby, when
taken as a whole, do not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements contained herein or therein not misleading. There are no facts
known to the Seller which, individually or in the aggregate, materially
adversely affect, or which (aside from general economic trends) may
reasonably be expected to materially adversely affect in the future, its
financial condition or assets or business, or which may impair its ability
to perform its obligations under this Agreement or any other Basic
Document, which have not been disclosed herein or therein or in the
certificates and other documents furnished to the Noteholder by or on its
behalf specifically for use in connection with the transactions
contemplated hereby or thereby.
(m) Legal Counsel, etc. Seller consulted with its own legal counsel
and independent accountants to the extent it deems necessary regarding the
tax, accounting and regulatory consequences of the transactions
contemplated hereby, Seller is not participating in such transactions in
reliance on any representations of any other party, their affiliates, or
their counsel with respect to tax, accounting and regulatory matters.
(n) No Material Adverse Change. No Material Adverse Change has
occurred with respect to the Seller since the end of the quarter reported
on in the Seller's Form 10-Q filed with the Commission on November 10,
2005.
(o) No Default. The Seller is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in, and is not otherwise in default under (i) any law
or statute applicable to it, including, without limitation, any Consumer
Law, (ii) any judgment, decree, writ, injunction, order, award or other
action of any court or governmental authority or arbitrator or any order,
rule or regulation of any federal, state, county, municipal or other
governmental or public authority or agency having or asserting
jurisdiction over it or any of its properties or (iii) (x) any
indebtedness or any instrument or agreement under or pursuant to which any
such indebtedness has been, or could be, issued or incurred or (y) any
other instrument or agreement to which it is a party or by which it is
bound or any of its properties is affected, including, without limitation,
the Basic Documents, which either individually or in the aggregate, (A)
could reasonably be expected to result in a Material Adverse Change with
respect to the Seller, or in any impairment of the right or ability of the
Seller to carry on its business substantially as now conducted or (B)
could reasonably be expected to materially and adversely affect the
Seller's performance of its obligations hereunder, or the validity or
enforceability of this Agreement or the other Basic Documents.
Annex-31
(p) Possession of Licenses, Certificates, Franchises and Permits.
The Seller holds all licenses, certificates, franchises and permits from
all governmental authorities necessary for the conduct of its business,
except where the failure to hold such licenses, certificates, franchises
and permits would not materially and adversely affect its ability to
perform its obligations under this Agreement or any other Basic Document
to which it is a party or under the transactions contemplated hereunder or
thereunder or the validity or enforceability of the Receivables or the
Timeshare Loans, 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 and adversely affect its ability to
perform its obligations under this Agreement or any other Basic Document
to which it is a party or under the transactions contemplated hereunder or
thereunder or the validity or enforceability of the Receivables or the
Timeshare Loans.
(q) Foreign Tax Liability. The Seller is not aware of any Obligor
under a Timeshare Loan who has withheld any portion of payments due under
such Timeshare Loan because of the requirements of a foreign taxing
authority, and no foreign taxing authority has contacted it concerning a
withholding or other foreign tax liability.
(r) No Deficiency Accumulation. The Seller is not aware of any
outstanding "accumulated funding deficiency" (as such term is defined
under ERISA and the Code) with respect to any "employee benefit plan" (as
such term is defined under ERISA) sponsored by it.
(s) Securities Laws. The Seller is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. No portion of the Purchase
Price for each of the Receivables and the Other Conveyed Property will be
used by it to acquire any security in any transaction which is subject to
Section 13 or Section 14 of the Securities Exchange Act of 1934, as
amended.
(t) Transactions in Ordinary Course. The transactions contemplated
by this Agreement are in the ordinary course of business of the Seller.
(u) Name. The legal name of the Seller is as set forth in the
signature page of this Agreement and the Seller does not have any
tradenames, fictitious names, assumed names or "doing business as" names.
Section 8.2 Additional Covenants of the Seller.
(a) Sale. The Seller agrees to treat the conveyances hereunder for
all purposes (including without limitation tax and financial accounting
purposes) as sales on all relevant books, records, tax returns, financial
statements and other applicable documents.
(b) Non-Petition. In the event of any breach of a representation and
warranty made by the Purchaser hereunder, the Seller covenants and agrees
that it will not take any action to pursue any remedy that it may have
hereunder, in law, in equity or otherwise, until a year and a day have
passed since the date on which the Note issued by the Purchaser has been
paid in full. The Purchaser and the Seller agree that damages will not be
an adequate remedy for breach of this covenant and that this covenant may
be specifically enforced by the Purchaser, and by the Trustee on behalf of
the Noteholder.
(c) Changes to Credit Policy. The Seller covenants that it will not
make, or permit to be made, any material changes to the Credit Policy
unless (i) the Noteholder expressly consents in writing prior to such
changes (such consent not to be unreasonably withheld) and (ii) after
giving effect to any such changes, the Rating Agency Condition is
satisfied.
(d) Compliance with Laws. The Seller shall comply with all
applicable laws, rules, regulations and orders applicable to it and its
business and properties except where the failure to comply will not have a
material adverse effect on its business or its ability to perform its
obligations under this Agreement or any other Basic Document to which it
is a party or under the transactions contemplated hereunder or thereunder
or the validity or enforceability of the Receivables and the Other
Conveyed Property.
Annex-32
(e) Maintain of Existence. The Seller shall preserve and maintain
for itself its existence (corporate or otherwise), rights, franchises and
privileges in the jurisdiction of its organization and except where the
failure to so preserve and maintain will not have a material adverse
effect on its business or its ability to perform its obligations under
this Agreement or any other Basic Document to which it is a party or under
the transactions contemplated hereunder or thereunder or the validity of
enforceability of the Receivables and the Other Conveyed Property.
(f) Ownership Inquiries. The Seller shall respond to any inquiries
with respect to ownership of a Receivable and the related Other Conveyed
Property by stating that such Receivable and the related Other Conveyed
Property has been sold to the Purchaser and that the Purchaser is the
owner of such Receivable and the related Other Conveyed Property.
(g) Change of Name. Any change in the legal name of the Seller and
any use by it of any tradename, fictitious name, assumed name or "doing
business as" name occurring after the Closing Date shall be promptly
disclosed to the Purchaser, the Trustee and the Noteholder in writing.
(h) Maintain Principal Place of Business. The Seller shall keep its
principal place of business and chief executive office and the office
where it keeps its records concerning the Receivables or the Other
Conveyed Property at the address of the Seller listed herein.
(i) Payment of Taxes. In the event that the Seller or the Purchaser
or any assignee of the Purchaser should receive actual notice of any
transfer taxes arising out of the transfer, assignment and conveyance of a
Receivable or related Other Conveyed Property from the Seller to the
Purchaser, on written demand by the Purchaser or its assignee, or upon the
Seller otherwise being given notice thereof, the Seller shall pay, and
otherwise indemnify and hold the Purchaser, and any subsequent assignee
harmless, on an after-tax basis, from and against any and all such
transfer taxes.
(j) Filing Continuation Statements. The Seller authorizes the
Purchaser and the Trustee to file continuation statements, and amendments
thereto, relating to the Receivables and the Other Conveyed Property and
all payments made with regard thereto without the signature of the Seller
where permitted by law. A photocopy or other reproduction of this
Agreement shall be sufficient as a financing statement where permitted by
law. The Seller confirms that it is not its present intention to file a
photocopy or other reproduction of this Agreement as a financing
statement.
(k) Accounting for Transfer. The Seller shall not prepare any
financial statements or other statements (including any tax filings) which
shall account for the transactions contemplated by this Agreement in any
manner other than as the sale of, or a capital contribution of, the
Receivables and the Other Conveyed Property by the Seller to the
Purchaser.
(l) Effect on Purchaser. The Seller shall not take any action or
fail to take any action if, as a result of such action or failure to act,
the Purchaser, in its capacity as Purchaser hereunder or as the Issuer
under the Indenture or any other Basic Document, will be, or is reasonably
likely to be, in breach of any of its representations, warranties or
covenants under any Basic Documents or otherwise unable to perform any of
its obligations thereunder.
(m) Waiver of Stay or Extension Laws. The Seller covenants (to the
extent it may lawfully do so) that it will not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of
this Agreement; and the Seller (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 hinder, delay or impede the execution of any
power and any right of the Seller to take such action shall be suspended.
(n) Substantive Consolidation. The Seller shall not take any action
or fail to take any action if, as a result of such action or failure to
act, the Purchaser, in its capacity as Purchaser hereunder or as the
Issuer under the Indenture or any other Basic Document, will be, or is
reasonably likely to be, substantively consolidated with the Seller.
Annex-33
Section 8.3 Liability of Seller; Indemnities. Subject to the limitation of
remedies set forth in Section 3.2 hereof with respect to a breach of any
representations, warranties or covenants contained in Section 3.1 hereof, the
Seller shall indemnify the Purchaser, the Servicer (so long as it is a party
other than Silverleaf) the Backup Servicer, the Trustee, the Custodian, the
Noteholder and their respective officers, directors, agents and employees
(collectively, the "Indemnified Parties") for any and all costs, expenses,
losses, damages, claims and liabilities (including reasonable legal fees and
related costs), that any of the Indemnified Parties may sustain arising out of
or as a result of the failure of a Receivable or related Timeshare Loan to be
originated in compliance with all requirements of law and for any breach of any
of its representations, warranties, covenants or other agreements contained
herein or in the other Basic Documents to which it is a party.
(a) The Seller shall defend, indemnify, and hold harmless the
Indemnified Parties from and against any and all costs, expenses, losses,
damages, claims, and liabilities (including reasonable legal fees and
related costs), arising out of or resulting from the use, ownership, or
operation by the Seller, any Affiliate thereof or any of their respective
agents or subcontractors, of a Resort or Timeshare Property, or out of
non-compliance by the Seller or any Affiliate thereof with any applicable
laws, rules or regulations relating thereto or relating to origination of
Timeshare Loans or the documentation in connection therewith.
(b) The Seller shall indemnify, defend and hold harmless the
Indemnified Parties from and against any taxes that may at any time be
asserted against any such Person with respect to the transactions
contemplated in this Agreement and any of the other Basic Documents
(except any income taxes arising out of fees paid to the Trustee and the
Backup Servicer and except any taxes to which the Trustee may otherwise be
subject), including without limitation any sales, gross receipts, general
corporation, tangible personal property, privilege or license taxes (but,
in the case of the Purchaser, not including any taxes asserted with
respect to federal or other income taxes arising out of distributions on
the Note) and costs and expenses in defending against the same.
(c) The Seller shall indemnify, defend and hold harmless the
Indemnified Parties, from and against any and all costs, expenses, losses,
damages and liabilities (including reasonable legal fees and related
costs) incurred by reason of (i) the Seller's willful misfeasance, bad
faith or negligence in the performance of its duties under this Agreement
or any of the other Basic Documents, or by reason of reckless disregard of
its obligations and duties under this Agreement and/or (ii) the Seller's
or the Purchaser's violation of Federal or state securities laws in
connection with the offering and sale of the Note.
(d) The Seller shall indemnify, defend and hold harmless the Trustee
and the Backup Servicer and its officers, directors, employees and agents
from and against any and all costs, expenses, losses, damages, claims and
liabilities (including reasonable legal fees and related costs), arising
out of, or incurred in connection with the acceptance or performance of
the trusts and duties set forth herein and in the other Basic Documents
except to the extent that such cost, expense, loss, claim, damage or
liability shall be due to the willful misfeasance, bad faith or negligence
(except for errors in judgment) of the Trustee or the Backup Servicer.
Indemnification under this Section shall survive the resignation or removal of
the Servicer or the Trustee and the termination of this Agreement and the other
Basic Documents, as applicable, and shall include reasonable fees and expenses
of counsel and other expenses of litigation. If the Seller shall have made any
indemnity payments pursuant to this Section and the Person to or on behalf of
whom such payments are made thereafter shall collect any of such amounts from
others, such Person shall promptly repay such amounts to the Seller, without
interest.
Notwithstanding any provision of this Section 8.3 or any other provision of this
Agreement, nothing herein shall be construed as to require the Seller to provide
any indemnification hereunder or under any other Basic Document for any costs,
expenses, losses, claims, damages or liabilities arising out of, or incurred in
connection with, credit losses with respect to the Receivables.
Annex-34
Section 8.4 Merger or Consolidation of Seller. Seller shall not merge or
consolidate with any other person, convey, transfer or lease substantially all
its assets as an entirety to another Person, or permit any other Person to
become the successor to Seller's business unless, after the merger,
consolidation, conveyance, transfer, lease or succession, the Seller is the
surviving entity and shall be capable of fulfilling its duties contained in this
Agreement and the other Basic Documents. Nothing contained herein shall be
deemed to release Seller or Servicer from any obligation. Seller shall provide
notice of any merger, consolidation or succession pursuant to this Section to
the Trustee, the Noteholder and each Rating Agency. Notwithstanding the
foregoing, Seller shall not merge or consolidate with any other Person or permit
any other Person to become a successor to Seller's business, unless (x)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 8.1 shall have been breached (for purposes
hereof, such representations and warranties shall be deemed made as of the date
of the consummation of such transaction) and no event that, after notice or
lapse of time, or both, would become an Event of Default shall have occurred and
be continuing, (y) Seller shall have delivered to the Trustee, the Rating Agency
and the Noteholder an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession comply with this Section
and that all conditions precedent, if any, provided for in this Agreement and
the other Basic Documents relating to such transaction have been complied with,
and (z) Seller shall have delivered to the Trustee, the Rating Agency and the
Noteholder an Opinion of Counsel, stating in the opinion of such counsel, either
(A) all financing statements and continuation statements and amendments thereto
have been authorized and filed that are necessary to preserve and protect the
interest of the Purchaser and the Trustee, respectively, in the Receivables and
the Other Conveyed Property and reciting the details of the filings or (B) no
such action shall be necessary to preserve and protect such interest.
Section 8.5 Limitation on Liability of Seller and Others. The Seller and
any director or officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
under any Basic Document.
ARTICLE IX
----------
THE SERVICER
------------
Section 9.1 Representations of Servicer. The initial Servicer makes the
following representations on which the Purchaser is deemed to have relied in
acquiring the Receivables and the Other Conveyed Property and on which the
Noteholder is deemed to have relied in purchasing the Note. The representations
speak as of the execution and delivery of this Agreement, as of the Closing Date
and as of each Funding Date, and shall survive the sale of the Receivables and
the Other Conveyed Property to the Purchaser and the pledge thereof by the
Purchaser to the Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer has been duly
organized and is validly existing as a corporation and in good standing
under the laws of the State of Texas (or, in the case of a successor
Servicer, it is a validly existing entity in good standing in its
jurisdiction of organization), with power, authority and legal right to
own its properties and to conduct its business as such properties are
currently owned and such business is presently conducted, and had at all
relevant times, and shall have, power, authority and legal right to
acquire, own and service the Receivables and the Other Conveyed Property.
(b) Due Qualification. The Servicer is duly qualified to do business
as a foreign corporation in good standing and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing
of the Receivables as required by this Agreement) requires or shall
require such qualification except where the failure to so qualify or
obtain such licenses or consents could not reasonably be expected to
result in a material adverse effect with respect to it or to the
Receivables or the Other Conveyed Property.
(c) Power and Authority. The Servicer has the power and authority to
execute and deliver this Agreement and the other Basic Documents to which
it is a party and to carry out its terms and their terms, respectively,
and the execution, delivery and performance of this Agreement and the
other Basic Documents to which it is a party have been duly authorized by
the Servicer by all necessary corporate action.
Annex-35
(d) Binding Obligation. This Agreement and the other Basic Documents
to which the Servicer is a party shall constitute legal, valid and binding
obligations of the Servicer enforceable in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, or other similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations on
the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) No Violation. The consummation of the transactions contemplated
by this Agreement and the other Basic Documents to which to the Servicer
is a party, the execution and delivery thereof and the fulfillment of the
terms of this Agreement and the other Basic Documents to which the
Servicer is a party, does not and will not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Servicer, or any indenture, agreement,
mortgage, deed of trust or other instrument to which the Servicer is a
party or by which it is bound or any of its properties are subject, or
result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, other than the Basic
Documents, or violate any law, judgment, decree, writ, injunction, award,
determination, order, rule or regulation applicable to the Servicer of any
court or of any federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Servicer
or any of its properties.
(f) No Proceedings. There are no proceedings or investigations
pending or, to the Servicer's knowledge, threatened against the Servicer,
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Servicer or
its properties (A) asserting the invalidity of this Agreement or any of
the other Basic Documents, (B) seeking to prevent the issuance of the Note
or the consummation of any of the transactions contemplated by this
Agreement or any of the other Basic Documents, or (C) seeking any
determination or ruling that might materially and adversely affect the
validity or enforceability of this Agreement, the Note or any of the other
Basic Documents or (D) relating to the Servicer and which might adversely
affect the federal or state income, excise, franchise or similar tax
attributes of the Note.
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required for the
issuance or sale of the Note or the consummation of the other transactions
contemplated by this Agreement or the other Basic Documents or the
execution and delivery thereof, except such as have been duly made or
obtained.
(h) Taxes. The Servicer has filed all federal and state tax returns
which are required to be filed and paid all taxes, including any
assessments received by it, to the extent that such taxes have become due
(other than taxes, the amount or validity of which are currently being
contested in good faith by appropriate proceedings and with respect to
which reserves in conformity with GAAP have been provided on the books of
the Servicer). Any taxes, fees and other governmental charges payable by
the Servicer in connection with consummation of the transactions
contemplated by this Agreement and the other Basic Documents to which the
Servicer is a party and the fulfillment of the terms of this Agreement and
the other Basic Documents to which the Servicer is a party have been paid
or shall have been paid as of the Closing Date and each Funding Date.
(i) Chief Executive Office. The Servicer hereby represents and
warrants that the Servicer's principal place of business and chief
executive office is located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇.
Annex-36
(j) Possession of Licenses, Certificates, Franchises and Permits.
The Servicer holds all licenses, certificates, franchises and permits from
all governmental authorities necessary for the conduct of its business,
except where the failure to hold such licenses, certificates, franchises
and permits would not materially and adversely affect its ability to
perform its obligations under this Agreement or any other Basic Document
to which it is a party or under the transactions contemplated hereunder or
thereunder or the validity or enforceability of the Receivables or the
Timeshare Loans, 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 and adversely affect its ability to
perform its obligations under this Agreement or any other Basic Document
to which it is a party or under the transactions contemplated hereunder or
thereunder or the validity or enforceability of the Receivables or the
Timeshare Loans.
(k) No Deficiency Accumulation. The Servicer is not aware of any
outstanding "accumulated funding deficiency" (as such term is defined
under ERISA and the Code) with respect to any "employee benefit plan" (as
such term is defined under ERISA) sponsored by it.
(l) Securities Laws. The Servicer is not an "investment company" or
a company "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended. No portion of the Purchase
Price for each of the Receivables and the Other Conveyed Property will be
used by it to acquire any security in any transaction which is subject to
Section 13 or Section 14 of the Securities Exchange Act of 1934, as
amended.
(m) No Default. The Servicer is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in, and is not otherwise in default under (i) any law
or statute applicable to it, including, without limitation, any Consumer
Law, (ii) any judgment, decree, writ, injunction, order, award or other
action of any court or governmental authority or arbitrator or any order,
rule or regulation of any federal, state, county, municipal or other
governmental or public authority or agency having or asserting
jurisdiction over it or any of its properties or (iii) (x) any
indebtedness or any instrument or agreement under or pursuant to which any
such indebtedness has been, or could be, issued or incurred or (y) any
other instrument or agreement to which it is a party or by which it is
bound or any of its properties is affected, including, without limitation,
the Basic Documents, which either individually or in the aggregate, (A)
could reasonably be expected to result in a Material Adverse Change with
respect to the Servicer, or in any impairment of the right or ability of
the Servicer to carry on its business substantially as now conducted or
(B) could reasonably be expected to materially and adversely affect the
Servicer's performance of its obligations hereunder, or the validity or
enforceability of this Agreement or the other Basic Documents.
(n) Financial Condition. The Servicer has a positive net worth and
is able to and does pay its liabilities as they mature. The Servicer is
not in default under any obligation to pay money to any Person except for
matters being disputed in good faith which do not involve an obligation of
the Servicer on a promissory note. The Servicer will not use the proceeds
from the transactions contemplated by the Basic Documents to give any
preference to any creditor or class of creditors, and this transaction
will not leave the Servicer with remaining assets which are unreasonably
small compared to its ongoing operations.
(o) Certificate, Statements and Reports. The officer's certificates,
statements, reports and other documents prepared by the Servicer and
furnished by Servicer to the Purchaser, the Trustee or the Noteholder
pursuant to this Agreement or any other Basic Document to which it is a
party, and in connection with the transactions contemplated hereby or
thereby, when taken as a whole, do not and will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements contained herein or therein not misleading. There are
no facts known to the Servicer which, individually or in the aggregate,
materially adversely affect, or which (aside from general economic trends)
may reasonably be expected to materially adversely affect in the future,
its financial condition or assets or business, or which may impair its
ability to perform its obligations under this Agreement or any other Basic
Document, which have not been disclosed herein or therein or in the
certificates and other documents furnished to the Noteholder by or on its
behalf specifically for use in connection with the transactions
contemplated hereby or thereby.
(p) ACH Form. The Servicer has delivered a form of the ACH Form
attached to this Agreement to the Backup Servicer for its review.
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Section 9.2 Liability of Servicer; Indemnities.(a) The Servicer (in its
capacity as such) shall be liable hereunder only to the extent of the
obligations in this Agreement and the other Basic Documents to which it is a
party specifically undertaken by the Servicer and the representations,
warranties, covenants and other agreements made by the Servicer in the Basic
Documents to which it is a party.
(i) The Servicer shall defend, indemnify and hold harmless the
Purchaser, the Trustee, the Backup Servicer, the Noteholder and
their respective officers, directors, agents and employees from and
against any and all costs, expenses, losses, damages, claims and
liabilities (including reasonable legal fees and related costs),
arising out of or resulting from the use, ownership, repossession or
operation by the Servicer or any Affiliate or agent or sub-covenants
thereof of any Resort or Timeshare Property;
(ii) The Servicer, so long as Silverleaf is the Servicer,
shall indemnify, defend and hold harmless the Purchaser, the
Trustee, the Backup Servicer, the Noteholder and their respective
officers, directors, agents and employees from and against any taxes
that may at any time be asserted against any of such parties with
respect to the transactions contemplated in this Agreement,
including, without limitation, any sales, gross receipts, general
corporation, tangible personal property, privilege or license taxes
(but not including any federal or other income taxes, including
franchise taxes asserted with respect to, and as of the date of, the
sale of the Receivables and the Other Conveyed Property to the
Purchaser, the pledge thereof to the Trustee or the issuance and
original sale of the Note) and costs and expenses in defending
against the same;
(iii) The Servicer shall indemnify, defend and hold harmless
the Purchaser, the Trustee, the Backup Servicer, the Noteholder and
their respective officers, directors, agents and employees from and
against any and all costs, expenses, losses, damages, claims and
liabilities (including reasonable legal fees and related costs) to
the extent that such cost, expense, loss, claim, damage, or
liability arose out of, or was imposed upon the Purchaser, the
Trustee, the Backup Servicer or the Noteholder through the
negligence, willful misfeasance or bad faith of the Servicer in the
performance of its duties under this Agreement or by reason of
reckless disregard of its obligations and duties under this
Agreement or as a result of a breach of any representation,
warranty, covenant or other agreement made by the Servicer in this
Agreement and the other Basic Documents to which it is a party; and
(iv) The Servicer shall indemnify, defend, and hold harmless
the Trustee and the Backup Servicer from and against all costs,
expenses, losses, damages, claims and liabilities (including
reasonable legal fees and related costs) arising out of or incurred
in connection with the acceptance or performance of the trusts and
duties herein contained, except to the extent that such cost,
expense, loss, claim, damage or liability: (A) shall be due to the
willful misfeasance, bad faith, or negligence (except for errors in
judgment) of the Trustee or the Backup Servicer, as applicable or
(B) relates to any tax other than the taxes with respect to which
the Servicer shall be required to indemnify the Trustee or the
Backup Servicer.
(b) Notwithstanding the foregoing, the Servicer shall not be
obligated to defend, indemnify, and hold harmless the Noteholder for any
losses, claims, damages or liabilities incurred by the Noteholder arising
out of claims, complaints, actions and allegations relating to Section 406
of ERISA or Section 4975 of the Code as a result of the purchase or
holding of Note by the Noteholder with the assets of a plan subject to
such provisions of ERISA or the Code.
(c) For purposes of this Section 9.2, in the event of the
termination of the rights and obligations of the Servicer (or any
successor thereto pursuant to Section 9.3) as Servicer pursuant to Section
10.1, or a resignation by such Servicer pursuant to this Agreement, such
Servicer shall be deemed to be the Servicer pending appointment of a
successor Servicer pursuant to Section 10.2. The provisions of this
Section 9.2(c) shall in no way affect the survival pursuant to Section
9.2(d) of the indemnification by the Servicer provided by Section 9.2(a).
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(d) Indemnification under this Section 9.2 shall survive the
termination of this Agreement and the other Basic Documents and any
resignation or removal of the Servicer or any successor Servicer as
Servicer and shall include reasonable fees and expenses of counsel and
expenses of litigation. If the Servicer shall have made any indemnity
payments pursuant to this Section and the recipient thereafter collects
any of such amounts from others, the recipient shall promptly repay such
amounts to the Servicer, without interest.
Section 9.3 Merger or Consolidation of the Servicer or Backup Servicer,
and Assumption of the Obligations of the Backup Servicer.
(a) The Servicer shall not merge or consolidate with any other
Person, convey, transfer or lease all or substantially all of its assets
as an entirety to another Person, or permit any other Person to become the
successor to the Servicer's business unless, after the merger,
consolidation, conveyance, transfer, lease or succession, the Servicer
shall be the surviving entity and shall be capable of fulfilling the
duties of the Servicer contained in this Agreement and the other Basic
Documents. Nothing contained herein shall be deemed to release the
Servicer from any obligation. The Servicer shall provide notice of any
merger, consolidation or succession pursuant to this Section to the
Trustee, the Noteholder and each Rating Agency. Notwithstanding the
foregoing, the Servicer shall not merge or consolidate with any other
Person or permit any other Person to become a successor to the Servicer's
business, unless (x) immediately after giving effect to such transaction,
no representation or warranty made pursuant to Section 9.1 shall have been
breached (for purposes hereof, such representations and warranties shall
be deemed made as of the date of the consummation of such transaction) and
no event that, after notice or lapse of time, or both, would become Event
of Default shall have occurred and be continuing, (y) the Servicer shall
have delivered to the Trustee, the Rating Agency and the Noteholder an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation, merger or succession comply with this Section and that all
conditions precedent, if any, provided for in this Agreement relating to
such transaction have been complied with, and (z) the Servicer shall have
delivered to the Trustee, the Rating Agency and the Noteholder an Opinion
of Counsel, stating in the opinion of such counsel, either (A) all
financing statements and continuation statements and amendments thereto
have been executed and filed that are necessary to preserve and protect
the interest of the Purchaser and the Trustee, respectively, in the
Receivables and the Other Conveyed Property and reciting the details of
the filings or (B) no such action shall be necessary to preserve and
protect such interest.
(b) Any Person (i) into which the Backup Servicer (in its capacity
as Backup Servicer or successor Servicer) may be merged or consolidated,
(ii) resulting from any merger or consolidation to which the Backup
Servicer shall be a party, (iii) which acquires by conveyance, transfer or
lease substantially all of the assets of the Backup Servicer, or (iv)
succeeding to the business of the Backup Servicer, in any of the foregoing
cases shall execute an agreement of assumption to perform every obligation
of the Backup Servicer under this Agreement and the other Basic Documents
and, whether or not such assumption agreement is executed, shall be the
successor to the Backup Servicer under this Agreement and the other Basic
Documents without the execution or filing of any paper or any further act
on the part of any of the parties to this Agreement and the other Basic
Documents, anything in this Agreement and the other Basic Documents to the
contrary notwithstanding; provided, however, that nothing contained herein
shall be deemed to release the Backup Servicer from any obligation.
Section 9.4 [RESERVED]
Section 9.5 [RESERVED]
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Section 9.6 Servicer and Backup Servicer Not to Resign. Subject to the
provisions of Section 9.3, neither the Servicer nor the Backup Servicer shall
resign from the obligations and duties imposed on it by this Agreement or the
other Basic Documents to which it is a party as Servicer or Backup Servicer
except (i) upon a determination that by reason of a change in legal requirements
the performance of its duties under this Agreement or the other Basic Documents
to which it is a party would cause it to be in violation of such legal
requirements in a manner which would have a material adverse effect on the
Servicer or the Backup Servicer, as the case may be, and the Noteholder does not
elect to waive the obligations of the Servicer or the Backup Servicer, as the
case may be, to perform the duties which render it legally unable to act or to
delegate those duties to another Person or, (ii) in the case of the Backup
Servicer, upon the prior written consent of the Noteholder. Any such
determination permitting the resignation of the Servicer or Backup Servicer
pursuant to clause (i) above shall be evidenced by an Opinion of Counsel to such
effect delivered and acceptable to the Trustee and the Noteholder. No
resignation of the Servicer shall become effective until the Backup Servicer or
an entity acceptable to the Noteholder shall have assumed the responsibilities
and obligations of the Servicer. No resignation of the Backup Servicer shall
become effective until an entity acceptable to the Noteholder shall have assumed
the responsibilities and obligations of the Backup Servicer; provided, however,
that in the event a successor Backup Servicer is not appointed within 60 days
after the Backup Servicer has given notice of its resignation and, if
applicable, has provided the Opinion of Counsel required by this Section 9.6,
the Backup Servicer may petition a court for its removal.
Section 9.7 Reporting Requirements. (a) The Servicer shall furnish, or
cause to be furnished to the Noteholder:
(a) Audit Report. As soon as available and in any event within 90
days after the end of each fiscal year of the Servicer, a copy of the
consolidated balance sheet of the Servicer and its Affiliates as at the
end of such fiscal year, together with the related statements of earnings,
stockholders' equity and cash flows for such fiscal year, prepared in
reasonable detail and in accordance with GAAP certified by Independent
Accountants of recognized national standing as shall be selected by the
Servicer.
(b) Quarterly Statements. As soon as available, but in any event
within 45 days after the end of each fiscal quarter (except the fourth
fiscal quarter) of the Servicer, copies of the unaudited consolidated
balance sheet of the Servicer and its Affiliates as at the end of such
fiscal quarter and the related unaudited statements of earnings,
stockholders' equity and cash flows for the portion of the fiscal year
through such fiscal quarter (and as to the statements of earnings for such
fiscal quarter) in each case setting forth in comparative form the figures
for the corresponding periods of the previous fiscal year, prepared in
reasonable detail and in accordance with GAAP applied consistently
throughout the periods reflected therein and certified by the chief
financial or accounting officer of the Servicer as presenting fairly the
financial condition and results of operations of the Servicer and its
Affiliates (subject to normal year-end adjustments).
ARTICLE X
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DEFAULT
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Section 10.1 Servicer Termination Events. For purposes of this Agreement,
each of the following shall constitute a "Servicer Termination Event":
(a) Any failure by the Servicer to deliver any proceeds or payment
required to be so delivered under this Agreement or any other Basic
Document that continues unremedied for a period of two Business Days after
notice (whether written or oral) of such failure is provided to Servicer;
(b) Failure by the Servicer to deliver to the Trustee and the
Noteholder the Servicer's Certificate by 12:00 noon New York City time on
the second Business Day after the date such Servicer's Certificate is
required to be delivered;
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(c) Failure on the part of the Servicer to duly observe or perform
any other covenants or agreements of the Servicer or the Purchaser, as
applicable, set forth in this Agreement or any other Basic Document to
which it is a party, which failure, except for covenants relating to
merger and consolidation or preservation of ownership or security
interests in the Receivables and the Other Conveyed Property and with
respect to the items covered in clause (k) below, continues unremedied for
a period of 30 days (or, if the Servicer shall have provided evidence
satisfactory to the Noteholder that such obligation cannot be cured in the
30-day period and that it is diligently pursuing a cure, 60 days), after
the earlier of (x) the Servicer first acquiring Knowledge thereof and (y)
the date on which written notice of such failure shall have been given to
the Servicer;
(d) The occurrence of an Insolvency Event with respect to the
Servicer;
(e) Any representation, warranty or statement of the Servicer made
in this Agreement or any other Basic Document to which it is a party or
any certificate, report or other writing delivered pursuant hereto or
thereto shall prove to be incorrect in any material respect as of the time
when the same shall have been made (excluding, however, any representation
or warranty set forth in this Agreement relating to the characteristics of
the Receivables), and the incorrectness of such representation, warranty
or statement has a material adverse effect on the Purchaser or the
Noteholder and such breach is not remedied within 30 days (or, if the
Servicer shall have provided evidence satisfactory to the Noteholder that
such breach cannot be cured in the 30-day period and that it is diligently
pursuing a cure, 60 days) after the earlier of (x) the Servicer first
acquiring Knowledge thereof and (y) the date on which written notice of
such failure shall have been given to the Servicer;
(f) So long as Silverleaf or an Affiliate thereof is the Servicer,
the Leverage Ratio exceeds 6.0:1;
(g) [Reserved];
(h) An Event of Default shall have occurred;
(i) If Silverleaf is the Servicer, a change occurs of more than 50%
of the executive management of the Servicer as described in Exhibit F
hereto, unless Silverleaf provides written certification to the Trustee
(which the Trustee shall promptly forward to the Noteholder) within 30
days after such change, certifying that such executive management
personnel have been replaced, and setting forth a description of the
replacement personnel's experience, ability and reputation, and the
Trustee shall not have received an objection to such replacement personnel
from Noteholder within 15 Business Days after sending such certificate to
the Noteholder;
(j) Any failure by the Servicer to duly observe and perform its
obligations under Section 4.2(f) hereof, which failure is not remedied
within 30 days (or, if the Servicer shall have provided evidence
satisfactory to the Noteholder that such obligation cannot be cured in the
30-day period and that it is diligently pursuing a cure, 60 days), after
the earlier of (x) the Servicer first acquiring Knowledge thereof and (y)
the date on which written notice of such failure shall have been given to
the Servicer; provided, however, that with respect to Section 4.2(f)(xiii)
hereof, the Servicer shall have 2 days to remedy any failure to perform
its obligations thereunder;
(k) So long as Silverleaf or an Affiliate thereof is the Servicer,
as of any date of determination, the Tangible Net Worth of Silverleaf is
less than the sum of (1) $100,000,000, (2) 50% of the cumulative positive
net income of the Servicer (without deduction for negative income) since
June 30, 2005 and (3) 50% of the net proceeds of any equity issued by
Silverleaf since June 30, 2005;
(l) So long as Silverleaf or an Affiliate thereof is the Servicer,
as of any date of determination, the sum of (1) available cash and (2)
borrowing capacity for working capital, maintained by Silverleaf is less
than $5,000,000;
(m) So long as Silverleaf or an Affiliate thereof is the Servicer,
Silverleaf experiences a net loss either in any fiscal year or in any two
consecutive fiscal quarters; or
Annex-41
(n) So long as Silverleaf or an Affiliate thereof is the Servicer,
as of any date of determination, the ratio of Silverleaf's (1) Earnings
Before Interest, Taxes, Deductions and Amortization (EBITDA) to (2)
Interest Expense, is less than 1.25:1.
In the event that the Servicer, Purchaser or Trustee gains Knowledge of the
occurrence of a Servicer Termination Event, the Servicer, Purchaser or Trustee,
as applicable, shall promptly notify the Noteholder in writing of such
occurrence; provided that the Servicer shall be deemed to satisfy such
obligation upon its delivery of an Officer's Certificate in accordance with
Section 4.10(b) hereof.
Section 10.2 Consequences of a Servicer Termination Event. If a Servicer
Termination Event shall occur and be continuing, the Noteholder by notice given
in writing to the Servicer may terminate all of the rights and obligations of
the Servicer under this Agreement; provided that such rights and obligations
shall be automatically terminated without any further action in the case of a
Servicer Termination Event described in Section 10.1(d). The outgoing Servicer
shall be entitled to its pro rata share of the Servicing Fee for the number of
days in the Accrual Period prior to the effective date of its termination. On or
after the receipt by the Servicer of such written notice or upon termination of
the term of the Servicer, all authority, power, obligations and responsibilities
of the Servicer under this Agreement, whether with respect to the Note or the
Receivables and Other Conveyed Property or otherwise, automatically shall pass
to, be vested in and become obligations and responsibilities of the Backup
Servicer (or such other successor Servicer appointed by the Noteholder under
Section 10.3); provided, however, that the successor Servicer shall have no
liability with respect to any obligation which was required to be performed by
the terminated Servicer prior to the date that the successor Servicer becomes
the Servicer or any claim of a third party based on any alleged action or
inaction of the terminated Servicer. The successor Servicer is authorized and
empowered by this Agreement to execute and deliver, on behalf of the terminated
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, whether to
complete the transfer and endorsement of the Receivables and the Other Conveyed
Property and related documents to show the Purchaser as lienholder or secured
party, or otherwise. The terminated Servicer agrees to cooperate with the
successor Servicer in effecting the termination of the responsibilities and
rights of the terminated Servicer under this Agreement, including, without
limitation, the transfer to the successor Servicer for administration by it of
all cash amounts that shall at the time be held by the terminated Servicer for
deposit, or have been deposited by the terminated Servicer, in the Collection
Account or thereafter received with respect to the Receivables and the Other
Conveyed Property and the delivery to the successor Servicer of all Timeshare
Loan Servicing Files that shall at the time be held by the terminated Servicer
and a computer tape in readable form as of the most recent Business Day
containing all information necessary to enable the successor Servicer to service
the Receivables and the Other Conveyed Property. All reasonable costs and
expenses (including reasonable attorneys' fees) incurred in connection with
transferring any Timeshare Loan Servicing Files to the successor Servicer and
amending this Agreement to reflect such succession as Servicer pursuant to this
Section 10.2 shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses. In addition, any successor
Servicer shall be entitled to payment from the immediate predecessor Servicer
for reasonable transition expenses incurred in connection with acting as
successor Servicer, and to the extent not so paid, such payment shall be made
pursuant to Section 5.7 hereof. Upon receipt of notice of the occurrence of a
Servicer Termination Event, the Trustee shall give notice thereof to the Rating
Agency and the Noteholder. If requested by the Noteholder, the successor
Servicer shall terminate the Lockbox Agreements and direct the Obligors to make
all payments under the Receivables and the Other Conveyed Property directly to
the successor Servicer (in which event the successor Servicer shall process such
payments in accordance with Section 4.2(e)), or to a lockbox established by the
successor Servicer at the direction of the Noteholder, at the successor
Servicer's expense. The terminated Servicer shall grant the Trustee, the
successor Servicer and the Noteholder reasonable access to the terminated
Servicer's premises at the terminated Servicer's expense.
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Section 10.3 Appointment of Successor.
(a) On and after the time (i) the Servicer receives a notice of
termination pursuant to Section 10.2, (ii) the Servicer resigns pursuant to
Section 9.6, or (iii) the Servicer is automatically terminated upon the
occurrence of a Servicer Termination Event described in Section 10.1(d), the
predecessor Servicer shall continue to perform its functions as Servicer under
this Agreement as follows: (A) in the case of termination pursuant to Section
10.2, the predecessor Servicer shall only perform its functions as Servicer
until the date specified in such termination notice or, if no such date is
specified in a notice of termination, until receipt of such notice; (B) in the
case of expiration and non-renewal of the term of the Servicer upon the
expiration of such term, or resignation of the Servicer, the predecessor
Servicer shall only perform its functions as Servicer until the later of (x) the
date 45 days from the delivery to the Trustee of written notice of such
resignation (or written confirmation of such notice) in accordance with the
terms of this Agreement and (y) the date upon which the predecessor Servicer
shall become unable to act as Servicer, as specified in the notice of
resignation and accompanying Opinion of Counsel; and (C) in the case of
automatic termination of the Servicer, the predecessor Servicer shall only
perform its functions as Servicer until a successor Servicer has assumed such
duties, obligations, and liabilities; PROVIDED, HOWEVER, that in no case shall
the Servicer be relieved of its duties, obligations and liabilities as Servicer
until a successor Servicer has assumed such duties, obligations and liabilities.
Notwithstanding the preceding sentence, if the Backup Servicer or any other
successor Servicer shall not have assumed the duties, obligations and
liabilities of Servicer within 45 days of the termination or resignation
described in this Section 10.3, the Servicer may petition a court of competent
jurisdiction to appoint any Eligible Servicer as the successor to the Servicer.
Pending appointment as successor Servicer, Backup Servicer (or such other Person
as shall have been appointed by the Noteholder) shall act as successor Servicer
unless it is legally unable to do so, in which event the outgoing Servicer shall
continue to act as Servicer until a successor has been appointed and accepted
such appointment. In the event of termination of the Servicer, ▇▇▇▇▇ Fargo Bank,
National Association, as the Backup Servicer, shall assume the obligations of
Servicer hereunder on the date specified in such written notice (the "Assumption
Date") pursuant to an assumption agreement in form and substance acceptable to
the Noteholder or, in the event that the Noteholder shall have determined that a
Person other than the Backup Servicer shall be the successor Servicer in
accordance with Section 10.2, on the date of the execution of a written
assumption agreement by such Person to serve as successor Servicer.
Notwithstanding the Backup Servicer's assumption of, and its agreement to
perform and observe, all duties, responsibilities and obligations of the Seller
as Servicer, or any successor Servicer, under this Agreement arising on and
after the Assumption Date, the Backup Servicer shall not: (i) be deemed to have
assumed or to become liable for, or otherwise have any liability for any duties,
responsibilities, obligations or liabilities of (A) the Seller or any other
Servicer arising on or before the Assumption Date, whether provided for by the
terms of this Agreement, arising by operation of law or otherwise, including,
without limitation, any liability for any duties, responsibilities, obligations
or liabilities of the Seller or any other Servicer arising on or before the
Assumption Date under Section 4.7 or 9.2 of this Agreement, regardless of when
the liability, duty, responsibility or obligation of the Seller or any other
Servicer therefor arose, whether provided by the terms of this Agreement,
arising by operation of law or otherwise, or (B) under Section 9.2(a)(ii), (iv)
or (v); (ii) be obligated to perform any repurchase or advancing obligations, if
any, of the Servicer; (iii) be obligated to pay any taxes required to be paid by
the predecessor Servicer; or (iv) be obligated to pay any of the fees and
expenses of any other party involved in the transaction, other than any fees or
expenses incurred in connection with its own negligence, willful misfeasance or
bad faith. Notwithstanding the above, if the Backup Servicer shall be legally
unable or unwilling to act as Servicer, the Backup Servicer, the Trustee or the
Noteholder may petition a court of competent jurisdiction to appoint any
Eligible Servicer as the successor to the Servicer. Pending appointment pursuant
to the preceding sentence, the Backup Servicer shall act as successor Servicer
unless it is legally unable to do so, in which event the outgoing Servicer shall
continue to act as Servicer until a successor has been appointed and accepted
such appointment. Subject to Section 9.6, no provision of this Agreement shall
be construed as relieving the Backup Servicer of its obligation to succeed as
successor Servicer upon the termination of the Servicer pursuant to Section 10.2
or the resignation of the Servicer pursuant to Section 9.6. If upon the
termination of the Servicer pursuant to Section 10.2 or the resignation of the
Servicer pursuant to Section 9.6, the Noteholder appoints a successor Servicer
other than the Backup Servicer, the Backup Servicer shall not be relieved of its
duties as Backup Servicer hereunder.
(b) Any successor Servicer shall be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the
Servicer would have been entitled to under this Agreement if the Servicer
had not resigned or been terminated hereunder.
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Section 10.4 Notification of Termination and Appointment. Upon any
termination of, or appointment of a successor to, the Servicer, the Trustee
shall give prompt written notice thereof to the Noteholder and to the Rating
Agency.
Section 10.5 Waiver of Past Defaults. The Noteholder may waive in writing
any default by the Servicer in the performance of its obligations under this
Agreement and the consequences thereof. Upon any such waiver of a past default,
such default shall cease to exist, and any Servicer Termination Event 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 thereto.
Section 10.6 Action Upon Certain Failures of the Servicer. In the event
that the Trustee shall have Knowledge of any failure of the Servicer specified
in Section 10.1 which would give rise to a right of termination under such
Section upon the Servicer's failure to remedy the same after notice, the Trustee
shall give prompt written notice thereof to the Servicer and the Noteholder. For
all purposes of this Agreement (including, without limitation, Section 6.2(b)
and this Section 10.6), the Trustee shall not be deemed to have Knowledge of any
failure of the Servicer as specified in Sections 10.1(c) through (n) unless
notified thereof in writing by the Servicer or the Noteholder. The Trustee shall
be under no duty or obligation to investigate or inquire as to any potential
failure of the Servicer specified in Section 10.1.
Section 10.7 Continued Errors. Notwithstanding anything contained herein
to the contrary, if the Backup Servicer becomes successor Servicer it is
authorized to accept and rely on all of the accounting, records (including
computer records) and work of the prior Servicer relating to the Receivables
(collectively, the "Predecessor Servicer Work Product") without any audit or
other examination thereof, and the Backup Servicer as successor Servicer shall
have no duty, responsibility, obligation or liability for the acts and omissions
of the prior Servicer. If any error, inaccuracy, omission or incorrect or
non-standard practice or procedure (collectively, "Errors") exist in any
Predecessor Servicer Work Product and such Errors make it materially more
difficult to service or should cause or materially contribute to the Backup
Servicer as successor Servicer making or continuing any Errors (collectively,
"Continued Errors"), the Backup Servicer as successor Servicer shall have no
duty or responsibility, for such Continued Errors; provided, however, that the
Backup Servicer as successor Servicer agrees to use its best efforts to prevent
further Continued Errors. In the event that the Backup Servicer as successor
Servicer becomes aware of Errors or Continued Errors, the Backup Servicer as
successor Servicer shall, with the prior consent of the Noteholder use its best
efforts to reconstruct and reconcile such data as is commercially reasonable to
correct such Errors and Continued Errors and to prevent future Continued Errors.
The Backup Servicer as successor Servicer shall be entitled to recover its costs
thereby expended in accordance with Section 5.7(a)(iv) hereof.
ARTICLE XI
----------
MISCELLANEOUS PROVISIONS
------------------------
Section 11.1 Amendment.
(a) This Agreement may not be waived, amended or otherwise modified
except in a writing signed by the parties hereto and the Noteholder.
(b) Promptly after the execution of any such amendment or waiver,
the Trustee shall furnish written notification of the substance of such
amendment or waiver to the Rating Agency.
(c) Prior to the execution of any amendment, waiver or consent to
this Agreement the Trustee shall be entitled to receive and rely upon (i)
an Opinion of Counsel stating that the execution of such amendment or
waiver is authorized or permitted by this Agreement and (ii) if requested
by the Noteholder, the Opinion of Counsel referred to in Section 11.2(i).
(d) The Trustee may, but shall not be obligated to, enter into any
such amendment or waiver which affects the Trustee's own rights, duties or
immunities under this Agreement or otherwise.
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(e) Upon the termination of the Seller as Servicer and the
appointment of the Backup Servicer as Servicer hereunder, all amendments
to the terms of this Agreement specified in an assumption agreement shall
become a part of this Agreement, as if this Agreement was amended to
reflect such changes in accordance with this Section 11.1.
Section 11.2 Protection of Title to Property. (a) (a) The Seller, the
Purchaser or Servicer or each of them shall authorize, execute (if necessary)
and file such financing statements and cause to be authorized, executed (if
necessary) and filed such continuation statements, all in such manner and in
such places as may be required by law fully to preserve, maintain and protect
the interest of the Purchaser and the interests of the Trustee in the
Receivables, the Other Conveyed Property and in the proceeds thereof. The Seller
shall deliver (or cause to be delivered) to the Noteholder and the Trustee
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) None of the Seller, the Purchaser or the Servicer shall change
its name, identity, jurisdiction of organization, form of organization or
corporate structure in any manner that would, could or might make any
financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the meaning of Section
9-506(a) of the UCC, unless it shall have given the Noteholder and the
Trustee at least thirty days' prior written notice thereof and shall have
promptly filed appropriate amendments to all previously filed financing
statements or continuation statements. Promptly upon such filing, the
Purchaser, the Seller or the Servicer, as the case may be, shall deliver
an Opinion of Counsel to the Trustee and the Noteholder, in form and
substance reasonably satisfactory to the Noteholder, stating either (A)
all financing statements and continuation statements have been authorized,
executed and filed that are necessary fully to preserve and protect the
interest of the Purchaser and the Trustee in the Receivables and the Other
Conveyed Property, and reciting the details of such filings or referring
to prior Opinions of Counsel in which such details are given, or (B) no
such action shall be necessary to preserve and protect such interest.
(c) Each of the Seller, the Purchaser and the Servicer shall have an
obligation to give the Noteholder and the Trustee at least 60 days' prior
written notice of any relocation of its chief executive office or a change
in its jurisdiction of organization if, as a result of such relocation or
change, the applicable provisions of the UCC would require the filing of
any amendment of any previously filed financing or continuation statement
or of any new financing statement and shall promptly file any such
amendment or new financing statement. The Servicer shall at all times be
organized under the laws of the United States (or any State thereof),
maintain each office from which it shall service Receivables and Other
Conveyed Property, and its chief executive office and jurisdiction of
organization, within the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable and Other Conveyed Property accurately and in sufficient detail
to permit (i) the reader thereof to know at any time the status of such
Receivable and Other Conveyed Property, including payments and recoveries
made and payments owing (and the nature of each) and any Liquidation
Expenses or other expenses incurred in respect of any Receivable and Other
Conveyed Property (and the nature of each) and (ii) reconciliation between
payments or recoveries on (or with respect to) each Receivable and Other
Conveyed Property and the amounts from time to time deposited in the
Collection Account in respect of such Receivable and Other Conveyed
Property.
(e) The Servicer shall maintain its computer systems so that, from
and after the time of sale under this Agreement of the Receivables and
Other Conveyed Property to the Purchaser, the Servicer's master computer
records (including any backup archives) that refer to a Receivable or
Other Conveyed Property shall indicate clearly the interest of the
Purchaser in such Receivable and Other Conveyed Property and that such
Receivable and Other Conveyed Property is owned by the Purchaser and
pledged to the Trustee. Indication of the Purchaser's and the Trustee's
interest in a Receivable and the related Other Conveyed Property shall be
deleted from or modified on the Servicer's computer systems when, and only
when, such Receivable shall have been paid in full or repurchased.
Annex-45
(f) If at any time the Seller or the Servicer shall propose to sell,
grant a security interest in or otherwise transfer any interest in
Receivables or Other Conveyed Property to any prospective purchaser,
lender or other transferee, the Servicer shall give to such prospective
purchaser, lender or other transferee computer tapes, records or printouts
(including any restored from backup archives) that, if they shall refer in
any manner whatsoever to any Receivable or Other Conveyed Property, shall
indicate clearly that such Receivable and the related Other Conveyed
Property has been sold and is owned by the Purchaser and pledged to the
Trustee.
(g) The Servicer shall permit the Trustee, the Backup Servicer and
the Noteholder and their respective agents upon reasonable notice and at
any time during normal business hours to inspect, audit, and make copies
of and abstracts from the Servicer's records regarding any Receivable and
the related Other Conveyed Property.
(h) Upon request, the Servicer shall furnish to the Noteholder or to
the Trustee, within five Business Days, a list of all Receivables (by
contract number and name of Obligor) then pledged to the Trustee, together
with a reconciliation of such list to the Schedule of Receivables and to
each of the Servicer's Certificates furnished before such request
indicating removal of Receivables from the lien of the Indenture.
(i) The Servicer shall deliver to the Noteholder and the Trustee:
(1) promptly after the execution and delivery of this
Agreement and, if required pursuant to Section 11.1, of each
amendment, waiver, or consent, an Opinion of Counsel, in form and
substance satisfactory to the Noteholder, stating that in the
opinion of such counsel, either (A) all financing statements and
continuation statements have been authorized, executed and filed
that are necessary fully to preserve and protect the interest of the
Purchaser and the Trustee in the Receivables and the Opinion
Collateral and reciting the details of such filings or referring to
a prior Opinion of Counsel in which such details are given, or (B)
no such action shall be necessary to preserve and protect such
interest; and
(2) as a condition precedent to the renewal of the Indenture
by the Noteholder pursuant to Section 2.3 thereof, an Opinion of
Counsel stating that, in the opinion of such counsel, either (a) all
financing statements and continuation statements have been
authorized, executed and filed that are necessary fully to preserve
and protect the interest of the Purchaser and the Trustee in the
Receivables and the Opinion Collateral, and reciting the details of
such filings or referring to prior Opinions of Counsel in which such
details are given, or (b) no such action shall be necessary to
preserve and protect such interest.
Each Opinion of Counsel referred to in clause (1) or (2) above shall specify any
action necessary (as of the date of such opinion) to be taken in the following
year to preserve and protect such interest.
Section 11.3 Notices. All demands, notices and communications upon or to
the Seller, the Backup Servicer, the Servicer, the Trustee or the Rating Agency
under this Agreement shall be in writing, via facsimile (and confirmed by
telephone in the case of facsimiles to Seller, Servicer and Purchaser),
personally delivered, or mailed by certified mail, return receipt requested, and
shall be deemed to have been duly given upon receipt (a) in the case of the
Seller, to Silverleaf Resorts, Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Chief Executive Officer, Telecopy: (214)
▇▇▇-▇▇▇▇; Telephone: (▇▇▇) ▇▇▇-▇▇▇▇, ext. 2275; (b) in the case of the Servicer,
to Silverleaf Resorts, Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Chief Executive Officer, Telecopy: (214)
▇▇▇-▇▇▇▇; Telephone: (▇▇▇) ▇▇▇-▇▇▇▇, ext. 2275; (c) in the case of the
Purchaser, to Silverleaf Finance IV, LLC, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Chief Financial Officer,
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇; Telephone: (▇▇▇) ▇▇▇-▇▇▇▇, ext. 3990; (d) in the case
of the Trustee or the Backup Servicer at the Corporate Trust Office; Telecopy:
(▇▇▇) ▇▇▇-▇▇▇▇; (e) in the case of the Noteholder, to UBS Real Estate Securities
Inc., 1285 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Telecopy: (▇▇▇)▇▇▇-▇▇▇▇; Telephone:
(▇▇▇)▇▇▇-▇▇▇▇; and (f) in the case of Moody's, to ▇▇▇▇▇'▇ Investors Service,
Inc., ABS Monitoring Department, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇. Any notice so mailed within the time prescribed in
this Agreement shall be conclusively presumed to have been duly given, whether
or not the Noteholder shall receive such notice.
Annex-46
Section 11.4 Assignment. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and permitted
assigns. Notwithstanding anything to the contrary contained herein, except as
provided in Sections 8.4, 9.3 and this Section 11.4 and as provided in the
provisions of this Agreement concerning the resignation of the Servicer, this
Agreement may not be assigned by the Purchaser, the Seller or the Servicer
without the prior written consent of the Trustee, the Backup Servicer and the
Noteholder; provided that the Purchaser will grant all of its right, title and
interest herein to the Trustee for the benefit of the Noteholder.
Section 11.5 Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the parties hereto and for the benefit
of the Noteholder or its assignee, as a third-party beneficiary. Nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Collateral or under
or in respect of this Agreement or any covenants, conditions or provisions
contained herein.
Section 11.6 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 11.7 Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 11.8 Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
Section 11.9 Governing Law. THIS AGREEMENT (OTHER THAN SECTIONS 2.1(a) AND
2.2 HEREOF) SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTIONS 2.1(a) AND 2.2 OF THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES UNDER SUCH SECTIONS SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
Section 11.10 Assignment to Trustee. The Seller hereby acknowledges and
consents to any mortgage, pledge, assignment and grant of a security interest by
the Purchaser to the Trustee pursuant to the Indenture for the benefit of the
Noteholder of all right, title and interest of the Purchaser in, to and under
the Receivables and Other Conveyed Property and/or the assignment of any or all
of the Purchaser's rights and obligations hereunder to the Trustee.
Section 11.11 Nonpetition Covenants. Notwithstanding any prior termination
of this Agreement, the Servicer and the Seller shall not, prior to the date
which is one year and one day after the Final Scheduled Settlement Date,
acquiesce, petition or otherwise invoke or cause the Purchaser to invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Purchaser under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Purchaser or
any substantial part of its property, or ordering the winding up or liquidation
of the affairs of the Purchaser.
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Section 11.12 Limitation of Liability of Trustee. Notwithstanding anything
contained herein to the contrary, this Agreement has been executed and delivered
by ▇▇▇▇▇ Fargo Bank, National Association, not in its individual capacity but
solely as Trustee and Backup Servicer and in no event shall ▇▇▇▇▇ Fargo Bank,
National Association, have any liability for the representations, warranties,
covenants, agreements or other obligations of the Purchaser hereunder or in any
of the certificates, notices or agreements delivered pursuant hereto, as to all
of which recourse shall be had solely to the assets of the Purchaser.
Section 11.13 Independence of the Servicer. For all purposes of this
Agreement, the Servicer shall be an independent contractor and shall not be
subject to the supervision of the Purchaser, the Trustee and Backup Servicer
with respect to the manner in which it accomplishes the performance of its
obligations hereunder. Unless expressly authorized by this Agreement, the
Servicer shall have no authority to act for or represent the Purchaser in any
way and shall not otherwise be deemed an agent of the Purchaser.
Section 11.14 No Joint Venture. Nothing contained in this Agreement (i)
shall constitute the Servicer and the Purchaser as members of any partnership,
joint venture, association, syndicate, unincorporated business or other separate
entity, (ii) shall be construed to impose any liability as such on any of them
or (iii) shall be deemed to confer on any of them any express, implied or
apparent authority to incur any obligation or liability on behalf of the others.
Section 11.15 Intention of Parties Regarding Delaware Securitization Act.
It is the intention of the Purchaser and the Seller that the transfer and
assignment of the property contemplated by Section 2.1(a) of this Agreement
shall constitute a sale of property from the Seller to the Purchaser, conveying
good title thereto free and clear of any liens, and the beneficial interest in
and title to such assets shall not be part of the Seller's estate in the event
of the filing of a bankruptcy petition by or against the Seller under any
bankruptcy or similar law. In addition, for purposes of complying with the
requirements of the Asset-Backed Securities Facilitation Act of the State of
Delaware, 6 Del. C. ss. 2701A, et seq. (the "Securitization Act"), each of the
parties hereto hereby agrees that:
(a) any property, assets or rights purported to be transferred, in
whole or in part, by the Seller to the Purchaser pursuant to this
Agreement shall be deemed to no longer be the property, assets or rights
of the Seller;
(b) none of the Seller, its creditors or, in any insolvency
proceeding with respect to the Seller or the Seller's property, a
bankruptcy trustee, receiver, debtor, debtor in possession or similar
person, to the extent the issue is governed by Delaware law, shall have
any rights, legal or equitable, whatsoever to reacquire (except pursuant
to a provision of this Agreement), reclaim, recover, repudiate, disaffirm,
redeem or recharacterize as property of the Seller any property, assets or
rights purported to be transferred, in whole or in part, by the Seller to
the Purchaser pursuant to this Agreement;
(c) in the event of a bankruptcy, receivership or other insolvency
proceeding with respect to the Seller or the Seller's property, to the
extent the issue is governed by Delaware law, such property, assets and
rights shall not be deemed to be part of the Seller's property, assets,
rights or estate; and
(d) the transaction contemplated by this Agreement shall constitute
a "securitization transaction" as such term is used in the Securitization
Act.
Section 11.16 Special Supplemental Agreement. If any party to this
Agreement is unable to sign any amendment or supplement due to its dissolution,
winding up or comparable circumstances, then the consent of the Noteholder shall
be sufficient to amend this Agreement without such party's signature.
Section 11.17 Limited Recourse. Notwithstanding anything to the contrary
contained in this Agreement, the obligations of the Purchaser hereunder are
solely the obligations of the Purchaser, and shall be payable by the Purchaser,
solely as provided herein. The Purchaser shall only be required to pay (a) any
fees, expenses, indemnities or other liabilities that it may incur hereunder (i)
from funds available pursuant to, and in accordance with, the payment priorities
set forth in Section 5.7(a) and (ii) only to the extent the Purchaser receives
additional funds for such purposes or to the extent it has additional funds
available (other than funds described in the preceding clause (i)) that would be
in excess of amounts that would be necessary to pay the debt and other
obligations of the Purchaser incurred in accordance with the Purchaser's limited
liability company agreement and all financing documents to which the Purchaser
is a party. In addition, no amount owing by the Purchaser hereunder in excess of
the liabilities that it is required to pay in accordance with the preceding
sentence shall constitute a "claim" (as defined in Section 101(5) of the
Bankruptcy Code) against it.
Annex-48
Section 11.18 Acknowledgement of Roles. The parties expressly acknowledge
and consent to ▇▇▇▇▇ Fargo Bank, National Association acting in the multiple
capacities of Backup Servicer and Trustee. The parties agree that ▇▇▇▇▇ Fargo
Bank, National Association in such multiple capacities shall not be subject to
any claim, defense or liability arising from its performance in any such
capacity based on conflict of interest principles, duty of loyalty principles or
other breach of fiduciary duties to the extent that any such conflict or breach
arises from the performance by ▇▇▇▇▇ Fargo Bank, National Association of any
other such capacity or capacities in accordance with this Agreement or any other
Basic Documents to which it is a party.
Section 11.19 Termination. The respective obligations and responsibilities
of the Seller, the Purchaser, the Servicer, the Backup Servicer, and the Trustee
created hereby shall terminate on the Termination Date; provided, however, in
any case there shall be delivered to the Trustee and the Noteholder an Opinion
of Counsel that all applicable preference periods under federal, state and local
bankruptcy, insolvency and similar laws have expired with respect to the
payments pursuant to this Section 11.19. The Servicer shall promptly notify the
Trustee, the Seller, the Issuer, each Rating Agency and the Noteholder of any
prospective termination pursuant to this Section 11.19.
Section 11.20 Submission to Jurisdiction. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS,
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF
THOSE COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, OR ANY LEGAL PROCESS WITH RESPECT TO ITSELF OR ANY OF ITS
PROPERTY, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY
SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY NEW YORK LAW.
Section 11.21 Waiver of Trial by Jury. THE PARTIES HERETO EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY
PARTY AGAINST THE OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS OR OTHERWISE. THE PARTIES HERETO EACH AGREE THAT ANY SUCH CLAIM OR CAUSE
OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT.
Section 11.22 Process Agent. Each of Purchaser, Seller, Servicer and
Trustee agrees that the process by which any proceedings in the State of New
York are begun may be served on it by being delivered by certified mail at the
chief executive office or corporate trust office, as applicable, or at its
registered office for the time being. If such person is not or ceases to be
effectively appointed to accept service of process on the Purchaser's, Seller's,
Servicer's or Trustee's behalf, the Purchaser, Seller, Servicer or Trustee, as
applicable, shall, on the written demand of the process agent, appoint a further
person in the State of New York to accept service of process on its behalf and,
failing such appointment within 15 days, the process agent shall be entitled to
appoint such a person by written notice to the Purchaser, Seller, Servicer or
Trustee, as applicable. Nothing in this sub-clause shall affect the right of the
process agent to serve process in any other manner permitted by law.
Annex-49
Section 11.23 No Set-Off. Each of the Seller and Servicer agrees that it
shall have no right of set-off or banker's lien against, and no right to
otherwise deduct from, any funds held in any account described herein or in the
Basic Documents for any amount owed to it by the Seller, Servicer or Noteholder.
Section 11.24 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising 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 hereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exhaustive of any rights, remedies, powers and privileges provided by law.
Section 11.25 Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
Annex-50
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective duly authorized officers as of the
day and the year first above written.
SILVERLEAF FINANCE IV, LLC,
a Delaware limited liability company,
as Purchaser
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: Vice President, Treasurer &
Chief Financial Officer
SILVERLEAF RESORTS, INC.,
a Texas corporation, as Seller
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: Chief Financial Officer
SILVERLEAF RESORTS, INC.,
a Texas corporation, as Servicer
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: Chief Financial Officer
▇▇▇▇▇ FARGO BANK, NATIONAL
ASSOCIATION, not in its
individual capacity, but
solely as Backup Servicer,
Trustee and Account
Intermediary
By: /S/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
Annex-51
List of Schedules and Exhibits to the Agreement not filed herewith:
Schedule A - [Intentionally Omitted]
Schedule B - Location for Delivery of Timeshare Loan Files
Schedule C - Form of Trial Balance Report/Delinquency Report
Exhibit A - Form of Servicer's Certificate
Exhibit B - Eligibility Criteria
Exhibit C - Form of Assignment
Exhibit D - Form of Addition Notice
Exhibit E - ACH Form
Exhibit F - List of Silverleaf Executive Management
Exhibit G - Record Layout
Exhibit H - Servicer's Monthly Representation Certificate
Exhibit I - Escrow Agent Wiring Instructions
Exhibit J - Form of Waiver Letter
Exhibit K - Credit Policy/Collection Policy
Annex-52