EX-10.21
XXXXXXXX, X.X.X.
AS COMPANY,
SUNTERRA FINANCIAL SERVICES, INC.
AS SERVICER,
LASALLE NATIONAL BANK
AS TRUSTEE AND AS BACK-UP SERVICER,
INDENTURE
DATED AS OF MARCH 31, 1999
XXXXXXXX, X.X.X.
$104,000,000
VACATION OWNERSHIP
RECEIVABLES-BACKED NOTES 1999-A
6.27% CLASS A NOTES
6.80% CLASS B NOTES
7.87% CLASS C NOTES
11.00% CLASS D NOTES
TABLE OF CONTENTS
PAGE
----
PRELIMINARY STATEMENT........................................................ 1
GRANTING CLAUSES............................................................. 2
ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION
Section 1.1. Definitions................................................... 4
Section 1.2. Acts of Noteholders........................................... 4
Section 1.3. Notices, etc. to Trustee, Company and
Servicer................................................ 5
Section 1.4. Notices to Noteholders; Waiver................................ 8
Section 1.5. Effect of Headings and Table of Contents...................... 9
Section 1.6. Successors and Assigns........................................ 9
Section 1.7. Severability.................................................. 9
Section 1.8. Benefits of Indenture......................................... 9
Section 1.9. Legal Holidays................................................ 9
Section 1.10. Governing Law.................................................10
Section 1.11. Counterparts..................................................10
ARTICLE II. NOTE FORM
Section 2.1. Form Generally................................................10
Section 2.2. Form of Class A, B, C and D Note..............................10
ARTICLE III. THE NOTES
Section 3.1. Designation of Notes; Certain Related
Provisions..............................................17
Section 3.2. Denominations.................................................18
Section 3.3. Execution, Authentication, Delivery and
Dating..................................................18
Section 3.4. Registration, Registration of Transfer
and Exchange............................................19
Section 3.5. Limitation on Transfer and Exchange...........................20
Section 3.6. Xxxxxxxxx, Xxxxxxxxx, Lost or Stolen Notes....................20
Section 3.7. Payment of Principal and Interest.............................21
Section 3.8. Persons Deemed Owners.........................................22
Section 3.9. Cancellation..................................................22
Section 3.10. Tax Treatment.................................................22
ARTICLE IV. AUTHENTICATION AND DELIVERY OF THE NOTES
Section 4.1. General Provisions............................................22
Section 4.2. Security for Notes............................................23
i
Section 4.3. Delivery of Mortgage Loans...................................23
ARTICLE V. SATISFACTION AND DISCHARGE
Section 5.1. Satisfaction and Discharge of Indenture......................24
Section 5.2. Application of Money Held in Trust...........................25
Section 5.3. Discharge of Security Interest...............................26
ARTICLE VI. REMEDIES
Section 6.1. Events of Default............................................26
Section 6.2. Acceleration of Maturity, Rescission and
Annulment..............................................27
Section 6.3. Remedies.....................................................29
Section 6.4. Trustee May File Proofs of Claim.............................30
Section 6.5. Trustee May Enforce Claims without
Possession of Notes....................................31
Section 6.6. Allocation of Money Collected................................31
Section 6.7. Limitation on Suits..........................................32
Section 6.8. Unconditional Right of Noteholders to
Receive Principal and Interest.........................33
Section 6.9. Restoration of Rights and Remedies...........................33
Section 6.10. Rights and Remedies Cumulative...............................33
Section 6.11. Delay or Omission Not Waiver.................................33
Section 6.12. Control by Noteholders.......................................34
Section 6.13. Waiver of Past Defaults......................................34
Section 6.14. Undertaking for Costs........................................35
Section 6.15. Sale of Trust Estate.........................................35
Section 6.16. Action on Notes..............................................36
Section 6.17. Company Bankruptcy...........................................36
ARTICLE VII. THE TRUSTEE
Section 7.1. Certain Duties and Responsibilities..........................37
Section 7.2. Notice of Default, Cure, Waiver or Rating
Action.................................................38
Section 7.3. Certain Rights of Trustee....................................39
Section 7.4. Not Responsible for Recitals or Issuance
of Notes...............................................40
Section 7.5. May Hold Notes...............................................41
Section 7.6. Money Held in Trust..........................................41
Section 7.7. Compensation and Reimbursement...............................42
Section 7.8. Corporate Trustee Requirement; Eligibility...................43
Section 7.9. Resignation and Removal; Appointment of
Successor..............................................43
Section 7.10. Acceptance of Appointment by Successor.......................45
Section 7.11. Merger, Conversion, Consolidation or
Succession to Business of Trustee......................45
ii
Section 7.12. Co-trustees and Separate Trustees............................46
Section 7.13. Rights with Respect to the Servicer..........................48
Section 7.14. Servicer as Agent and Bailee of Trustee......................48
Section 7.15. Representations and Warranties of the
Trustee................................................48
ARTICLE VIII. CONSOLIDATION AND MERGER
Section 8.1. Company May Not Consolidate, etc.............................50
ARTICLE IX. SUPPLEMENTAL INDENTURES
Section 9.1. Supplemental Indentures without Consent
of Noteholders.........................................50
Section 9.2. Supplemental Indentures with Consent of
Noteholders............................................51
Section 9.3. Execution of Supplemental Indentures.........................53
Section 9.4. Effect of Supplemental Indentures............................53
Section 9.5. Reference in Notes to Supplemental
Indenture..............................................53
ARTICLE X. REDEMPTION OF NOTES
Section 10.1. Redemption at the Option of the Servicer;
Election To Redeem.....................................53
Section 10.2. Notice of Redemption by the Company..........................54
Section 10.3. Deposit of the Redemption Price..............................54
Section 10.4. Notes Payable on Redemption Date.............................55
Section 10.5. Sale for Purposes of Redemption..............................55
ARTICLE XI. COVENANTS
Section 11.1. Payment of Principal and Interest............................56
Section 11.2. Maintenance of Office or Agency..............................56
Section 11.3. Money for Note Payments To Be Held in
Trust..................................................57
Section 11.4. Corporate Existence..........................................58
Section 11.5. Protection of Trust Estate...................................58
Section 11.6. Negative Covenants...........................................59
Section 11.7. Statement as to Compliance...................................60
Section 11.8. Investment Company Act.......................................60
Section 11.9. Enforcement of Servicing Agreement and
Sale Agreement.........................................60
Section 11.10. Taxes .......................................................61
Section 11.11. Company Ownership............................................61
Section 11.12. Nonconsolidation.............................................61
Section 11.13. Representations and Warranties and
Covenants..............................................62
Section 11.14. Opinions as to Trust Estate.................................67
Section 11.15. Indemnification by the Company..............................67
iii
ARTICLE XII. ACCOUNTS, ACCOUNTINGS AND RELEASES
Section 12.1. Collection of Money..........................................68
Section 12.2. Accounts.....................................................68
Section 12.3. Reliance on Representations and Warranties...................71
Section 12.4. Notice of Incorrect Representations and
Warranties.............................................72
Section 12.5. Misrepresentations...........................................72
Section 12.6. Mandatory Repurchase Obligation..............................73
Section 12.7. Subsequent Loans.............................................74
Section 12.8. Reports by Trustee to Noteholders............................75
Section 12.9. Accounting by Trustee to Company.............................75
Section 12.10. Trust Estate.................................................76
Section 12.11. Allocation of Losses.........................................76
ARTICLE XIII. APPLICATION OF MONIES
Section 13.1. Disbursements of Monies out of Collection
Account................................................77
iv
APPENDIX A Standard Definitions
SCHEDULE I Schedule of Mortgage Loans
EXHIBIT A Form of Assignment of Note
EXHIBIT B Form of Lost Note Affidavit
EXHIBIT C Form of Substitute Form W-9
EXHIBIT D Form of Certificate with respect to Pre-Paid Mortgage Loans
EXHIBIT E Form of Mortgage and Mortgage Note
v
This INDENTURE, dated as of March 31, 1999 (herein, as amended from
time to time as permitted hereby, called the "Indenture"), is entered into by
and among TerraSun, L.L.C., a Nevada limited liability company (together with
its permitted successors and assigns, the "Company"), Sunterra Financial
Services, Inc., a Nevada corporation, as servicer (herein, together with its
permitted successors and assigns, called the "Servicer") and LaSalle National
Bank, a nationally chartered bank, as trustee (together with its permitted
successors and assigns, the "Trustee") and as back-up servicer (together with
its permitted successors and assigns, the "Back-up Servicer").
PRELIMINARY STATEMENT
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of TerraSun, L.L.C. Vacation Ownership
Receivables-Backed Notes 1999-A, consisting of four classes (the "Class A
Notes", the "Class B Notes", the "Class C Notes" and the "Class D Notes",
collectively, the "Notes"). The cash proceeds from the sale of such Notes are to
be used by the Company to purchase the Mortgage Loans.
The following table sets forth the designation, Note Interest Rate and
aggregate Initial Note Principal Balance for the Class A Notes, the Class B
Notes, the Class C Notes and the Class D Notes.
INITIAL
NOTE NOTE
INTEREST PRINCIPAL
DESIGNATION RATE BALANCE
Class A 6.27% $52,000,000
Class B 6.80% $35,000,000
Class C 7.87% $13,000,000
Class D 11.00% $ 4,000,000
The Mortgage Loans have an Outstanding Pool Balance as of the Cut-off
Date equal to $106,810,653.
All covenants and agreements made by the Company and the Servicer
herein are for the benefit and security of
the Noteholders. The Company and the Servicer are entering into this Indenture,
and the Trustee is accepting the duties as trustee created hereby, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged.
GRANTING CLAUSES
The Company hereby Grants to the Trustee for the exclusive benefit of
the Holders, a lien upon and a security interest (which the Company represents
and warrants will be a perfected first-priority security interest) in all of the
Company's right, title and interest, whether now owned or hereafter acquired in
and to the Mortgage Loans and the Mortgage Collateral, including without
limitation all interest due and principal received on or with respect to the
Mortgage Loans after the Cut-off Date, all Net Liquidation Proceeds and
Insurance Proceeds received after the Cut-off Date with respect to any Mortgaged
Property to which any Mortgage Loans relate, all security interests in the
Mortgaged Property securing such Mortgage Loans, the Mortgage Loan Documents
relating to such Mortgage Loans duly endorsed as appropriate, the Mortgage
Files, any insurance policies related to the Mortgage Loans, the rights of the
Company under the TerraSun Loan Sale Agreement, the rights of the Company under
the Servicing Agreement, all monies received or held by the Servicer in respect
of the Mortgage Loans and the Mortgage Collateral, all proceeds with respect to
the foregoing, including, without limitation, all funds deposited in the
Collection Account, the related Lock-Box Accounts and the Reserve Account and
all Permitted Investments made with such funds, and all rights to enforce the
foregoing.
Such Grants are made in trust, to secure (i) the Notes, securing all
Notes of each Class equally and ratably without prejudice, priority or
distinction among the Notes of any such Class by reason of difference in time of
authentication or delivery or otherwise but, as between each Class of Notes as a
group and each other Class of Notes as a group, subject to the subordination of
payments on the Class B Notes to payments on the Class A Notes and on the Class
C Notes to payments on the Class A and Class B Notes and on the Class D Notes to
payments on the Class A, Class B and Class C Notes, as provided in Section 13.1
hereof, (ii) the payment of all other sums payable under this Indenture, and
(iii) compliance with the provisions of this Indenture, all as provided in this
Indenture.
In the case of Initial Mortgage Loans which have been prepaid in full
on or after the Cut-off Date and prior to April
2
16, 1999, or with respect to Subsequent Loans which have been prepaid in full on
or after the Subsequent Cut-off Date and prior to the Subsequent Transfer Date,
the Company, in lieu of Granting such Mortgage Loans to the Trustee, will
deliver on the Closing Date, or Subsequent Transfer Date, as applicable, to the
Company, or as the Company may direct, an officer's certificate in substantially
the form set forth in Exhibit D hereto and deposit into the Collection Account
on the Closing Date or the Subsequent Transfer Date, as applicable, all moneys
(together with all earnings, dividends, distributions, income and profits
relating thereto) received or held by the Servicer or on deposit in any Lock-box
Account in respect of such prepaid Mortgage Loans.
Except as hereinafter provided, the Company does hereby warrant and
represent that it has not permitted and hereby covenants that it will not permit
the creation of any Lien other than the Lien of this Indenture with respect to
any part of the Trust Estate, so long as this Indenture shall remain in effect,
to anyone other than the Trustee, and that it will not, except as provided in
this Indenture, enter into any agreement amending or supplementing this
Indenture, any of the Mortgage Loans, the TerraSun Loan Sale Agreement, the
Servicing Agreement or the Note Purchase Agreement, execute or grant any waiver
or modification of, or consent under, the terms of any of this Indenture, the
Mortgage Loans, the TerraSun Loan Sale Agreement, the Servicing Agreement or the
Note Purchase Agreement, settle or compromise any claim arising under any of
this Indenture, the Mortgage Loans, the TerraSun Loan Sale Agreement, the
Servicing Agreement or the Note Purchase Agreement or submit or consent to the
submission of any dispute, difference or other matter arising under or in
respect of any of this Indenture, the Mortgage Loans, the TerraSun Loan Sale
Agreement, the Servicing Agreement or the Note Purchase Agreement, to
arbitration thereunder.
The Trustee acknowledges such Xxxxx, accepts the trusts hereunder in
accordance with the provisions of this Indenture, agrees to act as Paying Agent
and agrees to perform the duties herein required. So long as any Note remains
outstanding, the Trustee shall act for the benefit of the Noteholders as their
interests may appear to the extent provided herein.
The Trustee agrees to maintain in its possession each Mortgage File
delivered to it pursuant to Section 2(b) of the TerraSun Loan Sale Agreement
unless and until such Mortgage File is released from the lien hereof pursuant to
Article Twelve hereof.
3
All things necessary to make this Indenture a valid agreement of the
Company in accordance with its terms have been done.
ARTICLE I.
DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION
Section 1.1. DEFINITIONS
(a) Except as otherwise expressly provided herein or unless the context
otherwise requires, the capitalized terms used in the Indenture shall have the
respective meanings specified in the Standard Definitions set forth as Appendix
A hereto, which is incorporated herein by this reference. The definitions of
such terms are equally applicable both to the singular and plural forms of such
terms.
(b) All references in this instrument to designated "Articles," "Sections,"
"Subsections" and other subdivisions are to the designated Articles, Sections,
Subsections and other subdivisions of this instrument as originally executed or
if amended or supplemented, as so amended and supplemented. The words "herein,"
"hereof," "hereunder" and other words of similar import refer to this Indenture
as a whole and not to any particular Article, Section, Subsection or other
subdivision. Reference to the Trustee's duties under this Indenture shall
include its duties as Trustee as set forth in the Servicing Agreement.
Section 1.2. ACTS OF NOTEHOLDERS
(a) Any request, demand, authorization, direction, notice, consent, waiver or
other action provided by this Indenture to be given or taken by Noteholders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Noteholders in person or by an agent duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Trustee, and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 7.1) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section 1.2.
4
(b) The fact and date of the execution by any Person of any such instrument or
writing may be proved in any manner which the Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver or
other action by the Holder of any Note shall bind the Holder of every Note
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Note.
Section 1.3. NOTICES, ETC. TO TRUSTEE, COMPANY, SERVICER AND DCR
Except as otherwise provided, any request, demand, authorization, direction,
notice, consent, waiver or Act of Noteholders or other document provided or
permitted by this Indenture to be made upon, given or furnished to, or filed
with the following parties, shall be deemed to have been duly made upon, given
or furnished to, or filed with, when delivered by hand, sent by overnight
courier or by telecopy, addressed to the appropriate parties at their addresses
designated herein or to such other address as the party to be notified may have
otherwise designated in a notice given as provided in this Section. A hard copy
of any item delivered by telecopy shall also be sent by overnight mail on the
day of such telecopy delivery.
The Company:
TerraSun, L.L.C.
0000 Xxxxxxxxx Xxxxx Xxxxx
Xxxxx 000-X
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
With a copy to:
Xxxxxxx Xxxxxxx and Xxxxxx Xxxx
SunTerra Corporation
0000 Xxxxxxxxx Xxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
5
Servicer:
0000 Xxxxxxxxx Xxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
With a copy to:
Xxxxxx Xxxx
SunSerra Funding, Corp.:
0000 Xxxxxxxxx Xxxxx Xxxxx
Xxxxx 000-X
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
With a copy to:
Xxxxxxx Xxxxxxx and Xxxxxx Xxxx
TerraSun Holding, Inc.
0000 Xxxxxxxxx Xxxxx Xxxxx
Xxxxx 000-X
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
With a copy to:
Xxxxxxx Xxxxxxx and Xxxxxx Xxxx
SunTerra Corporation
0000 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 000000
The Trustee and Back-up Servicer:
LaSalle National Bank
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Transaction: TerraSun 1999-A
Attention: Asset Backed Security
Trust Services/TerraSun 1999-A
Tel: 000-000-0000
Fax: 000-000-0000
6
DCR:
Duff & Xxxxxx Credit Rating Co.
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Asset-Backed Monitoring Group/Timeshare
Noteholders:
Connecticut General Life Insurance Company
and Connecticut General Life Insurance Company
on behalf of one or more separate accounts
000 Xxxxxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-2307
Attention: Xxxxx Xxxxxx
Principal Life Insurance Company and
Principal Life Insurance Company
on behalf of one or more separate accounts
000 Xxxxx Xxxxxx
Xxx Xxxxxx, Xxxx 00000
Attention: Xxxx Xxxxxx
Travelers Insurance Co. and
Primerica Life Insurance Company
Xxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxx Xxxxxxxxxxxx
United of Omaha Life Insurance Company and
Companion Life Insurance Company
Investment Division, 4th Floor
Mutual Plaza
Omaha, Nebraska 68175
Attention: Xxxxx Xxxxx
Nationwide Insurance Co., Nationwide Indemnity Company
and Allied Life Insurance Company B
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxx 00000-2220
Attention: Xxxxxx Xxxxxx
Pacific Life Insurance Co.
000 Xxxxxxx Xxxxxx Xx.
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx
Pan American Life Insurance Company
000 Xxxxxxx Xxxxxx
7
New Orleans, Louisiana 70130
Attention: Xxxx Xxxxxx
WITH A COPY TO
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx
Structured Finance Advisors, Inc.
00 Xxxxxxx Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx Xxxxx
The Noteholders and Structured Finance Advisors, Inc. shall be
entitled to receive any certificate, report or material notice
delivered by any Person under this Agreement. Any notice to
be provided to DCR shall be provided thereto by the Trustee.
Section 1.4. NOTICES TO NOTEHOLDERS; WAIVER
Where this Indenture provides for notice, reports and communication to
Noteholders of any event, such notice, reports or communication shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and by regular mail (except notice in connection with an occurrence of an Event
of Default, which shall be delivered by overnight courier), or by facsimile
followed by regular mail or by overnight courier, to each Noteholder affected by
such event, at its address as it appears on the Note Register (with a copy to
not more than two other Persons, at the addresses set forth in the Note
Register), not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. Any such notice, report or
communication shall only be deemed given upon receipt at the address set forth
in the Note Register. The Trustee hereby acknowledges receipt of Schedule I to
the Note Purchase Agreement and agrees to include the appropriate information
therein in the Note Register.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
8
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Section 1.5. EFFECT OF HEADINGS AND TABLE OF CONTENTS
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 1.6. SUCCESSORS AND ASSIGNS
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 1.7. SEVERABILITY
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 1.8. BENEFITS OF INDENTURE
Nothing in this Indenture or in the Notes, expressed or implied, shall
give to any Person, other than the parties hereto, any Paying Agent which may be
appointed pursuant to the provisions hereof and any of their successors
hereunder and the Noteholders, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
Section 1.9. LEGAL HOLIDAYS
In any case where the date of any Distribution Date shall not be a
Business Day, then (notwithstanding any other provision of the Notes or this
Indenture) payment need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the nominal
date of any such Distribution Date and, assuming timely payments on such
subsequent Business Day, no interest shall accrue on the payment due on the
Notes on such Payment Date for the period from and after any such nominal date.
9
Section 1.10. GOVERNING LAW
This Indenture and each Note shall be construed in accordance with and
governed by the laws of the State of New York, without giving effect to any
conflict of laws principles thereof.
Section 1.11. COUNTERPARTS
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
ARTICLE II.
NOTE FORM
Section 2.1. FORM GENERALLY
The Notes and the certificates of authentication shall be in
substantially the forms set forth in Section 2.2, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon, as may be
required to comply with the rules of any securities exchange on which the Notes
may be listed, or as may, consistently herewith, be determined by the officers
executing such Notes, as evidenced by their execution of the Notes. Any portion
of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
Section 2.2. FORM OF CLASS A, B, C AND D NOTE
[THIS NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A [AND CLASS B] [AND
CLASS C] NOTES AS DESCRIBED IN THE INDENTURE REFERRED TO HEREIN.]
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR UNDER ANY STATE SECURITIES
LAWS AND THE COMPANY HAS NOT BEEN REGISTERED UNDER THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED (THE "INVESTMENT COMPANY ACT"), AND ACCORDINGLY THIS NOTE MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS EXCEPT IN A
TRANSACTION THAT IS EXEMPTED UNDER THE SECURITIES ACT (INCLUDING TRANSFER MADE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT) AND APPLICABLE STATE SECURITIES
LAWS
10
AND BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUER OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (D) TO AN IAI THAT, PRIOR TO
SUCH TRANSFER, FURNISHES THE TRUSTEE WITH A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM
OF WHICH CAN BE OBTAINED FROM THE TRUSTEE), (E) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUERS) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE
FOREGOING."
THE PRINCIPAL OF THIS NOTE IS PAYABLE ON THE PAYMENT DATES AND IN THE AMOUNTS
DESCRIBED HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE PRINCIPAL BALANCE OF THIS
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF AND MAY BE
ASCERTAINED ONLY BY OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE TRUSTEE
NAMED XXXXXX OR ITS SUCCESSOR.
No. ________ Initial Note Principal
Balance of the Class [A][B][C] [D]
Notes: $____________
Class [A][B][C][D]
PPN: ________________ Initial Note Principal Balance
of this Note $____________
11
XXXXXXXX, X.X.X., VACATION OWNERSHIP
RECEIVABLES-BACKED NOTE, 1999-A
CLASS [A][B][C] [D]
FINAL MATURITY DATE: [_______ 15, 20__]
TerraSun, L.L.C., a limited liability company duly organized and
existing under the laws of the State of Nevada (the "Company," which term
includes any successor entity under the Indenture referred to below), for value
received, _________________ hereby promises to pay to ______________________, or
registered assigns, the principal sum of _______________________ Dollars
($_______________) in monthly installments beginning on the Initial Distribution
Date, and to pay interest monthly in arrears on the unpaid portion of said
principal sum (and, to the extent that the payment of such interest shall be
legally enforceable, on any overdue installment of interest on this Note) on the
twenty-fifth day of each calendar month or, if such twenty-fifth day is not a
Business Day, the Business Day immediately following (each a "Distribution
Date"), for the Interest Accrual Period immediately preceding such Distribution
Date until such unpaid principal is fully paid, at a rate per annum equal to
___% (the "Note Interest Rate"); PROVIDED, HOWEVER, that interest on any amount
of principal or interest that is not timely paid when due shall accrue interest
until paid at the Note Interest Rate. Each monthly installment of principal
payable on this Note on any Payment Date shall be payable pursuant to Section
13.1 of the Indenture until the Class [A][B][C][D]Notes have been paid in full.
Any remaining unpaid portion of the then Outstanding Note Balance of this Note
shall be due and payable no later than the Final Maturity Date referred to
above. The interest and principal so payable on any Distribution Date shall, as
provided in the Indenture, be paid to the Person in whose name this Note is
registered on the Record Date for such Distribution Date.
The principal of and interest due on this Note are payable, without
presentment, to the Person whose name appears as the registered Holder of this
Note on the Note Register on the Record Date for the Distribution Date by wire
or other transfer in immediately available funds to the account specified in
writing by such Holder at least three Business Days prior thereto or as
otherwise provided in the Indenture, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts. Funds represented by checks returned undelivered shall
be held for payment to the Person entitled thereto, subject to the terms of the
Indenture, at the office or agency in the United States of
12
America designated as such by the Company for such purpose pursuant to the
Indenture.
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose.
This Note is one of a duly authorized issue of Notes of the Company
designated as its TerraSun, L.L.C. Vacation Ownership Receivables-Backed Notes
1999-A, Class [A][B][C][D] Notes (herein called the "Notes") issued under an
Indenture dated as of March 31, 1999 (herein called the "Indenture"), among the
Company, Sunterra Financial Services, Inc., as Servicer, LaSalle National Bank,
as trustee (the "Trustee," which term includes any successor Trustee under the
Indenture) and as back-up servicer (the "Back-up Servicer"), to which Indenture
reference is hereby made for a statement of the respective rights thereunder of
the Company, the Trustee and the Holders of the Notes, and the terms upon which
the Notes are, and are to be, authenticated and delivered. All terms used in
this Note which are defined in the Indenture shall have the meanings assigned to
them in the Indenture. Certain provisions of the Indenture are described in this
Note. The Indenture shall govern in the event that the provisions of this Note
are inconsistent therewith.
As provided in the Indenture, the Notes are secured by certain Mortgage
Loans and by certain other collateral constituting the Trust Estate as described
in the Indenture. The Notes are equally and ratably secured by the collateral
pledged therefor to the extent provided by the Indenture.
Unless earlier declared, or they otherwise become due and payable by
reason of an Event of Default, the Notes are payable only at the time and in the
manner provided in the Indenture and are not redeemable or prepayable at the
option of the Company before such time except that the Notes shall be redeemable
at the option of the Company in whole, but not in part, on any Distribution Date
at such time as the aggregate Outstanding Note Balance is equal to or less than
10% of the Outstanding Note Balance as of the Closing Date. The Notes shall be
redeemed at a redemption price equal to the aggregate Outstanding Note Balance
thereof, plus accrued interest thereon through the redemption date. If an Event
of Default as defined in the Indenture shall occur and be continuing, the
principal of all the Notes may become or be declared due and payable in the
manner and with the effect provided in the Indenture.
13
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Note Register of
the Company, upon surrender of this Note for registration of transfer at the
office or agency of the Trustee in the United States of America, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Notes of the same
Class, of authorized denominations and for the same aggregate Outstanding Note
Balance, shall be issued to the designated transferee or transferees.
Prior to due presentment for registration of transfer of this Note, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Note is registered as the owner hereof for the purpose
of receiving payment as herein provided and for all other purposes whether or
not this Note be overdue, and neither the Company, the Trustee, nor any such
agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company with the consent of the Holders of at least 51% of the
aggregate Outstanding Note Balance of each class of Notes. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
Note Principal Balance of Outstanding Notes of one or more Classes, on behalf of
the Holders of all Notes, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults and their consequences
under the Indenture. Any such consent or waiver by the Holder of this Note shall
be conclusive and binding upon such Holder and upon all future holders of this
Note and of any Note issued upon the registration of transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent or
waiver is made upon this Note.
The Notes are issuable only in registered form without coupons in such
authorized denominations as provided in the Indenture and subject to certain
limitations therein set forth. The Notes are exchangeable for Notes of a like
Outstanding Note Balance as of the Closing Date of the same Class of a different
authorized denomination, as requested by the Holder surrendering same.
14
This Note and the Indenture shall be governed by and construed in
accordance with the laws of the State of New York.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note in
accordance with the Indenture at the times, place and rate, and in the coin or
currency, herein prescribed.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
15
IN WITNESS WHEREOF, ___________________ has caused this instrument to
be signed, manually or in facsimile, by its Managing Member.
[ ]
BY________________________________
Attest:
_______________________________
16
[FORM OF TRUSTEE'S
CERTIFICATE OF AUTHENTICATION]
This is one of the Class [A][B][C][D]Notes referred to in the
within-mentioned Indenture.
Dated:
LaSalle National Bank,
as Trustee
By______________________
Authorized Officer
ARTICLE III.
THE NOTES
Section 3.1. DESIGNATION OF NOTES; CERTAIN RELATED PROVISIONS
The Class A Notes shall be designated generally as the "TerraSun,
L.L.C. Vacation Ownership Receivables-Backed Notes 1999-A Class A Notes" of the
Company. The Class B Notes shall be designated generally as the "TerraSun,
L.L.C. Vacation Ownership Receivables-Backed Notes 1999-A Class B Notes" of the
Company. The Class C Notes shall be designated generally as the "TerraSun,
L.L.C. Vacation Ownership Receivables-Backed Notes 1999-A Class C Notes" of the
Company. The Class D Notes shall be designated generally as the "TerraSun,
L.L.C. Vacation Ownership Receivables-Backed Notes 1999-A Class D Notes" of the
Company.
All Notes of each class at any time simultaneously outstanding shall be
identical in respect of place or places of payment and dates of payments with
all other Notes of such class. Notes of each class shall have the same Note
Interest Rate as all other Notes of such class.
The stated maturity of each Class of Notes shall be September 15, 2008.
The Class A, Class B, Class C Notes and Class D Notes shall be assigned on or
before the Closing Date ratings of "AAA", "A", "BBB" and "BB", respectively, by
DCR.
The aggregate Outstanding Note Balance as of the Closing Date of the
Class A, Class B and Class C and Class D Notes that may be authenticated and
delivered hereunder is limited to $52,000,000, $35,000,000, $13,000,000 and
$4,000,000, respectively, except for Notes authenticated and delivered upon
17
registration of transfer of, or in exchange for, or in lieu of, other Notes of
the same class pursuant to Sections 3.4, 3.6 or 9.5 hereof.
Section 3.2. DENOMINATIONS
The Notes are available in a minimum denomination of $500,000 original
principal amount and integral multiples of $100,000 in excess thereof; PROVIDED,
HOWEVER, that one Note of each Class may be issued in a denomination that
includes any residual amount.
Section 3.3. EXECUTION, AUTHENTICATION, DELIVERY AND DATING
The Notes shall be executed on behalf of the Company by its President
or one of its Vice Presidents and attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Notes may
be manual or facsimile. The Notes may be printed, lithographed, typewritten,
mimeographed or otherwise produced.
Notes bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication or delivery of such Notes or did not hold
such offices at the date of authentication or delivery of such Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Notes executed by the Company together
with a Company Order authorizing authentication thereof to the Trustee for
authentication; and, upon receipt of such Notes, the Trustee shall authenticate
and deliver such Notes as in this Indenture provided and not otherwise.
Notwithstanding anything herein to the contrary, the aggregate original
principal amount of each class of the Notes that may be authenticated and
delivered under this Indenture is limited to the aggregate Outstanding Note
Balance for that Class as of the Closing Date, except for Notes authenticated
and delivered upon registration of transfer of, or in exchange for, or in lieu
of Notes pursuant to Section 3.4, 3.6 or 9.5 hereof.
Each Note shall bear on its face the Closing Date and be dated as of
the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there
18
appears to be on such Note a certificate of authentication substantially in the
form provided for herein, executed by the Trustee by the manual signature of one
of its authorized officers, and such certificate upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.
Section 3.4. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE
The Trustee, in its capacity as registrar of the Notes (the "Note
Registrar"), shall cause to be kept a register (the "Note Register") in which,
subject to such reasonable regulations as it may prescribe, the Trustee shall
provide for the registration of Notes and the registration of transfers of
Notes.
Upon surrender for registration of transfer of any Note at the
Corporate Trust Office of the Trustee to be maintained as provided in Section
11.2, the Company shall execute, and the Trustee shall authenticate and deliver,
in the name of the designated transferee or transferees, one or more new Notes
of any authorized denominations, of the same class and of a like Outstanding
Note Balance as of the Closing Date.
At the option of the Holder, Notes may be exchanged for other Notes of
any authorized denominations of the same class and of a like Outstanding Note
Balance as of the Closing Date, upon surrender of the Notes to be exchanged at
such office or agency. Whenever any Notes are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the Notes
which the Noteholder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of such transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed, by the Holder thereof or his attorney
duly authorized in writing. The form of assignment set forth at Exhibit A hereof
shall be deemed to be satisfactory for purposes of the last preceding sentence.
19
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 9.5 not involving any registration of transfer.
Section 3.5. LIMITATION ON TRANSFER AND EXCHANGE
The Notes have not been registered or qualified under the Securities
Act of 1933 (the "1933 Act") or the securities laws of any state. No transfer of
any Note shall be made unless such transfer is made pursuant to an effective
registration statement under the 1933 Act and registration or qualification
under applicable state securities laws or is exempt from such registration or
qualification. In the event that a transfer is to be made in reliance upon an
exemption from the 1933 Act and applicable state securities laws, the Trustee
shall require, in order to assure compliance with the 1933 Act, that the owner
desiring to effect such transfer and such owner's prospective transferee each
certify to the Company and Trustee in writing the facts surrounding the transfer
in the form of either Exhibit 1 or Exhibit 2 to the Note Purchase Agreement. The
Trustee may conclusively rely upon a Rule 144A Representation Letter from the
prospective transferee in the form attached as Exhibit 2 to the Note Purchase
Agreement or upon an investment letter from the prospective transferee in the
form attached as Exhibit 1 to the Note Purchase Agreement to establish the
availability of such exemption. Neither the Company nor the Trustee is obligated
to register or qualify the Notes under the 1933 Act or any other securities law.
The Trustee shall have no liability to the Trust Estate or otherwise
arising from a transfer of any such Note in reliance upon a certification or
Rule 144A Representation Letter described in this Section 3.5.
Section 3.6. MUTILATED, DESTROYED, LOST OR STOLEN NOTES
If (i) any mutilated Note is surrendered to the Trustee, or the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Trustee by the Noteholder an agreement
of indemnity in form and substance reasonably satisfactory to the Trustee to
save the Company and the Trustee harmless, then, in the absence of notice to the
Company or the Note Registrar that such Note has been acquired by a bona fide
purchaser, the Company
20
shall execute and upon its request the Trustee shall authenticate and deliver,
in exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Note, a new Note of the same Class, tenor and Outstanding Note Balance as of the
Closing Date, bearing a number not contemporaneously outstanding; PROVIDED,
HOWEVER, that if any such mutilated, destroyed, lost or stolen Note shall have
become or shall be about to become due and payable the Company in its discretion
may, instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Company or
the Trustee may require the payment by the Holder of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee connected
therewith).
Every new Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Notes of the same Class duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
Section 3.7. PAYMENT OF PRINCIPAL AND INTEREST
The principal of and interest due on the Notes of each Class are
payable, without presentment, to the Person whose name appears as the Holder of
such Note on the Record Date on the Note Register for the related Class by wire
or other transfer in immediately available funds to the account specified in
writing by such Holder in the Note Purchase Agreement, in the case of the
Noteholders, or otherwise specified in writing by such Holder at least three
Business Days prior to the Record Date for the Distribution Date on which wire
or other transfers are to commence. Such payment shall be in such coin or
currency of the United States of America as at the time of tender is legal
tender for the payment of public and private debts. Funds representing any such
checks returned undelivered shall be held in accordance with Section 11.3.
Payments to each Noteholder shall be made pursuant to Section 13.1 hereof. Upon
request, the Holder shall
21
surrender such Note at the Corporate Trust Office of the Trustee within 30 days
after such payment.
Section 3.8. PERSONS DEEMED OWNERS
Prior to due presentment for registration of transfer of any Note, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name any Note is registered as the owner of such Note for the
purpose of receiving payments of principal of and interest on such Note and for
all other purposes whatsoever, whether or not such Note be overdue, and neither
the Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
Section 3.9. CANCELLATION
All Notes surrendered to the Trustee following, or at the time of,
payment or for registration of transfer or exchange (including Notes surrendered
to any Person other than the Trustee which shall be delivered to the Trustee)
shall be promptly canceled by the Trustee. All canceled Notes held by the
Trustee shall be held by the Trustee in accordance with its standard retention
policy unless the Company shall direct in a timely manner by a Company Order
that they be returned to it.
Section 3.10. TAX TREATMENT
The Company has structured this Indenture and the Notes with the
intention that the Notes will qualify under the applicable tax law as
indebtedness of the Company. The Company and each Noteholder, by acceptance of
its Note, agree to treat the Notes as debt of the Company for all purposes.
ARTICLE IV.
AUTHENTICATION AND DELIVERY OF THE NOTES
Section 4.1. GENERAL PROVISIONS
The Notes shall be executed by the Company and delivered to the Trustee
for authentication and thereupon the same shall be authenticated and delivered
by the Trustee upon its receipt of a Company Order and upon compliance with the
conditions of Section 4.2, and upon delivery to the Trustee of the following:
22
(1) a copy of the Company's Board Resolution authorizing the
execution and delivery of this Indenture and the Notes; and
(2) either (i) a certificate or other official document evidencing
the due authorization, approval or consent of any government body or
bodies, at the time having jurisdiction in the premises, and that the
authorization, approval or consent of no other governmental body is
required for valid issuance of the Notes, or (ii) an Opinion of Counsel
that no such authorization, approval or consent of any governmental body
is required.
Section 4.2. SECURITY FOR NOTES
The Notes shall be executed by the Company and delivered to the Trustee
for authentication and thereupon the same shall be authenticated and delivered
to the Company by the Trustee upon receipt of a Company Order and upon:
(a) establishment for the benefit of the Trustee on behalf of the Noteholders of
the Lockbox Accounts, the Collection Account and the Reserve Account; and
(b) delivery by the Company to the Trustee, and receipt by the Trustee of the
Mortgage Files and the Grant of all of the Company's right, title, and interest
in and to the Trust Estate.
Section 4.3. DELIVERY OF MORTGAGE LOANS
In connection with the assignment of all of the Company's right, title
and interest in and to the Mortgage Loans and related Mortgage Loan Documents,
the Company has delivered to, and deposited with, the Trustee the Mortgage Loans
and related Mortgage Loan Documents. The Trustee acknowledges receipt of the
files representing Mortgage Loan Documents and declares that it holds and will
hold such Mortgage Loan Documents in trust for the use and benefit of all
present and future Noteholders. The Servicer will submit the related Assignments
for recording within three Business Days after the Closing Date at the expense
of the Company. The Trustee shall deliver a certification on the Closing Date,
indicating that it has reviewed each Mortgage File and the Schedule of Mortgage
Loans and has determined that: except as set forth on the schedule of exceptions
attached thereto, all required documents have been executed and received, that
such documents relate to the Mortgage Loans identified on the Schedule of
Mortgage Loans, and each Mortgage File contains an original Mortgage Note
related to each
23
such Mortgage Loan executed by the Mortgagor. The Trustee agrees, for the
benefit of Noteholders, to review each Mortgage Loan Document delivered to it
after the Closing Date within 30 days after the Grant of the related Mortgage
Loan to the Trustee to ascertain that all required documents related to such
Mortgage Loan have been executed and received, and that such documents relate to
the Mortgage Loans identified in the Schedule of Mortgage Loans that have been
provided to it and that each related Mortgage File contains an original Mortgage
Note related to each such Mortgage Loan executed by the Mortgagor listed on the
Schedule of Mortgage Loans either endorsed in blank by the original payee or
showing a complete chain of title through to the Trustee. If the Trustee finds
any document or documents constituting a part of the Mortgage Loan Documents to
be missing or defective in any material respect, the Trustee shall promptly so
notify the Company and the Seller and request that the Seller correct or cure
such omission or defect within 90 days from the date the Seller was notified of
such omission or defect. If within such 90-day period the Seller fails to cure
such omission or defect, then the Company shall cause the Seller to deposit the
Mortgage Purchase Price for the related Mortgage Loan in the Collection Account
on the second Business Day prior to the Distribution Date relating to the
Collection Period in which such 90-day period expired or cause to be substituted
a Substitute Mortgage Loan pursuant to Section 12.6(b) hereof. Any such
repurchased Mortgage Loan, upon deposit of the related Mortgage Purchase Price
or substitution of a Substitute Mortgage Loan, shall be released from the Trust
Estate by the Trustee to the Company or its designee within one Business Day of
such deposit or substitution.
ARTICLE V.
SATISFACTION AND DISCHARGE
Section 5.1. SATISFACTION AND DISCHARGE OF INDENTURE
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer and exchange or payment) with
respect to the Notes and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes and shall pay, assign,
transfer and deliver to the Company upon Company Order all cash, securities and
other property held by it as part of the Trust Estate (except for amounts
required to pay and discharge the entire indebtedness of the Notes), when
24
(1) either
(A) all Notes theretofore authenticated and delivered
(other than Notes which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 3.6) have
been delivered to the Trustee for cancellation; or
(B) all Notes not theretofore delivered to the Trustee
for cancellation have become due and payable and the Company has
irrevocably deposited or caused to be deposited with the Trustee, in
trust for the purpose, an amount sufficient to pay and discharge the
entire indebtedness on such Notes not theretofore delivered to the
Trustee for cancellation;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee and each Noteholder an
Officers' Certificate and an Opinion of Counsel each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture with respect to the Notes have been complied
with.
Notwithstanding the satisfaction and discharge of this Indenture, the
Company's obligations in Sections 3.4, 3.6, 7.7, 11.2 and 11.3, the Trustee's
obligations in Section 5.2 and the rights and immunities of the Trustee under
this Indenture shall survive until the Notes are no longer Outstanding.
Thereafter the obligations of the Company in Section 7.7 and the Trustee in
Section 5.2 and the rights and immunities of the Trustee under this Indenture
shall survive.
Section 5.2. APPLICATION OF MONEY HELD IN TRUST
All monies deposited with the Trustee pursuant to Section 5.1 shall be
held in trust and applied by it, in accordance with the provisions of the Notes
and this Indenture, to the payment, either directly or through any Paying Agent
as the Trustee may determine, to the Persons entitled thereto, of the principal
and interest for whose payment such money has been deposited with the Trustee.
25
Section 5.3. DISCHARGE OF SECURITY INTEREST
Upon satisfaction and discharge of the Indenture as specified in
Section 5.1, the Trustee shall, on written demand of and at the expense of the
Company and upon being supplied with instruments appropriate for the purpose,
execute and the Company shall file all documents (including without limitation
UCC Form 3) necessary to discharge all liens, mortgages, chattel mortgages and
other security interests filed with any governmental board or body with respect
to the Mortgage Loans, and any other assets of the Trust Estate, and the Trustee
shall otherwise cooperate in any way necessary to restore full unencumbered
title in the Mortgage Loans to the Company or its designee.
ARTICLE VI.
REMEDIES
Section 6.1. EVENTS OF DEFAULT
"Event of Default" wherever used herein means any one of the following
events (whatever the reason for such Event of Default and without regard to
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of all or part of any payment of interest
or principal required to be made under the terms of such Notes or this
Indenture when due;
(2) default in the performance, or breach of any covenant of the
Company or a Seller, as applicable, in this Indenture, a Sale Agreement or
the Note Purchase Agreement and continuance of such default or breach for
a period of 30 days after the earlier of (i) the date on which the Company
or such Seller, as applicable, shall first have knowledge of such default
or breach and (ii) the date on which written notice, specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder shall have been given to the
Company or such Seller, as applicable, by the Trustee or any Noteholder;
(3) breach of any representation or warranty of the Company or a
Seller, as applicable, in this Indenture, a Sale Agreement, in the Note
Purchase Agreement or in any certificate delivered by the Company or a
Seller affirming such representations and warranties, in each case as of
the
26
date such representation or warranty was made, which representation or
warranty remains uncured;
(4) a proceeding shall have been instituted in a court having
jurisdiction in the premises seeking the entry of a decree or order for
relief in respect of the Company or a Seller under the Federal Bankruptcy
Code or any other applicable bankruptcy, insolvency or other similar
Federal or State law, or appointing a receiver, liquidator, assignee,
trustee, or sequestrator (or other similar official) of the Company or a
Seller or of any substantial part of its respective property, or ordering
the winding up or liquidation of its respective affairs, which proceeding
shall continue undismissed and unstayed and in effect for a period of 90
consecutive days or any of such relief sought in such proceeding shall
have been granted; or
(5) the institution by the Company or a Seller of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by either of them to
the institution of bankruptcy or insolvency proceedings against either of
them, or the filing by either of them of a petition or answer or consent
seeking reorganization or relief under the Federal Bankruptcy Code or any
other applicable Federal or State law, or the consent by either of them to
the filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee or sequestrator (or other similar official)
of the Company or such Seller or of any substantial part of its respective
property, or the making by either of them of an assignment for the benefit
of creditors, or the admission by either of them in writing of its
respective inability to pay its debts generally as they become due, or the
taking of corporate action by the Company or the Seller in furtherance of
any such action; or
(6) the occurrence and continuance of a Servicer Event of Default.
Section 6.2. ACCELERATION OF MATURITY, RESCISSION AND ANNULMENT
If an Event of Default of the kind specified in clause (4) or (5) of
Section 6.1 occurs, the unpaid principal amount of all of the Notes shall
automatically become immediately due and payable without notice, presentment or
demand of any kind. If an Event of Default (other than an Event of Default of
the kind specified in clause (4) or (5) of Section 6.1) occurs and is
continuing, then and in every such case the Trustee may or at the direction of
the Majority Holders (or, if the only Event
27
of Default occurring is an Event of Default with respect to a Seller or Servicer
set forth in clauses (2), (3) or (6) of Section 6.1, then the Holder or the
Holders of 66 2/3% of the aggregate Outstanding Note Balance of the Notes), the
Trustee shall declare the principal of all of the Notes to be immediately due
and payable, by a notice in writing to the Company (and to the Trustee if given
by Noteholders), and upon any such declaration such principal (together with all
accrued and previously unpaid interest) shall become immediately due and
payable. The Trustee shall give notice to each Noteholder and DCR of such
declaration. Notwithstanding the foregoing, the Trustee may not declare the
Notes to be due and payable pursuant to this Section 6.2 as a result of an Event
of Default arising solely from the Company's failure to perform its agreements
set forth in Section 7.7.
At any time after such a declaration of acceleration has been made, but
before any Sale of the Trust Estate has been made or a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of 66 2/3% of the aggregate Outstanding Note
Balance of the Notes, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequence if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue installments of interest on all Class A,
Class B, Class C and Class D Notes,
(B) the principal of any of the Class A, Class B, Class
C or Class D Notes which has become due otherwise than by such
declaration of acceleration and interest thereon at the applicable
Note Interest Rate,
(C) to the extent that payment of such interest is
lawful, interest upon overdue installments of interest on the Class
A, Class B, Class C and Class D Notes at the rate specified therefor
in the applicable Notes, and
(D) all sums paid or advanced by the Trustee hereunder
and the Back-up Servicer under the Servicing Agreement and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
28
(2) all Events of Default, other than the nonpayment of the
principal of the Class A, Class B, Class C and Class D Notes which have
become due solely by such acceleration, have been cured or waived as
provided in Section 6.13.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Subsequent to any such declaration of acceleration and so long as such
declaration and its consequences has not been rescinded and annulled, prior to
the exercise by the Trustee of the remedies set forth in Section 6.3(b) or (c)
the Trustee shall give the Noteholders ten days' notice of its intention to take
such actions.
Section 6.3. REMEDIES
If an Event of Default shall have occurred and be continuing, the
Trustee may, after notification to all Noteholders and DCR and, at the direction
of the Majority Holders, shall do one or more of the following:
(a) institute Proceedings for the collection of all amounts then payable on the
Notes, or under this Indenture in respect of the Notes, whether by declaration
or otherwise, enforce any judgment obtained, and collect from the Trust Estate
securing the Notes the monies adjudged due;
(b) sell the Trust Estate or any portion thereof or rights or interest therein,
at one or more Sales called and conducted in any manner permitted by law;
(c) institute Proceedings from time to time for the complete or partial
foreclosure of this Indenture with respect to the portion of the Trust Estate
securing the Notes; and
(d) exercise any remedies of a secured party under the UCC or other applicable
law and take any other appropriate action to protect and enforce the rights and
remedies of the Trustee or the Holders of the Notes hereunder;
PROVIDED, HOWEVER, except for any Sale conducted pursuant to Section 10.5, that
without the consent of the Holders of 66 2/3% of the aggregate Outstanding Note
Balance of the Notes, the Trustee may not sell or otherwise liquidate the Trust
Estate or any portion thereof unless, in the reasonable judgment of the Trustee
after consultation with a Person of national reputation in the field of
appraisal of property of the type comprising the
29
Mortgaged Property, the proceeds of such Sale or Proceedings or liquidation
distributable to the Noteholders will be sufficient to discharge in full the
amounts then due and unpaid upon the Notes for principal and interest. The
Trustee shall have no liability for any public Sale or private Sale conducted in
reliance upon the advice of a Person of national reputation in the field of
appraisal. If the Notes have been declared due and payable following an Event of
Default and the Trustee does not sell or otherwise liquidate the Trust Estate,
it shall continue to hold such Trust Estate and make distributions therefrom
pursuant to Section 6.6 hereof.
Section 6.4. TRUSTEE MAY FILE PROOFS OF CLAIM
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial Proceeding, relating to the Company or any other obligor upon the Notes
or the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the principal of any Class of Notes shall then
be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of overdue principal or interest) shall be entitled and
empowered, to intervene in such proceeding or otherwise,
(i) to file and prove a claim for all amounts owing and unpaid in respect of the
Notes and to file such other papers or documents and take such other action
including participating as a member or otherwise, in any committee of creditors
appointed in the matter, as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel) and
of the Noteholders allowed in such judicial Proceeding;
(ii) to petition for lifting of the automatic stay and thereupon to foreclose
upon the Trust Estate as elsewhere provided herein; and
(iii) to collect and receive any monies or other property payable or deliverable
on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, or sequestrator (or other
similar official) in any such judicial Proceeding is hereby authorized by each
Noteholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to
30
the making of such payments directly to the Noteholders, to pay to the Trustee
any amount due to it for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
or reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such Proceeding.
Section 6.5. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES
All rights of actions and claims under this Indenture or the Notes may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any Proceeding relating thereto, and any such
Proceedings instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements,
indemnities and advances of the Trustee, its agents and counsel, be for the
benefit of the Holders of the Notes in respect of which such judgment has been
recovered applied to payments on the Notes in the order set forth in Section
6.6.
Section 6.6. ALLOCATION OF MONEY COLLECTED
If the Notes have been declared due and payable following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, any money collected by the Trustee with respect to the Notes pursuant
to this Article (and any funds then held or thereafter received by the Trustee)
shall be applied in the following order, at the date or dates fixed by the
Trustee, but not less frequently than on scheduled Distribution Dates:
FIRST: To the payment of all amounts due the Trustee under Section 7.7;
SECOND: To the Servicer, the Servicing Fee;
THIRD: (in the following order) To the payment, ratably, of (i) accrued
interest on the Class A, Class B, Class C and Class D Notes, in that order,
including interest (to the
31
extent such interest has been collected by the Trustee or a sum sufficient
therefor has been so collected and payment thereof is legally enforceable at the
rate prescribed therefor in the applicable Notes) on overdue installments of
interest, and (ii) the Outstanding Note Balances of the Class A, Class B, Class
C and Class D Notes, in that order;
FOURTH: To the payment of all reasonable costs and expenses incurred by
any Holder in connection with the enforcement of its rights hereunder or under
the Notes, ratably, without preference or priority of any kind; and
FIFTH: To the payment of any surplus to or at the written direction of
the Company or any other person legally entitled thereto.
Section 6.7. LIMITATION ON SUITS
No Holder shall have any right to institute any Proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment of a receiver
or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(2) the Holders of 10% of the aggregate Outstanding Note Balance of
the Notes shall have made written request to the Trustee to institute
Proceedings in respect of such Event of Default in its own name as Trustee
hereunder;
(3) such Holder or Holders have offered to the Trustee indemnity
reasonably satisfactory to it against the costs, expenses and liabilities
to be incurred in compliance with such request;
(4) the Trustee for 30 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
Proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 30 day period by the Majority Holders;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb
32
or prejudice the rights of any other Holders or to enforce any right under this
Indenture, except in the manner herein provided.
Section 6.8. UNCONDITIONAL RIGHT OF NOTEHOLDERS TO RECEIVE PRINCIPAL AND
INTEREST
Notwithstanding any other provision in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest on such Note as such principal and
interest becomes due and payable and to institute suit for the enforcement of
any such payment, and such right shall not be impaired without the consent of
such Holder.
Section 6.9. RESTORATION OF RIGHTS AND REMEDIES
If the Trustee or any Noteholder has instituted any Proceeding to
enforce any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Noteholder, then and in every such case the Company, the
Trustee and the Noteholders shall, subject to any determination in such
Proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the
Noteholders shall continue as though no such Proceeding has been instituted.
Section 6.10. RIGHTS AND REMEDIES CUMULATIVE
No right or remedy herein conferred upon or reserved to the Trustee or
to the Noteholders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 6.11. DELAY OR OMISSION NOT WAIVER
No delay or omission of the Trustee or of any Noteholder to exercise
any right or remedy accruing upon any Event of Default shall impair any such
right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Noteholders, or any of them, may be exercised from time to
time, and as often as may be
33
deemed expedient, by the Trustee or by the Noteholder or Noteholders, as the
case may be.
Section 6.12. CONTROL BY NOTEHOLDERS
The Holders of 51% of the aggregate Outstanding Note Balance of each
class of Notes shall have the right to direct in writing the decision whether to
conduct, and the time, method and place of conducting, any Proceeding for any
remedy available to the Trustee with respect to the Notes or exercising any
trust or power conferred on the Trustee with respect to the Notes; PROVIDED
that:
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction;
PROVIDED, HOWEVER, that, subject to Section 7.1, the Trustee need not take any
action which it determines might involve it in liability or be unjustly
prejudicial to the Noteholders not consenting.
Section 6.13. WAIVER OF PAST DEFAULTS
The Holders of 51% of the aggregate Outstanding Note Balance of each
class of Notes may waive, in writing, any past Event of Default with respect to
the Notes hereunder and its consequences, except an Event of Default
(1) in the payment of the principal of or interest on any Note, or a
default described in Section 6.1 (4) or (5), or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of 100% of the
Holders of the Outstanding Notes affected thereby.
Upon any such waiver, such Event of Default shall cease to exist and
shall be deemed to have been cured for every purpose of this Indenture. The
Trustee, upon receipt thereof, shall transmit by mail to DCR notice of such
waiver specifying the date on which the Event of Default was waived promptly
after the occurrence of such waiver.
34
Section 6.14. UNDERTAKING FOR COSTS
All parties to this Indenture agree, and each Holder of any Note by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee, as Trustee and as Back-up
Servicer, for any action taken, suffered or omitted by it as Trustee or as
Back-up Servicer, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 6.14 shall not apply to any suit instituted by the
Trustee or to any suit instituted by any Noteholder or group of Noteholders,
holding in the aggregate more than 10% in Outstanding Note Balance of all Notes,
or to any suit instituted by any Noteholder for the enforcement of the payment
of the principal of or interest on any Note when due.
Section 6.15. SALE OF TRUST ESTATE
(a) The power to effect any sale, transfer or other disposition (a "Sale") of
any portion of the Trust Estate pursuant to Section 6.3 shall not be exhausted
by any one or more Sales as to any portion of the Trust Estate remaining unsold,
but shall continue unimpaired until the entire Trust Estate securing the Notes
shall have been sold or all amounts payable under this Indenture with respect
thereto shall have been paid. The Trustee may from time to time postpone any
Sale by public announcement made at the time and place of such Sale. It is
hereby expressly agreed that the Trustee is not limited to any amount fixed by
law as compensation for any Sale.
(b) Any Noteholder may bid for and acquire any portion of the Trust Estate
securing the Notes in connection with any Sale thereof. In lieu of paying cash
for the entire purchase price therefor, any Noteholder, after deducting the
costs, charges and expenses (including reasonable attorney's fees) incurred by
the Trustee in connection with such Sale (and, in the case of any Class D
Noteholder, after all amounts owing on the Class A, Class B and Class C Notes
have been paid in full; and in the case of any Class C Noteholder, after all
amounts owing on the Class A and Class B Notes have been paid in full; and in
the case of any Class B Noteholder, after all amounts owing on the Class A Notes
have been paid in full) may make settlement for any portion of the purchase
price remaining by crediting against amounts owing
35
on the Notes held by it or other amounts owing to such Noteholder secured by
this Indenture, the portion of the net proceeds of such Sale to which such
Noteholder would be entitled hereunder.
(c) The Servicer and the Company covenant and agree that a Sale of some or the
entirety of the Mortgage Loans and Mortgaged Properties by a public Sale held
not less than ten days after notice thereof is commercially reasonable.
(d) The Trustee shall execute and deliver an appropriate instrument of transfer,
provided to it by the Servicer, transferring its interest in any portion of the
Trust Estate in connection with a Sale thereof. In addition, the Trustee is
hereby irrevocably appointed the agent and attorney-in-fact of the Company to
transfer and convey its interest in any portion of the Trust Estate in
connection with a Sale thereof, and to take all action necessary to effect such
Sale. No purchaser or transferee at such a sale shall be bound to ascertain the
Trustee's authority, inquire into the satisfaction of any conditions precedent
or see to the application of any monies.
Section 6.16. ACTION ON NOTES
The Trustee's right to seek and recover judgment on the Notes or under
this Indenture shall not be affected by the seeking, obtaining or application of
any other relief under or with respect to this Indenture. Neither the lien of
this Indenture nor any rights or remedies of the Trustee or the Noteholders
shall be impaired by the recovery of any judgment by the Trustee against the
Company or by the levy of any execution under such judgment upon any portion of
the Trust Estate or upon any of the assets of the Company.
Section 6.17. COMPANY BANKRUPTCY
The Trustee agrees, and each Holder of the Notes by its acceptance of
any note shall be deemed to agree, that it will not join in any proceeding to
commence a case against the Company or a Seller under the Federal Bankruptcy
Code or any other applicable bankruptcy, insolvency or similar federal or state
law without the consent of the Holders of more than 66 2/3% of the aggregate
Outstanding Note Balance of the Notes.
36
ARTICLE VII.
THE TRUSTEE
Section 7.1. CERTAIN DUTIES AND RESPONSIBILITIES
(a) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and in the
Servicing Agreement, and no implied covenants or obligations shall be read
into this Indenture or in the Servicing Agreement against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture; but
in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(b) In case an Event of Default (of which the Trustee has actual knowledge) has
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and skill
in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act,
or its own willful misconduct, except that:
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the
direction of the Majority Holders relating to the time, method and place
of conducting any
37
Proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Indenture with
respect to the Notes or under the Servicing Agreement;
(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it, PROVIDED that nothing herein
contained shall excuse the Trustee for failure to perform its duties as
Trustee under this Indenture or the Servicing Agreement;
(5) the Trustee shall not be charged with knowledge of any default
hereunder or under the Servicing Agreement or any other fact or
circumstance upon the occurrence of which it may be required to take
action hereunder unless one of its Responsible Officers has actual
knowledge thereof; and
(6) the Trustee shall have no obligation to ascertain whether any
payment of interest on an overdue installment of interest is legally
enforceable.
(d) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
Section 7.2. NOTICE OF DEFAULT, CURE, WAIVER OR RATING ACTION
Promptly after the occurrence of any Event of Default known to the
Trustee, the Trustee shall transmit by registered first class mail and facsimile
to all Holders, as their names and addresses appear on the Note Register, and
DCR notice of such Event of Default hereunder known to the Trustee, unless such
Event of Default shall have been cured or waived.
The Trustee shall provide to DCR and each Noteholder prompt notice of
any Event of Default known to it, and of any cure (including waiver) thereof,
together with a written explanation of the manner in which and time at which
such Event of Default was cured or waived.
38
The Trustee shall provide to each Noteholder notice of any rating
action taken against the Notes by DCR promptly after receipt.
Section 7.3. CERTAIN RIGHTS OF TRUSTEE
Subject to Section 7.1:
(a) the Trustee may, in the absence of bad faith on its part, conclusively rely
and shall be protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, note or other obligation, paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall deem it
desirable that a matter be proved or established prior to taking, suffering or
omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, request
and conclusively rely upon an Officers' Certificate of the Servicer or the
Company;
(d) the Trustee may, in its reasonable judgment, consult with in-house counsel
or any other counsel nationally-recognized in securitization with regard to
legal questions arising out of or in connection with this Indenture, and the
written advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request or direction of any of the
Noteholders pursuant to this Indenture, unless such Noteholders shall have
offered to the Trustee security or indemnity reasonably satisfactory to it
against the costs, expenses (including legal fees and expenses) and liabilities
which might be incurred by it in compliance with such request or direction; and
39
(f) the Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, note or other paper or
document, but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company, personally
or by agent or attorney.
Except as otherwise agreed by it in writing, the Trustee shall not be
responsible for the payment of any interest on amounts deposited with it
hereunder.
Section 7.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES
(a) The recitals contained herein and in the Notes, except the certificates of
authentication on the Notes, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity, adequacy or condition of the Trust
Estate or any part thereof, or as to the title of the Company thereto or as to
the security afforded thereby or hereby, or as to the validity or genuineness of
any securities at any time pledged and deposited with the Trustee hereunder or
as to the validity or sufficiency of this Indenture or of the Notes. The Trustee
shall not be accountable for the use or application by the Company of Notes or
the proceeds thereof or of any money paid to the Company or upon Company Order
or for the use or application by the Servicer of any amounts paid to the
Servicer under any provisions hereof.
(b) Except as otherwise expressly provided herein and without limiting the
generality of the foregoing, the Trustee shall have no responsibility or
liability for or with respect to the existence or validity of any Mortgaged
Property or Mortgage Loan, the perfection of any security interest (whether as
of the date hereof or at any future time), the maintenance of or the taking of
any action to maintain such perfection, the validity of the assignment of any
portion of the Trust Estate to the Trustee or of any intervening assignment, the
review of any Mortgage Loan (it being understood that the Trustee has not
reviewed and does not intend to review the substance or form of any such
Mortgage Loan or any Mortgage Loan Document) the performance or enforcement of
any Mortgage Loan or Mortgage Loan Document, the compliance by the Company, a
Seller or the Servicer
40
with any covenant or the breach by the Company, a Seller or the Servicer of any
warranty or representation made hereunder or in any related document or the
accuracy of any such warranty or representation, any investment of monies in the
Collection Account or Reserve Account or any loss resulting therefrom, the acts
or omissions of the Company, a Seller, the Servicer or any Mortgagor, any action
of the Servicer or a Seller taken in the name of the Trustee, or the validity of
the Servicing Agreement or a Sale Agreement.
(c) The Trustee shall not have any obligation or liability under any Mortgage
Loan by reason of or arising out of this Indenture or the granting of a security
interest in such Mortgage Loan hereunder or the receipt by the Trustee of any
payment relating to any Mortgage Loan pursuant hereto, nor shall the Trustee be
required or obligated in any manner to perform or fulfill any of the obligations
of the Company under or pursuant to any Mortgage Loan, or to make any payment,
or to make any inquiry as to the nature or the sufficiency of any payment
received by it, or the sufficiency of any performance by any party, under any
Mortgage Loan.
Section 7.5. MAY HOLD NOTES
The Trustee, any Paying Agent, Note Registrar or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Notes and if operative, may otherwise deal with the Company with the
same rights it would have if it were not Trustee, Paying Agent, Note Registrar
or such other agent.
Section 7.6. MONEY HELD IN TRUST
Money received by the Trustee pursuant to this Indenture shall be held
in trust for the purposes set forth herein. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
herein or required by law. The Trustee shall be under no liability for interest
on any money received by it hereunder except as otherwise agreed by the Trustee
in writing with the Company except with respect to income or gain or investments
that are its obligation in its corporate capacity.
41
Section 7.7. COMPENSATION AND REIMBURSEMENT
The Company agrees:
(a) to pay the Trustee the Trustee Fee, in accordance with Section
13.1 hereof, as reasonable compensation for all services rendered by it
hereunder (which Trustee's Fee shall not be limited by any provision of
law in regard to the compensation of a trustee of an express trust);
(b) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of the Trustee's agents
and counsel) or the Servicing Agreement, except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(c) to indemnify the Trustee, its officers, directors, employees,
custodians, nominees and agents for, and to hold them harmless against,
any loss, liability or expense incurred without negligence or bad faith on
their part, arising out of or in connection with the acceptance or
administration of this trust and performance hereunder and under the
Servicing Agreement in accordance with the terms hereof, including the
costs and expenses of defending itself against any claim or xxxxxxxxx in
connection with the exercise or performance of any of its powers or duties
hereunder and including any loss, liability or expense incurred by it as
Back-up Servicer without negligence or bad faith.
As security for the performance of the Company under this Indenture,
the Trustee shall have a lien and right to payment, prior to the lien of the
Noteholders and all other Persons, upon the Trust Estate. The Trustee shall not
institute any proceeding solely to enforce its lien which would involve the Sale
or other disposition of the Trust Estate until at least 91 days have elapsed
since the date on which all of the Notes have been paid or discharged. The
Trustee shall not be entitled to reimbursement of the expenses described in
Section 7.7(b) above pursuant to Section 13.1(a) hereof, unless, at least 30
days prior to the related Distribution Date, the Trustee has submitted to the
Servicer a written request for such reimbursement and the Servicer has failed to
comply with such request on or prior to such Distribution Date.
42
Section 7.8. CORPORATE TRUSTEE REQUIREMENT; ELIGIBILITY
There shall at all times be a Trustee hereunder which shall at all
times be a depository institution or trust company organized and doing business
under the laws of the United States of America or any State thereof; authorized
under such laws to exercise corporate trust powers; have a combined capital and
surplus of at least $500,000,000; and be subject to supervision or examination
by federal or state authorities; PROVIDED, HOWEVER, that any successor Trustee
shall in addition be an institution with long-term, unsecured debt obligations
rated "AA" or better by DCR or any other rating acceptable to DCR. If such
corporation shall publish reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority,
then for the purpose of this Section 7.8, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall immediately notify the Company, the Servicer, the Noteholders
and DCR. In the event of such occurrence, the Company or the Servicer may cause
the Trustee to resign immediately in the manner and with the effect hereinafter
specified in this Article.
Section 7.9. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR
(a) No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee under Section 7.10.
(b) The Trustee may resign at any time by giving written notice thereof to the
Company, the Servicer, DCR and to the Noteholders. If an instrument of
acceptance by a successor Trustee shall not have been delivered to the Trustee
within 90 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Majority Holders,
delivered to the Trustee and to the Company.
(d) If at any time:
43
(1) the Trustee shall cease to be eligible under Section 7.8 and
shall fail to resign after written request therefor by the Company or by
any such Noteholder, or
(2) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 6.14, any Noteholder who has been a bona
fide Holder of a Note for at least six months (provided that the Notes have been
Outstanding for at least six months, otherwise the Holder of the Note that has
been outstanding for the longest period of time) may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of acting, or if
a vacancy shall occur in the office of the Trustee for any cause, the Company,
by a Board Resolution, shall promptly appoint a successor Trustee that meets the
requirements set forth in Section 7.8. If no successor Trustee shall have been
so appointed by the Company within 30 days after such resignation or removal or
by the Majority Holders pursuant to Section 7.9(f), any Noteholder who has been
a bona fide Holder of Notes for at least six months (provided that the Notes
have been outstanding for at least six months) may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor trustee.
(f) Notwithstanding Section 7.9(e) hereof, under the following circumstances a
successor Trustee may be appointed by Act of the Majority Holders delivered to
the Company and (unless the office of the Trustee is then vacant) any retiring
Trustee: (a) a vacancy shall exist at any time in the office of the Trustee for
any cause; (b) the Company shall not have appointed a successor Trustee within
30 days after the Trustee's resignation or removal; or (c) less than one year
shall have passed after the appointment by the Company of a successor Trustee
pursuant to Section 7.9(e). Any successor Trustee appointed by such Act of the
Majority Holders shall, forthwith upon its acceptance of such appointment,
become the successor Trustee and supersede the successor Trustee, if any,
appointed by the Company.
44
(g) The Company shall give notice of each resignation and each removal of the
Trustee and each appointment of a successor Trustee by mailing written notice of
such event by first-class mail, postage prepaid, to the Servicer, DCR and the
Holders of Notes as their names and addresses appear in the Note Register. Each
notice shall include the name of the successor Trustee and the address of its
Corporate Trust Office.
(h) The Trustee shall be paid all amounts outstanding upon such resignation or
removal and the obligations of the Company and the Servicer in Section 7.7
hereof shall survive such resignation or removal.
Section 7.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and the Noteholders and the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Company or the successor Trustee, such retiring Trustee shall, upon payment
of its reasonable charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trust of the retiring Trustee,
and shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder, subject nevertheless
to its lien, if any, provided for in Section 7.7 (which lien may be exercised
whether or not the Notes have been paid, satisfied or discharged in full, in
accordance with the provisions of said Section 7.7). Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
Section 7.11. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS OF
TRUSTEE
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
45
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
PROVIDED such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Notes have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Notes so authenticated with the same effect as if
such successor Trustee had itself authenticated such Notes.
Section 7.12. CO-TRUSTEES AND SEPARATE TRUSTEES
At any time or times, for the purpose of meeting the legal requirements
of any jurisdiction in which any of the Trust Estate may at the time be located
(including for purposes of foreclosure), the Company and the Trustee shall have
power to appoint, and, upon the written request of the Trustee or of the Holders
of Notes representing at least 25% of the aggregate Outstanding Note Balance of
any Class, the Company shall for such purpose join with the Trustee in the
execution, delivery and performance of all instruments and agreements necessary
or proper to appoint, one or more Persons approved by the Trustee either to act
as co-trustee, jointly with the Trustee, of all or any part of such Trust
Estate, or to act as separate trustee of any such property, in either case with
such powers as may be provided in the instrument of appointment, and to vest in
such Person or Persons in the capacity aforesaid, any property, title, right or
power deemed necessary or desirable, subject to the other provisions of this
Section. If the Company does not join in such appointment within 15 days after
the receipt by it of a request so to do, or in case an Event of Default has
occurred and is continuing, the Trustee alone shall have power to make such
appointment.
Should any written instrument from the Company be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right or power, any and all
such instruments shall, on request, be executed, acknowledged and delivered by
the Company.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
46
(1) The Notes shall be authenticated and delivered and all rights,
powers, duties and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustee hereunder, shall be exercised
solely by the Trustee.
(2) The rights, powers, duties and obligations hereby conferred or
imposed upon the Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed
by the Trustee or by the Trustee and such co-trustee or separate trustee
jointly, as shall be provided in the instrument appointing such co-trustee
or separate trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed, the Trustee
shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and
performed by such co-trustee or separate trustee.
(3) The Trustee at any time, by an instrument in writing executed by
it, with the concurrence of the Company evidenced by a Board Resolution,
may accept the resignation of or remove any co-trustee or separate
trustee, appointed under this Section, and, in case an Event of Default
has occurred and is continuing, the Trustee shall have power to accept the
resignation of, or remove, any such co-trustee or separate trustee without
the concurrence of the Company. Upon the written request of the Trustee,
the Company shall join with the Trustee in the execution, delivery and
performance of all instruments and agreements necessary or proper to
effectuate such resignation or removal. A successor to any co-trustee or
separate trustee that has so resigned or been removed may be appointed in
the manner provided in this Section.
(4) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Trustee or any other such
trustee hereunder nor shall the Trustee be liable by reason of any act or
omission of any co-trustee or separate trustee hereunder.
(5) Any Act of Noteholders delivered to the Trustee shall be deemed
to have been delivered to each such co-trustee and separate trustee.
47
Section 7.13. RIGHTS WITH RESPECT TO THE SERVICER
(a) The Trustee may terminate all rights and powers of the Servicer at any time,
in accordance with the terms of the Servicing Agreement.
(b) If the Company shall have knowledge of the occurrence of any default or
event of default under the Servicing Agreement, the Company shall promptly
notify the Trustee in writing, the Noteholders and DCR thereof, and shall
specify in such notice the action, if any, the Company is taking in respect of
such event of default.
(c) Upon any termination of the original Servicer's rights and powers pursuant
to the Servicing Agreement, a successor Servicer may be appointed in accordance
with the provisions thereof, and if no successor is so appointed the Trustee
shall serve as Servicer in accordance with the provisions of the Servicing
Agreement.
Section 7.14. SERVICER AS AGENT AND BAILEE OF TRUSTEE
Solely for the purpose of perfection of the lien of this Indenture,
each of the Trustee and the Servicer hereby acknowledges that the Servicer is
acting as agent and bailee of the Trustee for the benefit of the Noteholders as
secured party in holding any items constituting a part of the Trust Estate,
including any Mortgage Loans and the Mortgage Files relating to the Mortgage
Loans and monies, which from time to time come into the possession of the
Servicer (of which the Trustee shall retain a copy, other than in connection
with Mortgage Loans released pursuant to this Indenture) PROVIDED that, with
respect to any other duties pursuant to said Servicing Agreement, the Servicer
is acting as an independent contractor. It is intended that, by the Servicer's
acceptance of such agency pursuant to the Servicing Agreement, the Trustee for
the benefit of the Noteholders, as secured party, shall be deemed to have
possession of such monies and other items for purposes of the UCC as adopted in
the state in which such property is held by the Servicer. Subject to Section 7.1
hereunder, the Trustee shall not be liable for any act or omission of the
Servicer in its capacity as agent and bailee of the Trustee.
Section 7.15. REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE
The Trustee hereby makes the following representations and warranties on which
the Company, the Servicer and Noteholders shall be entitled to rely:
48
(i) The Trustee is a nationally chartered bank duly organized, validly existing,
and in good standing under the laws of its place of organization;
(ii) The Trustee has full power, authority and legal right to execute, deliver,
and perform this Indenture and the Servicing Agreement, and has taken all
necessary action to authorize the execution, delivery, and performance by it of
this Indenture and the Servicing Agreement;
(iii) The execution, delivery and performance by the Trustee of this Indenture
and the Servicing Agreement (a) does not violate any provision of any law or any
order, writ, judgment, or decree of any court, arbitrator, or governmental
authority applicable to the Trustee or any of its assets, (b) does not violate
any provision of the corporate charter or by-laws of the Trustee, and (c) does
not violate any provision of, or constitute, with or without notice or lapse of
time, a default under, or result in the creation or imposition of any Lien on,
any properties included in the Trust Estate pursuant to the provisions of any
mortgage, indenture, contract, agreement, or other undertaking to which the
Trustee is a party, which violation or default could reasonably be expected to
materially and adversely affect the Trustee's performance or ability to perform
its duties under this Indenture and the Servicing Agreement or the transactions
contemplated in this Indenture and the Servicing Agreement;
(iv) The execution, delivery and performance by the Trustee of this Indenture
and the Servicing Agreement does not require the authorization, consent, or
approval of, the giving of notice to, the filing or registration with, or the
taking of any other action in respect of, any governmental authority or agency
regulating the banking and corporate trust activities of the Trustee;
(v) This Indenture and the Servicing Agreement has been duly executed and
delivered by the Trustee and constitutes the legal, valid, and binding agreement
of the Trustee, enforceable in accordance with its terms, and the Trustee meets
the requirements of Section 7.8 hereof;
(vi) The Notes have been duly authenticated by the Trustee; and
(vii) The Trustee represents that it will use commercially reasonable best
efforts to cure (by August 1999) any deficiencies with regards to the
manipulation or calculation of dates beyond December 31, 1999 in the internally
maintained computer software
49
systems used by the Trustee in the conduct of its trust business which
materially and adversely affect its ability to perform its obligations under
this Indenture. The Trustee further represents that it will use commercially
reasonable best efforts to obtain reasonable assurances from each third party
vendor of licensed computer software systems used by the Trustee in the conduct
of its trust business that such vendors shall use commercially reasonable
efforts to cure any deficiencies with regards to the manipulation or calculation
of dates beyond December 31, 1999 and such systems shall, as of August 1999,
contain no deficiencies with regards to the manipulation or calculation of dates
beyond December 31, 1999 which would materially and adversely affect the ability
of the Trustee to perform its obligations under this Indenture.
ARTICLE VIII.
CONSOLIDATION AND MERGER
Section 8.1. COMPANY MAY NOT CONSOLIDATE, ETC.
The Company shall not consolidate or merge with or into any other
Person or convey or transfer its properties and assets substantially as an
entirety to any Person.
ARTICLE IX.
SUPPLEMENTAL INDENTURES
Section 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS
(a) Without the consent of the Holders of any Notes, the Company, when
authorized by a Board Resolution, the Servicer and the Trustee, at any time and
from time to time, may enter into one or more supplemental indentures PROVIDED
that such action shall not result in a reduction or withdrawal of the then
current rating on any class of Notes as confirmed by DCR in writing, in form
satisfactory to the Trustee, for any of the following purposes; PROVIDED,
FURTHER, that no such supplemental indenture shall have any of the effects
described in clauses (1) through (6) of the proviso to Section 9.2 hereof or
adversely affect the interest of the Holders of any Notes:
(1) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey
and confirm unto the Trustee any property subject or required to be
subjected to the lien of
50
this Indenture, or to subject additional property to the lien of this
Indenture; or
(2) to add to the conditions, limitations and restrictions on the
authorized amount, terms and purposes of issue, authentication and
delivery of the Notes, as herein set forth, additional conditions,
limitations and restrictions thereafter to be observed; or
(3) to add to the covenants of the Company, for the benefit of the
Holders of the Notes, or to surrender any right or power herein conferred
upon the Company; or
(4) to convey, transfer, assign, mortgage or pledge any property
to or with the Trustee; or
(5) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provisions
with respect to matters or questions arising under this Indenture, which
shall not be inconsistent with the provisions of this Indenture; or
(6) to evidence the succession of the Trustee
pursuant to Article 7.
(b) Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to this Section, the Company shall deliver to
DCR and each Noteholder by overnight mail, a notice setting forth in general
terms the substance of such supplemental indenture together with a copy of such
supplemental indenture. Any failure of the Company to mail such notice and copy,
or any defect therein, shall not, however, in any way impair or affect the
validity of any such supplemental indenture.
Section 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS
With the consent of the Holders of more than 51% of aggregate
Outstanding Note Balance of each class of Notes, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, and the Trustee may enter into one or more supplemental
indentures for the purpose of adding any provisions to, or changing in any
manner or eliminating any of the provisions of, this Indenture modifying in any
manner the rights of the Holders of the Notes under this Indenture; PROVIDED
that, unless the unanimous consent of the Noteholders is received, such action
shall not result in a reduction or withdrawal of the then current rating on any
class
51
of Notes as confirmed by DCR in writing, in form satisfactory to the
Trustee; and PROVIDED further that no such supplemental indenture shall, without
the consent of all Holders of each class of Outstanding Notes affected thereby:
(1) reduce the Outstanding Note Balance of any Note or the Note Interest Rate
thereon or change the amount or priority or time of any payment on any Note or
any place of payment where, or the coin or currency in which, any Note or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment; or
(2) impair or adversely affect the Trust Estate except as otherwise permitted
herein; or
(3) modify or alter the provisions of the definition of the term "Outstanding";
or
(4) modify or alter the provisions of the proviso to Section 6.3; or
(5) modify any of the provisions of this Section 9.2 or any provision herein
requiring the consent, waiver, approval or Act of the Holder or Holders of any
particular amount of the Outstanding Note Balance of any Class of Notes; or
(6) permit the creation of any lien ranking prior to or on a parity with the
lien of this Indenture with respect to any part of a Trust Estate or terminate
the lien of this Indenture on any property at any time subject hereto or deprive
the Holder of any Note of the security afforded by the lien of this Indenture.
It shall be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to this Section, the Company shall mail to DCR
and each Noteholder a notice setting forth in general terms the substance of
such supplemental indenture together with a copy of such supplemental indenture.
Any failure of the Company to mail such notice and copy, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
supplemental indenture.
52
Section 9.3. EXECUTION OF SUPPLEMENTAL INDENTURES
In executing or accepting any supplemental indenture permitted by this
Article or the modifications thereby of the trusts created by this Indenture,
the Trustee shall be entitled to be supplied with, and prior to executing any
supplemental indenture pursuant to Section 9.1 the Trustee shall require (and
subject to Section 7.1 shall be fully protected in relying upon), an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustee's own
duties or immunities under this Indenture or otherwise.
Section 9.4. EFFECT OF SUPPLEMENTAL INDENTURES
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby.
Section 9.5. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURE
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and if required by the
Trustee shall, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Notes.
ARTICLE X.
REDEMPTION OF NOTES
Section 10.1. REDEMPTION AT THE OPTION OF THE SERVICER; ELECTION TO REDEEM
The Servicer shall have the right to purchase all, but not less than
all, the Mortgage Loans at the Purchase Price, on any Distribution Date
(hereinafter referred to as a "Redemption Date") occurring after such time as
the aggregate Outstanding Note Balance is equal to or less than 10% of the
aggregate Outstanding Note Balance as of the Closing Date. The Funds represented
by such Purchase Price shall be used to redeem the
53
Notes in whole, but not in part, at the Redemption Price, with the excess to be
paid to the Company.
Installments of interest and principal due on or prior to a Redemption
Date shall continue to be payable to the Holders of Notes called for redemption
as of the relevant Record Dates according to their terms and the provisions of
Section 3.7. The election of the Servicer to cause the redemption of the Notes
pursuant to this Section shall be evidenced by a Board Resolution directing the
Trustee to make the payment of the Redemption Price on all of the Outstanding
Notes from monies deposited with the Trustee pursuant to Section 10.3.
Section 10.2. NOTICE OF REDEMPTION BY THE COMPANY
Notice of redemption pursuant to Section 10.1 shall be given by
facsimile and registered mail, postage prepaid, mailed not less than 30 days
prior to the applicable Redemption Date, to the Trustee, DCR and to each Holder
of Outstanding Notes, at its address in the Note Register.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) that on the Redemption Date, the Redemption Price shall become due and
payable upon each such Note, and that interest thereon shall cease to accrue on
such date upon the payment of the Redemption Price; and
(4) the place where such Notes are to be surrendered within 30 days after the
Redemption Date, which shall be the office or agency of the Servicer to be
maintained as provided in Section 11.2.
Notice of redemption of Notes shall be given by the Servicer or, at the
Servicer's request, by the Trustee in the name and at the expense of the
Servicer. Failure to give notice of redemption, or any defect therein, to any
Holder of any Note selected for redemption shall not impair or affect the
validity of the redemption of any other Note.
Section 10.3. DEPOSIT OF THE REDEMPTION PRICE
On or before the Business Day next preceding any Redemption Date, the
Servicer shall deposit with the Trustee or with the Paying Agent an amount of
monies sufficient to pay the
54
Redemption Price of all Outstanding Notes on such Redemption Date (less any
portion of such payment set aside from monies in the Collection Account or the
Reserve Account for the Notes to be redeemed).
In the case of a redemption pursuant to which a sale under Section 10.5
is to be held, on or before the Business Day next preceding the related
Redemption Date, the Servicer shall deposit with the Trustee or with the Paying
Agent an amount of money equal to the amount by which the Redemption Price is
reasonably expected to exceed the proceeds of the sale plus an amount of money
sufficient to pay the Trustee's fees and expenses reimbursable to the Trustee in
accordance with Section 7.7.
Section 10.4. NOTES PAYABLE ON REDEMPTION DATE
Notice of redemption having been given as provided in Section 10.2, the
Notes to be redeemed shall, on the applicable Redemption Date, become due and
payable at the Redemption Price and on such Redemption Date (unless the Servicer
shall default in the payment of the Redemption Price) such Notes shall cease to
bear interest. On the Redemption Date, the Holders of such Notes shall be paid
the Redemption Price by the Paying Agent; PROVIDED, HOWEVER, that installments
of principal and interest which are due on or prior to the Redemption Date shall
be payable to the Holders of such Notes registered as such on the relevant
Record Dates according to their terms and the provisions of Section 3.7.
If the Holders of any Note called for redemption shall not be so paid,
the principal shall, until paid, continue to bear interest from the Redemption
Date at the related Note Interest Rate until payment of principal is made.
Section 10.5. SALE FOR PURPOSES OF REDEMPTION
(a) By Servicer Request, the Servicer may direct the Trustee to sell the
Mortgage Loans securing the Notes called for redemption for the purpose of
redeeming the Outstanding Notes in accordance with Section 10.1. The Servicer
Request shall (i) specify the time and place of the sale, terms and the manner
in which the sale is to be conducted and (ii) be accompanied by an Officers'
Certificate certifying that no Event of Default shall be continuing. The date of
any such sale shall be the Redemption Date and the amount of the proceeds from
such sale shall equal or exceed the Redemption Price. Upon receipt of such
Servicer Request, the Trustee shall employ its best efforts to sell the Mortgage
Loans on the terms and conditions specified therein; provided, however, the
Trustee may only sell such Mortgage Loans
55
if (x) no Event of Default shall be continuing and (y) the amounts required to
have been deposited by the Servicer with the Trustee or a Paying Agent pursuant
to Section 10.3 shall have been so deposited. The Trustee shall deposit all
proceeds from such sale (net of the Trustee's fees and expenses in connection
with such sale, which fees and expenses shall not reduce the amount of such
proceeds below the Redemption Price) in the Collection Account.
(b) The Trustee shall execute and deliver an appropriate instrument of
conveyance, without recourse, warranty or representation, delivered to it by the
Servicer transferring the Company's interest in any portion of the Mortgage
Loans securing the Notes in connection with a sale thereof. In addition, the
Trustee is hereby irrevocably appointed the agent and attorney-in-fact of the
Company to transfer and convey the Company's interest in any portion of such
Mortgage Loans in connection with a sale thereof, and to take all action
necessary to effect such sale. No purchaser or transferee at such a sale shall
be bound to ascertain the Trustee's authority, inquire into the satisfaction of
any conditions precedent or to see to the application of any monies.
ARTICLE XI.
COVENANTS
Section 11.1. PAYMENT OF PRINCIPAL AND INTEREST
The Company shall duly and punctually pay the principal of and interest
on the Notes in accordance with the terms of the Notes and this Indenture.
Section 11.2. MAINTENANCE OF OFFICE OR AGENCY
The Company shall maintain an office or agency within the United States
of America where Notes may be presented or surrendered for payment, where Notes
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Notes and this Indenture
may be served. The Company hereby initially appoints the Trustee its office or
agency for each of said purposes. The Company shall give prompt written notice
to the Trustee of the location, and of any change in the location, of any such
office or agency. If at any time the Company shall fail to maintain any such
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office, and the Company hereby appoints the Trustee at its
Corporate Trust
56
Office its agent to receive all such presentations, surrenders, notices and
demands.
Section 11.3. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST
The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent shall:
(1) hold all sums held by it in respect of payments on Notes in trust for the
benefit of the Noteholders entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other obligor
upon the Notes) in the making of any payment; and
(3) at any time during the continuance of any such default, upon the written
request of the Trustee, forthwith pay to the Trustee all sums so held in trust
by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by such Paying Agent; and, upon
such payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Subject to any applicable escheat law, any money deposited with the
Trustee or any Paying Agent in trust for payment to Noteholders on any Payment
Date and remaining unclaimed for three years after such payment has become due
and payable shall be paid to the Company on Company Request; and the Holder of
such Note shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, shall thereupon cease; PROVIDED,
HOWEVER, that the Trustee or such Paying Agent, before being required to make
any such repayment, shall at the expense of the Company cause to be published
once, in a newspaper published in the English language, customarily published on
each Business Day and of general circulation in the city in which the Corporate
Trust Office is located, notice that such money remains unclaimed and
57
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
shall be repaid to the Company. The Trustee shall also adopt and employ, at the
expense of the Company, any other reasonable means of notification of such
repayment (including, but not limited to, mailing notice of such repayment to
Noteholders whose right to or interest in monies due and payable but not claimed
is determinable from the records of any Paying Agent, at the last address as
shown on the Note Register for each such Noteholder). Notwithstanding the
foregoing, nothing herein shall be deemed to require the Trustee to give or
cause the publication of any notice of the repayment of such monies to the
Company and the Trustee shall not be liable to the Noteholders or the Trust
Estate for its failure to provide or cause such notice.
Section 11.4. CORPORATE EXISTENCE
The Company shall keep in full effect its existence, rights and
franchises as a limited liability company under the laws of the State of Nevada,
shall operate in accordance with, and subject to the limitations set forth in,
its operating agreement, and shall obtain and preserve its qualification to do
business as a foreign limited liability company in each jurisdiction in which
such qualification is or shall be necessary to protect the validity and
enforceability of this Indenture or the Notes. The Company shall promptly
deliver to DCR and each Noteholder a copy of any amendment to its charter or its
operating agreement.
Section 11.5. PROTECTION OF TRUST ESTATE
The Company shall from time to time execute and deliver all such
supplements and amendments hereto (a copy of which shall be provided to the
Noteholders) and all such financing statements, continuation statements,
instruments of further assurance and other instruments, and shall take such
other action as is necessary or advisable to:
(i) Grant more effectively all or any portion of the Trust Estate;
(ii) maintain or preserve the lien of this Indenture or carry out more
effectively the purposes hereof;
(iii) perfect, publish notice of, or protect the validity of any Grant made or
to be made by this Indenture;
58
(iv) enforce any of the Mortgage Loans or, where appropriate, any security
interest in the Trust Estate and the proceeds thereof; or
(v) preserve and defend title to the Trust Estate and the rights of the Trustee
and the Noteholders therein against the claims of all persons and parties.
Section 11.6. NEGATIVE COVENANTS
So long as any Notes are Outstanding, the Company shall not:
(i) sell, transfer, exchange or otherwise dispose of any of the Trust Estate
(except as expressly permitted by Section 10.5 and except as provided in
Sections 12.6 and 12.7); or
(ii) claim any credit on, or make any deduction from, the principal or interest
payable in respect of the Notes by reason of the payment of any taxes levied or
assessed upon any of the Trust Estate; or
(iii) other than in accordance with the restrictions set forth therein, amend
its organizational documents without the consent of the Majority Holders;
provided, the Company shall not amend the organizational documents if the effect
of any such amendment would be to result in a reduction or withdrawal of the
then current rating of DCR assigned to the Notes as confirmed in writing by DCR;
or
(iv) (a) permit the validity or effectiveness of this Indenture to be impaired,
or permit this Indenture to be amended, hypothecated, subordinated, terminated
or discharged, or permit any Person to be released from any covenants or
obligations of this Indenture, except as may be expressly permitted hereby and
thereby, (b) except to the extent permitted under this Indenture, permit any
lien, charge, security interest, mortgage or other encumbrances to be created on
or extended to or otherwise arise upon or burden the Trust Estate or any part
thereof or any interest therein or the proceeds thereof or incur any
indebtedness other than the Notes, or (c) permit this Indenture to not
constitute a valid first priority perfected security interest in the Trust
Estate; or
(v) change the location of its chief executive office without thirty days' prior
written notice to the Trustee, accompanied by such evidence of actions taken as
shall be necessary to continue the perfection of the lien on the Collateral; or
59
(vi) incur any indebtedness not permitted by its operating agreement, or assume
or guaranty any indebtedness of any other entity other than the indebtedness
evidenced by the Notes; or
(vii) engage in any business not permitted by its Operating Agreement; or
(viii) obtain or carry insurance relating to the Mortgage Loans separate from
that required by the Servicing Agreement, unless the Trustee and the Noteholders
shall have the same rights with respect thereto as they have with respect to the
insurance required by the Servicing Agreement.
Section 11.7. STATEMENT AS TO COMPLIANCE
The Company shall deliver to the Trustee, the Noteholders and DCR,
within 30 days after each December 31, March 31, June 30 and September 30
(commencing June 30, 1999, with the written statement delivered on such date
covering the period from the Closing Date through June 30, 1999), a written
statement signed by the Chairman or the President or a Vice President and by the
Treasurer or an Assistant Treasurer or the Controller or an Assistant Controller
of the Company, stating, as to each signer thereof, that
(1) a review of the activities of the Company during the preceding twelve-month
period and of performance under this Indenture has been made under his
supervision and
(2) the Company has fulfilled all its obligations under this Indenture
throughout such period, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to him and the nature
and status thereof.
Section 11.8. INVESTMENT COMPANY ACT
The Company shall conduct its operations in a manner which shall not
subject it to registration as an "investment company" under the Investment
Company Act of 1940.
Section 11.9. ENFORCEMENT OF SERVICING AGREEMENT AND SALE AGREEMENT
The Company shall promptly take all actions necessary, and diligently
pursue all remedies available to it, to enforce the obligations of the Servicer
under the Servicing Agreement and TerraSun Holding, Inc. under the TerraSun Loan
Sale Agreement to secure its and the Noteholders' rights thereunder, PROVIDED
that,
60
prior to taking any action in the name of the Trustee, it shall receive
the written consent of the Trustee.
Section 11.10. TAXES
The Company shall pay or cause to be paid all taxes when due and
payable or levied against its assets, properties or income, including any
property that is part of the Trust Estate.
Section 11.11. COMPANY OWNERSHIP
The Company agrees that its books and records will reflect its
ownership of the Mortgage Loans and that such Mortgage Loans are subject to the
security of the Trustee on behalf of the Noteholders.
Section 11.12. NONCONSOLIDATION
The Company agrees that so long as any Notes are Outstanding, it will
be operated such that it will not be substantively consolidated in the
bankruptcy estate of the Parent or any Affiliate thereof and will not have its
separate existence disregarded in the event of a bankruptcy of the Parent or
Affiliate thereof. Without limiting the foregoing, the Company agrees that:
(a) it will pay its own expenses, neither the Sellers nor the Parent
will guarantee any of the Company's obligations other than pursuant to the Note
Purchase Agreement and neither the Sellers, the Parent nor any Affiliate thereof
will lend funds to the Company for the payment of expenses;
(b) it will conduct its business exclusively on its own stationery and
all correspondence by the Company will be in its own name;
(c) it will not permit the Sellers (other than the Managing Member),
the Parent or any Affiliate thereof to be involved in the daily management of
the Company; PROVIDED, HOWEVER, an officer of the Parent or any such Affiliate
shall not be prohibited from serving as an officer of the Company;
(d) except in accordance with its organizational documents, it will not
engage in any intercompany transactions with the Sellers, the Parent or any
Affiliate thereof, except as provided in the Sale Agreements, the Servicing
Agreement or this Indenture;
61
(e) it will maintain company records and books of account separate and
distinct from the Sellers' and the Parent's corporate records and the records of
any Affiliate thereof and maintain corporate formalities and separate business
offices and telephone number;
(f) the financial statements of Sun Funding, Inc., Terra Loans Corp.
and the Company will disclose that the assets of the Company are not available
to pay creditors of Sun Funding, Inc., Terra Loans Corp. or any Affiliate
thereof and will reflect the separate corporate existence of the Company;
(g) it will not act as agent for the Sellers, the Parent or any
Affiliate thereof and agrees that it will not authorize the Sellers, the Parent
or any Affiliate thereof to act as its agent, except in Sunterra Financial
Services, Inc.'s capacity as Servicer under the Servicing Agreement;
(h) its managing member shall maintain at least one Independent
Director as required in the managing member's certificate of incorporation;
(i) it will maintain its assets separate and distinct from the Sellers'
assets, the Parent's assets and the assets of any Affiliate thereof, and shall
not permit its assets to be commingled with those of the Sellers, the Parent or
any Affiliate thereof;
(j) it shall not become contractually liable for the payment of any
liability of the Sellers or the Parent; and
(k) it will not modify or amend its operating agreement with respect to
the purpose or purposes for which it is organized.
Section 11.13. REPRESENTATIONS, WARRANTIES AND COVENANTS
The Company makes the following representations, warranties and
covenants as to itself as of the Closing Date and with respect to any Subsequent
Transfer Date, as of such Subsequent Transfer Date:
(a) DUE FORMATION; VALID EXISTENCE; GOOD STANDING AND LIMITED PURPOSE.
The Company is a limited liability company duly organized and validly existing
in good standing under the laws of the jurisdiction of its formation; and is
duly qualified to do business as a foreign limited liability company and in good
standing under the laws of each jurisdiction where the character
62
of its property, the nature of its business or the performance of its
obligations under this Indenture, the Sale Agreement, the Servicing Agreement or
the Note Purchase Agreement makes such qualification necessary except where the
failure to be so qualified will not have a material adverse effect on the
business of the Company or its ability to perform its obligations under this
Indenture, the TerraSun Loan Sale Agreement, the Servicing Agreement or the Note
Purchase Agreement or any other documents or transactions contemplated hereunder
or the validity or enforceability of the Mortgage Loans.
(b) POSSESSION OF LICENSES, CERTIFICATES, FRANCHISES AND PERMITS. The
Company holds, and at all times during the term of this Indenture, the TerraSun
Loan Sale Agreement, the Servicing Agreement or the Note Purchase Agreement will
hold, all material licenses, certificates, franchises and permits from all
governmental authorities necessary for the conduct of its business and has
received no notice of proceedings relating to the revocation of any such
license, certificate, franchise or permit, which singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would materially and
adversely affect its ability to perform its obligations under this Indenture,
the TerraSun Loan Sale Agreement, the Servicing Agreement or the Note Purchase
Agreement or any other documents or transactions contemplated hereunder or the
validity or enforceability of the Mortgage Loans.
(c) AUTHORITY AND POWER. The Company has, and at all times during the
term of this Indenture will have, all requisite power and authority to own its
properties, to conduct its business, to execute and deliver this Indenture, the
TerraSun Loan Sale Agreement, the Servicing Agreement and the Note Purchase
Agreement and to perform all of its obligations under this Indenture, the
TerraSun Loan Sale Agreement, the Servicing Agreement and the Note Purchase
Agreement. The Company has all requisite power and authority to acquire, own and
Grant to the Trustee as part of the Trust Estate the Mortgage Loans.
(d) AUTHORIZATION, EXECUTION AND DELIVERY; VALID AND BINDING. This
Indenture, the TerraSun Loan Sale Agreement, the Servicing Agreement or the Note
Purchase Agreement and all other documents and instruments required or
contemplated hereby to be executed and delivered by the Company have been duly
authorized, executed and delivered by the Company and, assuming the due
execution and delivery by the other party or parties hereto and thereto,
constitute legal, valid and binding agreements enforceable against the Company
in accordance with their respective terms subject, as to the enforcement of
remedies, to
63
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforceability of creditors' rights generally applicable in the
event of the bankruptcy, insolvency or reorganization of the Company and to
general principles of equity.
(e) NO VIOLATION OF LAW, RULE, REGULATION, ETC. The execution, delivery
and performance by the Company of this Indenture, the TerraSun Loan Sale
Agreement, the Servicing Agreement or the Note Purchase Agreement and any other
documents and transactions in connection herewith to which the Company is a
party do not and will not (i) violate any of the provisions of the Certificate
of Formation or operating agreement of the Company, (ii) violate any provision
of any law, governmental rule or regulation currently in effect applicable to
the Company or its properties or by which the Company or its properties may be
bound or affected, including, without limitation, any bulk transfer laws, (iii)
violate any judgment, decree, writ, injunction, award, determination or order
currently in effect applicable to the Company or its properties or by which the
Company or its properties are bound or affected, (iv) conflict with, or result
in a breach of, or constitute a default under, any of the provisions of any
material indenture, mortgage, deed of trust, contract or other instrument to
which the Company is a party or by which it is bound or (v) result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, mortgage, deed of trust, contract or other
instrument.
(f) GOVERNMENTAL CONSENT. No consent, approval, order or authorization
of, and no filing with or notice to, any court or other governmental authority
in respect of the Company is required in connection with the authorization,
execution, delivery or performance by the Company of this Indenture, the
TerraSun Loan Sale Agreement, the Servicing Agreement or the Note Purchase
Agreement or any of the other documents or transactions contemplated hereunder.
(g) DEFAULTS. The Company is not in default under any material
agreement, contract, instrument or indenture to which the Company is a party or
by which it or its properties is or are bound, or with respect to any order of
any court, administrative agency, arbitrator or governmental body which would
have a material adverse effect on the transactions contemplated hereunder; and
no event has occurred which with notice or lapse of time or both would
constitute such a default with respect to any such agreement, contract,
instrument or indenture, or with
64
respect to any such order of any court, administrative agency, arbitrator or
governmental body.
(h) INSOLVENCY. The Company will be solvent at all relevant times prior
to, and will not be rendered insolvent by, the transfer of the Mortgage Loans to
the Trust Estate. Prior to the date hereof, the Company did not, and is not
about to, engage in any business or transaction for which any property remaining
with the Company would constitute an unreasonably small amount of capital. In
addition, the Company has not incurred debts that would be beyond the Company's
ability to pay as such debts matured.
(i) PENDING LITIGATION OR OTHER PROCEEDINGS. There is no pending or, to
the best of the Company's knowledge, threatened action, suit, proceeding or
investigation before any court, administrative agency, arbitrator or
governmental body against or affecting the Company which, if decided adversely,
would materially and adversely affect (i) the condition (financial or
otherwise), business or operations of the Company, (ii) the ability of the
Company to perform its obligations under, or the validity or enforceability of,
this Indenture, the TerraSun Loan Sale Agreement, the Servicing Agreement or the
Note Purchase Agreement or any other documents or transactions contemplated
under this Indenture, (iii) any Mortgaged Property or title of any Mortgagor to
any Mortgaged Property or (iv) the Trustee's ability to foreclose or otherwise
enforce the liens of the Mortgage Loans.
(j) ALL ELIGIBLE MORTGAGE LOANS GRANTED TO THE TRUSTEE. Each Mortgage
Loan which has been acquired by the Company and Granted to the Trustee was owned
by the applicable Seller, prior to the Company's acquisition thereof, free and
clear of all liens other than Permitted Encumbrances and was related to a
Resort.
(k) INFORMATION. No document, certificate or report furnished or
required to be furnished by the Company pursuant to this Indenture, when taken
as a whole with the other information provided by the Indenture, contains or
will contain when furnished any untrue statement of a material fact or fails or
will fail to state a material fact necessary in order to make the statements
contained therein not misleading.
(l) CONDOMINIUM UNITS COMPLETE. The condominium units related to the
Mortgage Loans in the Resorts have been issued a certificate of occupancy and
have been completed as required by all applicable state and local laws.
65
(m) DELIVERY OF INSURANCE PROCEEDS. In the event that the Company shall
have received any Insurance Proceeds, to the extent such Insurance Proceeds are
not used to rebuild or repair the related Mortgaged Property, the Company shall
promptly deposit such Insurance Proceeds into the Collection Account.
(n) NO DEFICIENCY ACCUMULATION. As of the Closing Date, the Company has
not incurred any "accumulated funding deficiency" (as such term is defined under
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
the Code) with respect to any "employee benefit plan" (as such term is defined
under ERISA) sponsored by the Company.
(o) TAXES. The Company has timely filed all tax returns (Federal, state
and local) which are required to be filed and has paid all taxes related
thereto, other than those which are being contested in good faith.
(p) PLACE OF BUSINESS. The principal place of business and chief
executive office of the Company are located at 0000 Xxxxxxxxx Xxxxx Xxxxx, Xxxxx
000-X, Xxx Xxxxx, Xxxxxx.
(q) NAME. The legal name of the Company is as set forth in this
Agreement and the Company does not use any other tradenames, fictitious names,
assumed names or "doing business as" names.
(r) SUBSIDIARIES AND CONSOLIDATION. The Company has no subsidiaries and
will be operated in such a manner so as not to be substantively consolidated in
the bankruptcy estate of the Parent or any Affiliate.
(s) NO ADVERSE CHANGE. Since its formation, there has been no change in
the business, operations, financial condition, properties or assets of the
Company which would have a material adverse effect on its ability to perform its
obligations under this Indenture or materially adversely affect the transactions
contemplated under this Indenture, the TerraSun Loan Sale Agreement, the
Servicing Agreement or the Note Purchase Agreement.
(t) SECURITIES LAWS. The Company 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.
(u) REMITTANCE TO THE SERVICER. In the event that any Mortgagor should
remit to the Company any payment or other
66
property on or in respect of a Mortgage Loan, then, not later than the Business
Day following receipt thereof, the Company shall transfer such Remittance to the
Servicer.
(v) MANAGEMENT. Other than the Managing Member, the Sellers are not
involved in the day-to-day management of the Company and the Company maintains
its assets separately from the assets of the Sellers.
(w) RATING CONFIRMATION. So long as any Notes are outstanding, the
Company shall, prior to sponsoring any trusts or issuing any other debt or
guarantees, obtain from DCR a confirmation of its ratings on the Notes.
(x) CONTINUITY OF RATING. The Company will cause DCR to continually
review the credit quality of the Notes.
(y) FORM OF MORTGAGE. Each Mortgage or deed of trust and Mortgage Note
is substantially in the form of the Mortgage and Mortgage Note attached as
Exhibit E hereto.
Section 11.14. OPINIONS AS TO TRUST ESTATE.
On or before the date which is 30 days before the earliest anniversary
of the Closing Date on which a financing statement filed in connection with the
Trust Estate expires, the Company shall furnish to each Noteholder an Opinion of
Counsel stating either that, in the opinion of such counsel, such action has
been taken with respect to the recording, filing, re-recording and re-filing of
this Indenture, any indentures supplemental hereto and any other requisite
documents, as applicable, and with respect to the execution and filing of any
financing statements and continuation statements as is necessary to maintain the
first perfected Lien and security interest created by this Indenture with
respect to the Trust Estate or stating that in the opinion of such counsel no
such action is necessary to maintain such lien and security interest.
Section 11.15. INDEMNIFICATION BY THE COMPANY.
The Company shall indemnify, defend and hold harmless the Noteholders
and the Trustee from and against any loss, liability or expense incurred by
reason of the Company's gross negligence, willful misfeasance or bad faith in
the performance of its obligations and duties hereunder, reckless disregard of
its obligations and duties hereunder or breach of any provision hereof.
67
ARTICLE XII.
ACCOUNTS, ACCOUNTINGS AND RELEASES
Section 12.1. COLLECTION OF MONEY
In accordance with the terms and conditions set forth herein, the
Trustee may demand payment or delivery of, and shall receive and collect,
directly and without intervention or assistance of any fiscal agent or other
intermediary, all money and other property payable to or receivable by the
Trustee pursuant to this Indenture and in accordance with the Servicing
Agreement. The Trustee shall hold all such money and property so received by it
as part of the Trust Estate and shall apply it as provided in this Indenture. If
any default occurs in the making of any payment or performance under any
Mortgage Loan, the Trustee, upon Company or Servicer Request may, and upon the
written request of the Holders of more than 50% of the aggregate Outstanding
Note Balance of any Class of Notes shall subject to Section 7.1, take such
action as may be appropriate to enforce such payment or performance, including
the institution and prosecution of appropriate Proceedings. Any such action
shall be without prejudice to any right to claim an Event of Default under this
Indenture and to proceed thereafter as provided in Article Six.
Section 12.2. ACCOUNTS
(a) Prior to the Closing Date, the Trustee shall open and maintain or
cause to be opened and maintained, at a depository institution (which shall
initially be LaSalle National Bank), a trust account denominated "Collection
Account -- TerraSun, L.L.C. Vacation Ownership Receivables-Backed Notes 1999-A".
Funds deposited in the Collection Account shall be held in trust for the Holders
of the Notes for the uses and purposes set forth herein. The Collection Account
shall at all times be an Eligible Account, shall relate solely to the Notes, the
Mortgage Loans and Permitted Investments and the Trustee shall have the
exclusive right to withdraw funds therefrom. The Collection Account shall be
segregated on the books and records of the Trustee, and the funds deposited
therein shall not be subject to, and shall be protected from, all claims, liens,
and encumbrances of any creditors or depositors of the Trustee (whether made
directly, or indirectly through a liquidator or receiver of the Trustee).
So long as no Servicer Event of Default shall have occurred and be
continuing, all or any portion of the Collection Account shall be invested by
the Trustee at the Servicer's
68
written direction in one or more Permitted Investments with the appropriate
maturity meeting the requirements set forth below. If the Servicer does not
direct the Trustee to invest funds deposited in the Collection Account, or if a
Servicer Event of Default shall have occurred and be continuing, such funds
shall be invested by the Trustee in Permitted Investments listed in clause (v)
of the definition of "Permitted Investments" herein. All Permitted Investments
shall be in the name of the Trustee. All income or other gain from investment of
monies deposited in the Collection Account shall be deposited in the Collection
Account immediately upon receipt thereof, and any loss resulting from Permitted
Investment shall be charged to the Collection Account. The maximum permissible
maturity or, if applicable, the latest redemption date of any Permitted
Investments made with amounts that will constitute part of the Collection
Account Amount for a particular Distribution Date shall be not later than the
Business Day preceding such Distribution Date or a Redemption Date, as
applicable; provided, HOWEVER, that if the Collection Account is maintained with
the Trustee, for Permitted Investments on which the Trustee is the obligor
(including repurchase agreements on which the Trustee in its commercial capacity
is liable as principal), such Permitted Investments may mature on such
Distribution Date. No Permitted Investment may be sold prior to its maturity or
required redemption.
Amounts held in the Collection Account which represent the final
payment due to Noteholders on the Final Distribution Date shall, to the extent
not distributed on the Final Distribution Date, be held uninvested pending
distribution to the Noteholders in accordance with this Indenture.
On any day, based on an Officer's Certificate of the Servicer, the
Trustee shall withdraw amounts specified therein and certified to have been
deposited into the Collection Account in error and remit the same to the
Servicer or as the Servicer may direct.
(b) Prior to the Closing Date, the Trustee shall establish a trust
account denominated "Reserve Account -- TerraSun, L.L.C. Vacation Ownership
Receivables-Backed Notes 1999-A" (the "Reserve Account"), which shall have the
characteristics set forth in this Section 12.2(b). Funds deposited in the
Reserve Account shall be held in trust by the Trustee for the Holders of the
Notes for the uses and purposes set forth herein. The Reserve Account shall at
all times be an Eligible Account, shall relate solely to the Notes and Permitted
Investments and the Trustee shall have the exclusive right to withdraw funds
therefrom. The Reserve Account shall be
69
segregated on the books and records of the Trustee, and the funds deposited
therein shall not be subject to, and shall be protected from, all claims, liens,
and encumbrances of any creditors or depositors of the Trustee (whether made
directly, or indirectly through a liquidator or receiver of the Trustee).
On the Closing Date, the Company shall deposit in the Reserve Account
the Initial Reserve Account Deposit. Any deposit to the Reserve Account shall be
made by wire transfer of immediately available funds in accordance with
instructions provided by the Trustee.
With respect to each Distribution Date, after making the distributions
required pursuant to clauses "first" through "thirteenth" of Section 13.1(a),
after making the distributions required pursuant to clauses "first" through
"tenth" if the Trustee has received notice from the Servicer that a Default
Trigger II has occurred and is continuing, and after making the distributions
required pursuant to clauses "first" through "eighth" if the Trustee has
received notice from the Servicer that Default Trigger III has occurred and is
continuing, the Trustee shall withdraw from the Collection Account an amount up
to any positive difference between the Requisite Reserve Amount and the amount
then on deposit in the Reserve Account, and deposit such amount in the Reserve
Account.
On the second Business Day preceding each Distribution Date, the
Trustee shall (i) withdraw from the Reserve Account (to the extent of funds on
deposit therein) an amount equal to the Shortfall Amount and (ii) upon receipt
of instruction from the Servicer pursuant to Section 2.6 of the Servicing
Agreement, withdraw from the Reserve Account (to the extent of funds on deposit
therein) an amount equal to the P&I Advances for the related Collection Period,
and deposit such amounts into the Collection Account by 5:00 p.m. New York City
time on the Business Day prior to the Distribution Date.
On the Business Day immediately preceding the first Distribution Date
following any date of determination on which the amount on deposit in the
Reserve Account exceeds the Requisite Reserve Amount after taking into account
the distributions to be made on such Distribution Date, as applicable, the
Trustee shall withdraw from the Reserve Account the amount of such excess and
deposit the same in the Collection Account for distribution in accordance with
Section 13.1(a).
On the Business Day immediately preceding the Final Distribution Date
hereunder the Trustee shall withdraw all
70
amounts then on deposit in the Reserve Account, deposit the same into the
Collection Account, and thereafter terminate the Reserve Account.
On any day, based on an Officer's Certificate of the Servicer, the
Trustee shall withdraw amounts specified therein and certified to have been
deposited into the Reserve Account in error and remit the same to the Servicer
or as the Servicer may direct.
So long as no Servicer Event of Default shall have occurred and be
continuing, all or any portion of the amounts on deposit in the Reserve Account
shall be invested by the Trustee at the Servicer's written direction in one or
more Permitted Investments with the appropriate maturity meeting the
requirements set forth below. If the Servicer does not direct the Trustee to
invest funds deposited in the Reserve Account, or if a Servicer Event of Default
shall have occurred and be continuing, such funds shall be invested by the
Trustee in Permitted Investments listed in clause (v) of the definition of
"Permitted Investments" herein. All Permitted Investments shall be in the name
of the Trustee. All income or other gain from investment of monies deposited in
the Reserve Account shall be deposited in the Reserve Account immediately upon
receipt thereof and any loss resulting from Permitted Investment shall be
charged to the Reserve Account. The maximum permissible maturity or, if
applicable, the latest redemption date of any Permitted Investments made with
amounts on deposit in the Reserve Account for a particular Distribution Date
shall be not later than two Business Days preceding such Distribution Date;
PROVIDED, HOWEVER, that if the Reserve Account is maintained with the Trustee,
for Permitted Investments on which the Trustee is the obligor (including
repurchase agreements on which the Trustee in its commercial capacity is liable
as principal), such Permitted Investments may mature on such Distribution Date;
and provided, FURTHER, that all funds invested in Permitted Investments of the
type described in clause (v) of the definition of "Permitted Investments" must
be withdrawn from such Permitted Investment no later than such Distribution Date
if such investment is managed by the Trustee, and two Business Days prior to the
Distribution Date if not managed by the Trustee. No Permitted Investment may be
sold prior to its maturity or required redemption.
Section 12.3. RELIANCE ON REPRESENTATIONS AND WARRANTIES
The Company agrees and acknowledges that the Trustee and the
Noteholders have relied and will continue to rely upon
71
each of the representations and warranties in the Granting Clause, Section 11.13
above and Section 3 of the TerraSun Loan Sale Agreement, and further agrees that
such Persons are entitled to so rely thereon. The representations and warranties
in the Granting Clause and Section 11.13 above shall survive the Grant of the
Trust Estate to the Trustee and shall continue in full force and effect,
notwithstanding any restrictive or qualified endorsement on the Mortgage Notes
and notwithstanding subsequent termination of this Indenture. The
representations and warranties in Section 11.13 above shall be unimpaired by any
review and examination of the Mortgage Files or other documents evidencing or
relating to the Mortgage Loans or any failure on the part of the Trustee to
review or examine the Mortgage Files and such other documents and shall inure to
the benefit of any permitted transferee of the Trustee.
Section 12.4. NOTICE OF INCORRECT REPRESENTATIONS AND WARRANTIES
If any party hereto during the term of this Indenture discovers, or receives
notice from the Trustee, that any of the representations or warranties contained
in Section 3 of the TerraSun Loan Sale Agreement are, in any material respect,
false, incorrect or misleading, or if any such party obtains knowledge of any
event or circumstance that would reasonably cause such party to believe that any
of such representations or warranties are, in any material respect, false,
incorrect or misleading, such party shall promptly deliver to the other parties
hereto, to DCR and the applicable Seller notice of a breach of such
representation or warranty.
Section 12.5. MISREPRESENTATIONS
If any of the representations or warranties contained in Section 3(b)
of the Sale Agreements are, in any material respect, false, incorrect or
misleading as to any Mortgage Loan, the Trustee, upon receiving notice or
otherwise obtaining knowledge of such fact, shall, in writing, request the
related Seller, at its expense, to take such action as is necessary to cause
such false, incorrect or misleading representation or warranty to be, in all
material respects, true, correct and not misleading, within 90 days following
the giving of written notice to such Seller by the Trustee of such false,
incorrect or misleading representation or warranty, or following the discovery
thereof by such Seller. Such Seller will promptly deliver written notice of any
such discovery to the Trustee. Such Seller will also promptly deliver written
notice to the Trustee as to
72
the actions taken to cure any such false, incorrect or misleading representation
or warranty.
Section 12.6. MANDATORY REPURCHASE OBLIGATION
(a) If within the applicable time period set forth in Section 12.5
above the applicable Seller fails to cure, in all material respects, any
representation or warranty with respect to any Mortgage Loan in Section 3(b) of
a Sale Agreement which is, in any material respect, false, incorrect or
misleading, then, the Company shall cause to be repurchased each Mortgage Loan
with respect to which such false, incorrect or misleading representation or
warranty was made (each, a "Defective Mortgage Loan") on the Distribution Date
following the first Record Date after the expiration of the 90-day cure period
described in Section 12.5 hereof, related to such Defective Mortgage Loan (a
"Repurchase Date").
(b) Each Defective Mortgage Loan shall be so repurchased at the
Mortgage Purchase Price therefor, which shall be paid into the Collection
Account in immediately available funds on such Repurchase Date; PROVIDED,
HOWEVER, that in the case of a Defective Mortgage Loan as to which discovery of
a breach of a representation or warranty contained in Section 3(b) of a Sale
Agreement is made, or notice thereof is given, the related Seller, at its
election, may in substitution for such Defective Mortgage Loan sell a Substitute
Mortgage Loan to the Company, which will then pledge such Substitute Mortgage
Loan to the Trustee upon the satisfaction of the following conditions:
(i) the related Seller executes and delivers an Assignment of the
Substitute Mortgage Loan to the Company or at the direction of the Company, to
the Trustee;
(ii) the related Seller delivers, or causes to be delivered, the
Mortgage Loan Documents to the Trustee; and
(iii) the related Seller, in an Officer's Certificate, confirms all
representations and warranties of Section 3 of the Sale Agreement and provides
to the Trustee copies of all necessary filings and recording. The Servicer shall
file and record such documents.
On any date of determination, the aggregate Outstanding Principal
Balance of the Substitute Mortgage Loans as of the related dates of substitution
shall not exceed 3% of the Outstanding Pool Balance as of the Cut-Off Date.
73
Upon satisfaction of such conditions, the Servicer shall add the
Substitute Mortgage Loan to, and delete the Defective Mortgage Loan from, the
Schedule of Mortgage Loans. Such substitution shall be effected prior to the
first Distribution Date that occurs more than 90 days after the related Seller
becomes aware, or should have become aware, or receives written notice from the
Trustee, of the breach referred to in Section 12.5 hereof.
(c) Upon (i) payment by the related Seller of an amount equal to the
Mortgage Purchase Price or (ii) provision by the Company of a Substitute
Mortgage Loan in accordance with Section 12.6(b), as the case may be, the
Trustee shall deliver to the related Seller such duly executed instruments as
may be necessary to release the lien of this Indenture on the Defective Mortgage
Loan. Upon the repurchase of or substitution for a Defective Mortgage Loan under
this Section 12.6, this Indenture shall terminate as to the Mortgage Loan so
repurchased or substituted. Upon such repurchase or substitution, the related
Mortgage Loan Documents shall be redelivered to the Seller.
Section 12.7. SUBSEQUENT LOANS
(a) With respect to any Collection Period in which the Trustee receives
any Upgrade Prepayments, the Company may elect to Grant one or more Subsequent
Loans during such Collection Period in accordance with the provisions of this
Section.
(b) On any Subsequent Transfer Date, provided the conditions set forth
in paragraph (c) below are satisfied and no Event of Default shall have occurred
and be continuing, the Trustee shall withdraw from the Collection Account an
amount equal to the least of (i) the aggregate Mortgage Purchase Price for the
Subsequent Loans to be Granted on such date, (ii) any amounts representing
Upgrade Prepayments then on deposit in the Collection Account and (iii) the
Remaining Substitution/Purchase Amount; and shall pay such amount to the
applicable Seller(s) on behalf of the Company.
(c) The Trustee shall only be required to withdraw and pay any amounts
referred to in paragraph (b) above, upon the satisfaction of the following
conditions on or prior to the Subsequent Transfer Date:
(i) the Company executes and delivers a Notice of Subsequent Loan(s) to
the Trustee at least two Business Days prior to the related Subsequent Transfer
Date;
74
(ii) the Company delivers, or causes the related Seller(s) to deliver,
the related Mortgage Loan Documents to the Trustee;
(iii) the Company delivers to the Trustee copies of all necessary
filings and recordings which the Servicer shall file and record;
(iv) in connection with Subsequent Loans sold by Blue Bison Funding
Corp. to TerraSun Holding, Inc., the Company delivers a release with respect to
such Subsequent Loans executed by Xxxxxx Capital Corporation; and
(v) the Company delivers a bringdown true sale opinion with respect to
such Subsequent Loans.
Section 12.8. REPORTS BY TRUSTEE TO NOTEHOLDERS AND DCR
On each Distribution Date, the Trustee shall or cause the Servicer to
report to each Holder of Notes and DCR the amount of payments to such
Noteholders which represents principal and the amount which represents interest,
and shall contemporaneously advise the Company of all such payments. The Trustee
may satisfy its obligations under this Section 12.8 by delivering (or by causing
the Servicer to deliver) the Servicer Report to each such Holder of the Notes
and DCR. Based on notice delivered by the Servicer, on or before the 30th day
prior to the Final Distribution Date, the Trustee shall provide notice to DCR
and the Holders of Notes to be paid on the Final Distribution Date for such
Notes. Such notice shall include (1) a statement that if the appropriate
payments are made on the Final Distribution Date, interest shall cease to accrue
as of the Final Distribution Date and (2) a statement that following the final
payment of all principal and accrued interest on such Notes that Holders thereof
are required to surrender the same to the Trustee within 30 days.
Section 12.9. ACCOUNTING BY TRUSTEE TO COMPANY
Within five Business Days following each Distribution Date, the Trustee
shall render to the Company and each Noteholder an accounting of:
(i) the aggregate funds deposited in each of the Collection Account and
the Reserve Account subsequent to the immediately preceding Distribution Date;
75
(ii) the amount of principal and the amount of interest paid to the
Holders of each Class of Notes;
(iii) any funds remaining in the Collection Account after (A) payments
of interest and principal as set forth pursuant to clause (ii) above and (B)
payments of all other amounts payable from the Collection Account pursuant to
Section 13.1(a), including an accounting of such payments;
(iv) any discrepancy between the aggregate amount of principal
remaining on the Notes after giving effect to the principal payment on the Notes
on such Distribution Date and the aggregate amount of principal remaining on the
Notes as set forth on the Servicer Report.
Section 12.10. TRUST ESTATE
(a) The Trustee may, and when required by the provisions of Articles
Five, Six and Twelve of this Indenture shall, execute instruments to release
property from the lien of this Indenture, or convey the Trustee's interest in
the same, in a manner and under circumstances which are not inconsistent with
the provisions of this Indenture. No party relying upon an instrument executed
by the Trustee as provided in this Article Twelve shall be bound to ascertain
the Trustee's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any monies.
(b) At the written request of the Company and upon being supplied with
appropriate forms therefor, the Trustee shall, at such time as there are no
Notes Outstanding and all amounts due under this Indenture have been paid and
the lien of the Indenture has been discharged in accordance with Section 5.1
hereof, release the Trust Estate from the lien of this Indenture.
Section 12.11. ALLOCATION OF LOSSES
On each Distribution Date, to the extent the sum of (i) amounts to be
distributed pursuant to clause "nineteenth" of Section 13.1 and (ii) amounts on
deposit in the Reserve Account, are insufficient to cover Realized Losses with
respect to the Mortgage Loans that were incurred at any time following the
Cut-off Date through the end of the related Collection Period, and in any event
that were not previously allocated pursuant to this Section 12.11 on any prior
Distribution Date, prior to the distributions to be made on such date pursuant
to Section 13.1, the Trustee shall allocate to the respective Notes as follows
the aggregate of all such Realized Losses, but only to the extent
76
that the aggregate outstanding principal balance of the Notes as of such
Distribution Date (after taking into account all of the distributions to be made
on such Distribution Date pursuant to Section 13.1), exceeds the sum of (x) the
Outstanding Pool Balance and (y) amounts then on deposit in the Reserve Account,
immediately following such Distribution Date: FIRST, to the Class D Notes, until
the remaining principal balance thereof has been reduced to zero; SECOND, to the
Class C Notes, until the remaining principal balance thereof has been reduced to
zero; and THIRD, to the Class B Notes, until the remaining principal balance
thereof has been reduced to zero; and FOURTH, to the Class A Notes, until the
remaining principal balance thereof has been reduced to zero. Any allocation of
such Realized Losses to a class of Notes shall be made by reducing the
respective principal balances thereof by the amount so allocated. All such
Realized Losses, if any, allocated to a class of Notes shall be allocated among
the respective Notes of such class, pro rata.
ARTICLE XIII.
APPLICATION OF MONIES
Section 13.1. DISBURSEMENTS OF MONIES OUT OF COLLECTION ACCOUNT
(a) On each Distribution Date, unless distributions are governed by
Section 6.6 hereof, the Trustee shall distribute, based on the information
contained in the Servicer's Report, to the extent of the amount on deposit in
the Collection Account with respect to such Distribution Date, funds in the
Collection Account as follows:
FIRST, to the Trustee, the Trustee Fee and any reasonable out-of-pocket
expenses due to the Trustee;
SECOND, to the Servicer, the Servicing Fee;
THIRD, to the Reserve Account, the amount of any unreimbursed P&I
Advances related to prior Distribution Dates;
FOURTH, to the holders of the Class A Notes, the Current Interest
Amount for such class and any Unpaid Interest Shortfalls with respect to prior
Distribution Dates;
FIFTH, to the holders of the Class B Notes, the Current Interest Amount
for such class and any Unpaid Interest Shortfalls with respect to prior
Distribution Dates;
77
SIXTH, to the holders of the Class C Notes, the Current Interest Amount
for such class and any Unpaid Interest Shortfalls with respect to prior
Distribution Dates;
SEVENTH, to the holders of the Class D Notes, the Current Interest
Amount for such class and any Unpaid Interest Shortfalls with respect to prior
Distribution Dates;
EIGHTH, to the holders of the Class A Notes, the Unpaid Principal
Shortfall for such class and the Class A Current Principal Amount;
NINTH, if Default Trigger III has occurred, to the Reserve Account, an
amount up to the difference between the amount then on deposit therein, and the
Requisite Reserve Amount;
TENTH, to the holders of the Class B Notes, the Unpaid Principal
Shortfall for such class and the Class B Current Principal Amount;
ELEVENTH, if Default Trigger II has occurred (but Default Trigger III
is not in effect), to the Reserve Account, an amount up to the difference
between the amount then on deposit therein, and the Requisite Reserve Amount;
TWELFTH, to the holders of the Class C Notes, the Unpaid Principal
Shortfall for such class and the Class C Current Principal Amount;
THIRTEENTH, to the holders of the Class D Notes, the Unpaid Principal
Shortfall for such class and the Class D Current Principal Amount;
FOURTEENTH, to the Reserve Account, an amount up to the difference
between the amount then on deposit therein, and the Requisite Reserve Amount;
FIFTEENTH, to the holders of the Class A Notes, an amount equal to, and
in reimbursement of, all Realized Losses, if any, previously allocated to the
Class A Notes and not previously reimbursed;
SIXTEENTH, to the holders of the Class B Notes, an amount equal to, and
in reimbursement of, all Realized Losses, if any, previously allocated to the
Class B Notes and not previously reimbursed;
SEVENTEENTH, to the holders of the Class C Notes, an amount equal to,
and in reimbursement of, all Realized Losses, if
78
any, previously allocated to the Class C Notes and not previously reimbursed;
EIGHTEENTH, to the holders of the Class D Notes, an amount equal to,
and in reimbursement of, all Realized Losses, if any, previously allocated to
the Class D Notes and not previously reimbursed;
NINETEENTH, to the Company, any amounts remaining in the Collection
Account.
Distributions to Noteholders shall be made by wire or other transfer of
funds pursuant to written instructions (in the case of a Noteholder that is a
corporation, signed by an authorized officer thereof) delivered to the Trustee
at least three Business Days prior to a Distribution Date, and PROVIDED,
FURTHER, that the final distribution in retirement of the Notes shall be made as
set forth in this Indenture.
(b) The Trustee and any Paying Agent on behalf of the Company shall
comply with all requirements of the Code, Treasury Regulations and applicable
state and local law with respect to the withholding from any distributions made
by it to any Noteholder of any applicable withholding taxes imposed thereon and
with respect to any applicable reporting requirements in connection therewith.
(c) To prevent backup withholding on payments made with respect to the
Notes, each Noteholder is required to provide the Trustee with (i) the
Noteholder's correct Taxpayer Identification Number ("TIN") by completing the
form set forth as Exhibit C hereto (Substitute Form W-9), certifying that the
TIN provided on the Substitute Form W-9 is correct and that (A) such Noteholder
is exempt from backup withholding, (B) the Noteholder has not been notified by
the Internal Revenue Service ("IRS") that the Noteholder is subject to backup
withholding as a result of failure to report all interest or dividends or (C)
the IRS has notified the Noteholder that the Noteholder is no longer subject to
backup withholding and (ii) if applicable, an adequate basis for exemption. A
Foreign Noteholder may qualify as an exempt recipient by submitting to the
Trustee a properly completed IRS Form W-8, signed under penalties of perjury,
attesting to that Noteholder's exempt status.
(d) The Trustee or other Note Registrar shall not permit a transfer of
a Class C or Class D Note if such transfer would result in the Company having
more than ninety-nine (99) Noteholders in aggregate, as reflected in the Note
Register, in
79
connection with the Class C or Class D Notes. In addition, no entity that is a
partnership, grantor trust or S corporation may acquire a Note if (i)
substantially all of the value of the interest of a person owning an interest in
such entity is attributable to the entity's (direct or indirect) interest in the
Note, and (ii) a principal purpose of the use of the tiered arrangement is to
permit the Company to satisfy the 100-person limitation in paragraph (h)(1)(ii)
of Section 1.7704-1 of the Treasury Regulations.
(e) The foregoing provisions of this Section 13.1 notwithstanding, any
monies deposited in the Collection Account for purposes of redeeming Notes
pursuant to Article Ten shall, subject to Section 11.3, remain in the Collection
Account until paid or set aside for the purpose of such redemption.
(f) (i) The rights of the Class B, Class C and Class D Noteholders to
receive payments on their respective Notes are expressly subordinated to the
rights of the Noteholders with earlier alphabetical class designations to
receive payments on their respective Notes.
(g) Subject to Section 2.3(d) of the Servicing Agreement, in making the
withdrawals and payments required by Section 13.1(a) and in making the reports
and accounting referred to in Section 12.8, the Trustee shall act in accordance
with the information set forth in the Servicer Report furnished it by the
Servicer for the payment of Mortgage Loans received in the related Due Period
and shall be fully protected in relying thereon, unless a Responsible Officer of
the Trustee has actual knowledge that such information is incorrect.
80
IN WITNESS WHEREOF, the Company, the Trustee and the Servicer have
caused this Indenture to be duly executed by their respective officers thereunto
duly authorized and their respective seals, duly attested, to be hereunto
affixed, all as of the day and year first above written.
COMPANY:
XXXXXXXX, X.X.X.
By: TerraSun Holding, Inc.
By:/s/ Xxxxx X. Xxxxxxxx
-----------------------
Name: Xxxxx X. Xxxxxxxx
Title: Secretary
SERVICER:
SUNTERRA FINANCIAL SERVICES, INC.
By:/s/ Xxxxx X. Xxxxxxxx
-------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Secretary
TRUSTEE AND BACK-UP SERVICER:
LASALLE NATIONAL BANK
By: /s/ Xxxxxxx Xxxx
-------------------------
Name: /s/ Xxxxxxx Xxxx
Title: Vice President
EXHIBIT A
(FORM OF ASSIGNMENT OF NOTE)
For value received the undersigned hereby sells, assigns and transfers
unto ___________________ whose social security or other tax identifying number
is _______________________ a note as hereinafter described and hereby
irrevocably constitutes and appoints ___________________, attorney, to transfer
the same on the Note Register of the Trustee with full power of substitution in
the premises.
DESCRIPTION OF NOTE:
-------------------
Class __ Note No.___ with an Outstanding Note
Balance as of the Closing Date of
$_____________ issued under that certain
Indenture dated as of March 31, 1999 among
TerraSun, L.L.C. (the "Company"), Sunterra
Financial Services, Inc. as servicer (the
"Servicer"), LaSalle National Bank, as
trustee (the "Trustee") and as back-up
servicer (the "Back-up Servicer").
[SELLER/ASSIGNOR]
BY:________________________
Name:
Title:
Dated: ____________________
NOTE: The signature to this assignment must correspond with the name as
written on the face of the Note herein described in every particular,
without alterations or enlargement or any change whatsoever.
Signature Guaranteed:
-------------------------
A-1
NOTE: Signature(s) must be guaranteed by a participant in a
signature medallion program.
A-2
EXHIBIT B
LOST NOTE AFFIDAVIT
STATE OF NEW YORK ) LOST NOTE
) SS.: AFFIDAVIT
COUNTY OF NEW YORK)
_______________________________________________ being duly sworn, deposes and
says:
That deponent is a _________________________________
That the deponent held or received the mortgage note relating to _______________
(the "Mortgage Note") at their premises located at ____________________________.
That to the best of deponent's knowledge the Mortgage Note was lost or
destroyed
[Deponent]
___________________________
Name:
Title:
EXHIBIT E
FORM OF MORTGAGE AND MORTGAGE NOTE
APPENDIX A
STANDARD DEFINITIONS
"ACH PAYMENTS" means payments of Monthly P&I received from Mortgagors
subscribing to the automatic debit option offered by the Servicer.
"ACT" has the meaning given in Section 1.2 of the Indenture.
"AFFILIATE" means with respect to any specified Person means any other
Person controlling or controlled by, or under common control with, such
specified Person. For the purposes of this definition, "CONTROL" when used with
respect to any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "CONTROLLING" or
"CONTROLLED" have meanings correlative to the foregoing.
"ASSIGNMENT" means, with respect to the Mortgage Loans, the original
instruments of assignment of such Mortgage Loans in recordable form by a Seller
in blank or in the name of the Trustee on behalf of the Noteholders.
"BACK-UP SERVICER" means LaSalle National Bank, its successors and
assigns.
"BANKRUPTCY CODE" means Title 11 of the United States Code as in effect
from time to time.
"BLUE BISON LOAN SALE AGREEMENT" means the Loan Sale Agreement, dated
as of March 31, 1999, between Blue Bison Funding Corp. and Sun Funding, Inc.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or other
day on which national banking institutions in the State of New York, the city in
which the Corporate Trust Office is located or the state in which the principal
place of business of the Servicer or, in the case of a Sub-Servicer, where such
Sub-Servicer is located, are authorized or obligated by law or executive order
to be closed.
"CHARGED-OFF MORTGAGE LOAN" means any Mortgage Loan which is or becomes
180 or more days delinquent in respect of any payment of principal or interest
or in respect of which the Servicer has received the related deed in lieu of
foreclosure, whichever is earlier.
"CLASS A CURRENT PRINCIPAL AMOUNT" means, for any Distribution Date,
the product of (x) the related Percentage Interest and (y) the Current Principal
Amount for such Distribution Date.
"CLASS A NOTE" means any Note designated as a "Class A Note" on the
face thereof, in the form set forth in Section 2.2 of the Indenture, and
executed, authenticated and delivered in accordance with the procedures set
forth therein.
"CLASS B CURRENT PRINCIPAL AMOUNT" means, for any Distribution Date,
the product of (x) the related Percentage Interest and (y) the Current Principal
Amount for such Distribution Date.
"CLASS B NOTE" means any Note designated as a "Class B Note" on the
face thereof, in the form set forth in Section 2.2 of the Indenture, and
executed, authenticated and delivered in accordance with the procedures set
forth therein.
"CLASS C CURRENT PRINCIPAL AMOUNT" means, for any Distribution Date,
the product of (x) the related Percentage Interest and (y) the Current Principal
Amount for such Distribution Date.
"CLASS C NOTE" means any Note designated as a "Class C Note" on the
face thereof, in the form set forth in Section 2.2 of the Indenture, and
executed, authenticated and delivered in accordance with the procedures set
forth therein.
"CLASS D CURRENT PRINCIPAL AMOUNT" means, for any Distribution Date,
the product of (x) the related Percentage Interest and (y) the Current Principal
Amount for such Distribution Date.
"CLASS D NOTE" means any Note designated as a "Class D Note" on the
face thereof, in the form set forth in Section 2.2 of the Indenture, and
executed, authenticated and delivered in accordance with the procedures set
forth therein.
"CLOSING DATE" means the date on which Notes are first executed,
authenticated and delivered to the Noteholders.
-2-
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLECTION ACCOUNT" means the account created, maintained and
denominated as such pursuant to Section 12.2(a) of the Indenture.
"COLLECTION ACCOUNT AMOUNT" means, with respect to any Distribution
Date and the related Collection Period, in each case to the extent deposited in
the Collection Account, (i) Collection Period P&I received during such
Collection Period, (ii) amounts paid by a Seller pursuant to Section 12.6 of the
Indenture during the period from and including the Business Day prior to the
prior Distribution Date (or, in the case of the Initial Distribution Date, from
and including the Cut-off Date) to and including the second Business Day next
preceding such Distribution Date representing the Mortgage Purchase Price with
respect to Mortgage Loans repurchased by the Company or a Seller, as applicable,
pursuant to Section 4.3 or 12.6 of the Indenture, (iii) the Redemption Price
(iv) Insurance Proceeds and Net Liquidation Proceeds received during such
Collection Period (less any amounts withdrawn by the Trustee pursuant to Section
12.7 of the Indenture), (v) the aggregate of the portions of Prepayments
described in clauses (i), (iii) and (iv) of the definition of "Prepayment"
received during such Collection Period, (vi) interest earned on amounts on
deposit in the Lock-Box Accounts and (vii) income from the investment in
Permitted Investments of amounts deposited in the Collection Account pursuant to
the preceding clauses (i)-(vi).
"COLLECTION PERIOD" means with respect to each Distribution Date, the
period from and including the first day of the month preceding the month in
which such Distribution Date occurs through and including the last day of such
month.
"COLLECTION PERIOD P&I" means, with respect to any Collection Period,
the amount equal to the aggregate of the payments of Monthly P&I received by or
on behalf of the Servicer during such Collection Period, from or on behalf of
Mortgagors.
"COMPANY" TerraSun, L.L.C., a Nevada limited liability company.
"COMPANY ORDER" and "COMPANY REQUEST": A written order or request
signed in the name of the Company by the Chairman of the Board, President, Vice
President, Treasurer, Assistant Treasurer, Controller, Assistant Controller,
Secretary, or an
-3-
Assistant Secretary of the Managing Member, and delivered to the Trustee.
"COMPARABLE PROPERTY" means a timeshare estate that (i) is not a
Mortgaged Property and (ii) entitles its owner to the same amount of time in the
same type of unit in the same Resort as the related Foreclosure Property.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is at the date hereof located at the
address provided in Section 1.3 of the Indenture hereof or at such other address
as the Trustee may designate from time to time by notice to the Noteholders, the
Company and the Servicer.
"CURRENT INTEREST AMOUNT" means (i) with respect to an Interest Accrual
Period (other than the first Interest Accrual Period) and any class of Note, the
product of the applicable Note Interest Rate and the Outstanding Note Balance of
such class of Note on the related Distribution Date (prior to the application of
distributions on such date), multiplied by a fraction, the numerator of which is
30 and the denominator of which is 360 and (ii) with respect to the first
Interest Accrual Period, and any class of Note, the product of the applicable
Note Interest Rate and the Outstanding Note Balance of such Class of Note on the
related Distribution Date (prior to the application of distributions on such
date), multiplied by a fraction, the numerator of which is the actual number of
days elapsed during such Interest Accrual Period and the denominator of which is
360.
"CURRENT INTEREST SHORTFALL" means, with respect to any Distribution
Date and any class of Note, the excess of (i) the applicable Current Interest
Amount for such Distribution Date over (ii) the amount distributed as interest
with respect to such class for such Distribution Date.
"CURRENT PRINCIPAL AMOUNT" means, with respect to any Distribution Date
other than the Final Distribution Date, an amount equal to the sum of
(a) (i) the aggregate of the respective portions of Monthly P&I and P&I
Advances allocable to principal from or on behalf of Mortgagors due during such
Collection Period,
(ii) an amount equal to the aggregate of the respective portions of
Net Liquidation Proceeds received during such Collection Period that are
allocable to principal of
-4-
the related Defaulted Mortgage Loans (other than Charged-off Mortgage Loans) and
Charged-off Mortgage Loans, and
(iii) the aggregate of the respective portions of Prepayments
allocable to principal of the related Mortgage Loans received during such
Collection Period (less any amounts withdrawn from the Collection Account by the
Trustee pursuant to Section 12.7 of the Indenture)
MINUS (b) the aggregate of the respective portions of P&I Advances
allocable to principal previously withdrawn from the Reserve Account and not
reimbursed.
On the Final Distribution Date, the Current Principal Amount shall be
an amount equal to the then current outstanding principal balance of the Notes.
"CURRENT PRINCIPAL SHORTFALL" means, with respect to any Distribution
Date and any class of Note, the excess of (i) the applicable Current Principal
Amount due for such Distribution Date over (ii) the amount distributed as
principal with respect to such class for such Distribution Date.
"CUT-OFF DATE" means March 31, 1999.
"CYPRESS POINTE II DECLARATION" means the Declaration of Condominium
for Cypress Pointe Resort II, a Condominium, dated April 19, 1996, recorded in
O.R. Book 5044, page 3557, Public Records of Orange County, Florida, as
modified, amended, supplemented and/or restated.
"DCR" means Xxxx & Xxxxxx Credit Rating Co. or its successors and
assigns. If neither such rating organization nor any successor remains in
existence, "DCR" shall be deemed to refer to such other nationally recognized
statistical rating organization or other comparable Person designated by the
Company and approved in writing by the Majority Holders, notice of which
designation shall be given to the Trustee and the Servicer, and specific ratings
of DCR herein referenced shall be deemed to refer to the equivalent ratings of
the party so designated.
"DEFAULT TRIGGER I" means, on any Distribution Date the average Default
Trigger Ratio calculated on the basis of the three immediately preceding Record
Dates exceeds 8.5% per annum.
"DEFAULT TRIGGER II" means, on any Distribution Date the average
Default Trigger Ratio calculated on the basis of the three immediately preceding
Record Dates exceeds 12.0% per annum.
-5-
"DEFAULT TRIGGER III" means, on any Distribution Date the average
Default Trigger Ratio calculated on the basis of the three immediately preceding
Record Dates exceeds 14.5% per annum.
"DEFAULT TRIGGER RATIO" means, as of each Record Date, a fraction
(expressed as a percentage), the numerator of which is the product of (i) the
Outstanding Principal Balance of all Mortgage Loans that first became Defaulted
Mortgage Loans during the related Collection Period and (ii) twelve, and the
denominator of which is the aggregate Outstanding Pool Balance on such Record
Date.
"DEFAULTED MORTGAGE LOAN" means (i) any Mortgage Loan which is 180 or
more days delinquent in respect of any payment of principal or interest, (ii)
any Mortgage Loan with respect to which the Servicer has initiated foreclosure
proceedings with respect to the related timeshare estate or has received the
related deed in lieu of foreclosure or (iii) any Mortgage Loan in respect of
which the Servicer shall, prior to the date on which such Mortgage Loan would
otherwise become a Defaulted Mortgage Loan, determine in good faith that future
payments of Monthly P&I will not be made by the Mortgagor.
"DEFAULTED MORTGAGE LOAN UNPAID PRINCIPAL AMOUNT" means, with respect
to any Distribution Date and the immediately preceding Collection Period, the
amount, if any, equal to the aggregate Outstanding Principal Balances of all
Mortgage Loans that first became Defaulted Mortgage Loans during the related
Collection Period (to the extent such principal has not previously been
distributed to Noteholders pursuant to Section 13.1 of the Indenture).
"DEFECTIVE MORTGAGE LOAN" has the meaning given in Section 12.6(a) of
the Indenture.
"DELINQUENCY TRIGGER RATIO" means, as of each Record Date, a fraction
(expressed as a percentage), the numerator of which is the Outstanding Principal
Balance of all Delinquent Mortgage Loans (excluding Defaulted Mortgage Loans)
and the denominator of which is the aggregate Outstanding Pool Balance on such
Record Date.
"DELINQUENT MORTGAGE LOAN" means, so long as such Mortgage Loan is not
a Defaulted Mortgage Loan, any Mortgage Loan with respect to which, as of the
end of a Collection Period, any payment of principal and interest under the
Mortgage Loan is 60 or more days past due by an amount in excess of $20.00.
-6-
"DISTRIBUTION DATE" means, (i) with respect to the initial Collection
Period, May 25, 1999, and (ii) thereafter the 25th day of each calendar month
or, if such date is not a Business Day, the next succeeding Business Day.
"DUE DATE" means, as to any installment of Monthly P&I, the date upon
which such installment is required to be paid pursuant to the related Mortgage
Note, without giving effect to any grace period permitted by such Mortgage Note
or the related Mortgage.
"ELIGIBLE ACCOUNT" means an account that is either (i) maintained with
a depository institution or trust company the long-term unsecured debt
obligations of which have credit ratings from DCR of "AA-" if rated by DCR, or
if not rated by DCR, from Standard & Poor's of "AA-" or from Moody's of "Aa3",
or better, or which is the principal subsidiary of a holding company the
long-term unsecured debt obligations of which are so rated or (ii) maintained
with a depository institution or trust company the commercial paper or other
short-term unsecured debt obligations of which have credit ratings in the
highest category from DCR, if rated by DCR, or if not rated by DCR, Standard &
Poor's or Xxxxx'x, or which is the principal subsidiary of a holding company the
commercial paper or other short-term unsecured debt obligations of which are so
rated, in either case which account is fully insured up to applicable limits by
the Federal Deposit Insurance Corporation; PROVIDED, HOWEVER, that so long as an
account is a trust account maintained with LaSalle National Bank and its
long-term unsecured debt obligations have credit ratings from DCR of "AA-" if
rated by DCR, or if not rated by DCR, from Standard & Poor's of "AA-" or from
Moody's of "Aa3", or better, or it is the principal subsidiary of a holding
company the long-term unsecured debt obligations of which are so rated, such
account is deemed to be an Eligible Account.
"EVENT OF DEFAULT" has the meaning provided in Section 6.1 of the
Indenture.
"FINAL DISTRIBUTION DATE" means the Distribution Date on which the
final distribution in respect of the Notes is made.
"FINAL MATURITY DATE" means March 15, 2010.
"FORECLOSURE PROPERTY" has the meaning given in Section 2.8(b) of the
Servicing Agreement.
"FOREIGN NOTEHOLDER" means a beneficial owner of Notes who is not, for
U.S. Federal income tax purposes, (i) a citizen
-7-
or resident of the U.S., (ii) an individual present in the U.S. for 183 days or
more in a taxable year, (iii) a corporation created or organized in the U.S. or
under the laws of the U.S. or the laws of any state, (iv) an estate the income
of which is includable in gross income for U.S. tax purposes regardless of its
source, or (v) a trust if a court within the U.S. is able to exercise primary
supervision over the administration of the trust and one or more U.S. persons
have the authority to control substantial decisions of the trust.
"GRAND BEACH DECLARATION" means the Declaration of Condominium for
Grand Beach Resort, a Condominium, dated as of January 13, 1995, and recorded in
Book 4844, page 2297, in Orange County, Florida, as modified, amended,
supplemented and/or restated.
"GRANT" means to grant, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, mortgage, pledge, create and grant a security
interest in and right of set-off against, deposit, set over and confirm. A Grant
of the security interest in the Mortgage Loans or of any other instrument shall
include all rights, powers and options (but none of the obligations) of the
Granting party thereunder, including, without limitation, the immediate and
continuing right to claim, collect, receive and receipt for payments in respect
of the Mortgage Loans, or any other payment due thereunder, to give and receive
notices and other communications, to make waivers or other agreements, to
exercise all rights and options, to bring proceedings in the name of the
Granting party or otherwise, and generally to do and receive anything which the
Granting party is or may be entitled to do or receive thereunder or with respect
thereto.
"GREENSPRINGS PLANTATION DECLARATION" means the Declaration of Project
and Timeshare instruments for Greensprings Plantation Resort, dated June 30,
1995, recorded in Deed Book 749, page 67, Clerk's Office of the Circuit Court
for Xxxxx City County, Virginia, as modified, amended, supplemented and/or
restated.
"INDENTURE" means the Indenture, dated as of March 31, 1999, among the
Company, the Trustee, the Back-up Servicer and the Servicer, as originally
executed and, if from time to time supplemented or amended by one or more
indentures supplemental thereto entered into pursuant to the applicable
provisions thereof, as so supplemented or amended.
-8-
"INDEPENDENT" means, when used with respect to any specified Person,
that such Person (i) is in fact independent of the Company, the Servicer, a
Seller, or any Affiliate of any of them, (ii) does not have any direct financial
interest in or any material indirect financial interest in any of the Company,
the Servicer, a Seller or an Affiliate of either of them, and (iii) is not
connected with any of the Company, the Servicer, a Seller or an Affiliate of any
of them as an officer, employee, promoter, underwriter, trustee, partner,
director or Person performing similar functions.
"INITIAL DISTRIBUTION DATE": May 25, 1999.
"INITIAL MORTGAGE LOANS" means the Mortgage Loans transferred by a
Seller or the Company, as applicable, on the Closing Date.
"INITIAL RESERVE ACCOUNT DEPOSIT" means the product of (i) the
aggregate Outstanding Note Balance on the Closing Date and (ii) 2.0%.
"INSURANCE PROCEEDS" means (i) proceeds of any insurance policy,
including property insurance policies, casualty insurance policies and title
insurance policies, and (ii) any condemnation proceeds, in each case which
relate to the Mortgage Loans or the Mortgaged Property and are paid to the
Company, the Servicer, any of their respective affiliates or to any mortgagee of
record.
"INTEREST ACCRUAL PERIOD" means, with respect to the Initial
Distribution Date, the period beginning May 4, 1999, and ending on the day
immediately preceding such Distribution Date, and with respect to any other
Distribution Date, the period beginning on the immediately preceding
Distribution Date and ending on the day immediately preceding the current
Distribution Date.
"LAKE TAHOE DECLARATION" means the Declaration of Covenants, Conditions
and Restrictions for Lake Tahoe Vacation Ownership Resort, dated as of May 1,
1996, and recorded in Book 4684, page 72, in El Dorado County, California, as
modified, amended, supplemented and/or restated.
"LATE FEE" means, with respect to any payment of Monthly P&I and the
related Due Date, the late charge payable by the related Mortgagor in accordance
with the terms of the related Mortgage Note if such payment of Monthly P&I is
received by or on
-9-
behalf of the Servicer more than the number of days specified in such Mortgage
Note following such Due Date.
"LIEN" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind.
"LIQUIDATION" means, with respect to any Defaulted Mortgage Loan or
Charged-off Mortgage Loan, the sale of the related Mortgaged Property, following
foreclosure, other enforcement action or the taking of a deed-in-lieu of
foreclosure, to a Person other than the Servicer, a Seller or the Company
(except pursuant to Section 2.8(d) of the Servicing Agreement) and the recording
of a deed of conveyance with respect thereto.
"LIQUIDATION EXPENSES" means, with respect to the Liquidation of any
Defaulted Mortgage Loan or Charged-off Mortgage Loan, reasonable out-of-pocket
expenses incurred by the Servicer in connection with such Liquidation, including
without limitation, unpaid property taxes, marketing costs incurred by the sales
agent employed by the Servicer or any of its affiliates, sales commissions
payable to such sales agent and dues or maintenance fees payable to the
condominium association or timeshare association.
"LIQUIDATION PROCEEDS" means, with respect to the Liquidation of any
Defaulted Mortgage Loan (other than Charged-off Mortgage Loan) or Charged-off
Mortgage Loan, amounts actually received in connection with such Liquidation.
"LOAN NUMBER" means, with respect to any Mortgage Loan, the number
assigned to such Mortgage Loan by the Servicer, which number is set forth in the
Schedule of Mortgage Loans.
"LOAN SALE AGREEMENTS" means collectively, the Blue Bison Loan Sale
Agreement, the SunSera Loan Sale Agreement and the TerraSun Loan Sale Agreement.
"LOCK-BOX ACCOUNT" means an account created, maintained and denominated
as such pursuant to Section 2.3(a) of the Servicing Agreement, which shall be an
Eligible Account.
"LOCK-BOX BANK" means a depository institution or any successor thereto
at which a Lock-Box Account is established.
"LOST NOTE AFFIDAVIT" means, the affidavit to be executed in connection
with any delivery of a copy of an original
-10-
Mortgage Note in lieu of such original, substantially in the form attached as
Exhibit B to the Indenture.
"MAINTENANCE FEE" means the fee denominated as the "service fee"
payable by each Mortgagor according to the terms of the related Mortgage Note on
each Due Date.
"MAJORITY HOLDERS" means the Holders of Outstanding Notes evidencing
Percentage Interests that in the aggregate equal 51% or more of the aggregate of
the denominations of all Outstanding Notes.
"MANAGING MEMBER" means TerraSun Holding, Inc., a Nevada corporation.
"MATURITY DATE" means, with respect to any Mortgage Loan, the date on
which the last payment of Monthly P&I in respect of such Mortgage Loan shall be
due and payable as specified on the Schedule of Mortgage Loans.
"MISCELLANEOUS PAYMENTS" means, with respect to any Mortgage Loan, any
amounts received from or on behalf of the related Mortgagor representing
assessments, payments relating to real property taxes, insurance premiums,
condominium association fees, Maintenance Fees and any other payments not
allocable to Monthly P&I under the Mortgages.
"MONTHLY P&I" means, with respect to any Mortgage Loan and any
Collection Period, the payment of principal and interest due in such Collection
Period pursuant to the related Mortgage Note.
"MOODY'S" means Xxxxx'x Investors Service, Inc. or its successor in
interest. If neither such rating agency nor any successor remains in existence,
"Moody's" shall be deemed to refer to such other nationally recognized
statistical rating agency or other comparable Person designated by the Company,
and approved in writing by the Majority Holders, notice of which designation
shall be given to the Trustee and the Servicer, and specific ratings of Moody's
herein referenced shall be deemed to refer to the equivalent ratings of the
party so designated.
"MORTGAGE" means the original mortgage, deed of trust or other
instrument creating a first lien on the Mortgaged Property securing a Mortgage
Loan.
"Mortgage Collateral" means, with respect to any Mortgage, all property
and rights at any time pledged to secure
-11-
such Mortgage and all proceeds thereof, together with all rights of the Company
under the Mortgage Loan Documents.
"MORTGAGE FILES" means the Mortgage Loan Documents and other papers and
computerized records customarily maintained by the Servicer in servicing
mortgage loans comparable to the Mortgage Loans.
"MORTGAGE LOAN" means each loan listed on the Schedule of Mortgage
Loans, evidenced by a Mortgage Note and secured by a Mortgage, including any
Substitute Mortgage loans and Subsequent Loans, but excluding any such loan
which has been released from the lien of the Indenture pursuant to the terms
thereof. Unless the context otherwise requires, the term "Mortgage Loan" shall
include all collateral securing such Mortgage Loan.
"MORTGAGE LOAN COUPON RATE" means, with respect to any Mortgage Loan,
the per annum rate of interest set forth in the related Mortgage Note, used to
calculate the interest payment due on such Mortgage Loan.
"MORTGAGE LOAN DOCUMENTS" means, with respect to each Mortgage Loan and
each Mortgagor:
(i) an original Mortgage Note, executed by the Mortgagor for such
Mortgage Loan, endorsed in blank (either directly on the Mortgage
Note or on an allonge affixed thereto), by an authorized officer of
the originator and showing a complete chain of endorsements from the
original payee of the Mortgage Note to the Trustee:
"Pay to the order of _____________, without recourse",
or if an original Mortgage Note is not available, a copy thereof
accompanied by an original executed Lost Note Affidavit;
(ii) an original Mortgage (or a copy thereof certified (which may be
a blanket certification) by an authorized officer of the related
originator) with evidence that such Mortgage has been recorded in
the appropriate recording office;
(iii) an original assignment of the Mortgage (which may be a part of
a blanket assignment of more than one Mortgage Loan), from the
related originator to the
-12-
Trustee, in recordable form but unrecorded, signed by an authorized
officer of originator; (or a copy thereof) referencing such Mortgage
Loan and covering the Trustee for the benefit of the Noteholder; and
(v) an original of each guarantee, assumption, modification or
substitution agreement, if any, which relates to the related
Mortgage Loan (or copy thereof certified by an officer of the
related originator to be a true and correct copy).
"MORTGAGE NOTE" means the original note or other instrument of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
"MORTGAGE PURCHASE PRICE" means, for any Mortgage Loan, the Outstanding
Principal Balance of the Mortgage Loan together with all interest thereon
accrued at the Mortgage Loan Coupon Rate but unpaid as of the end of the
Collection Period preceding the date of purchase, as calculated by the Servicer.
"MORTGAGED PROPERTY" means the timeshare estate at the Resort which
secures a Mortgage Loan.
"MORTGAGOR" means, collectively, the obligor or obligors on a Mortgage
Note.
"NET LIQUIDATION PROCEEDS" means, with respect to any Mortgage Loan,
the amount derived by subtracting from the Liquidation Proceeds the related
Liquidation Expenses.
"NOTE" means any Class A Note, Class B Note, Class C Note, or Class D
Note authenticated by the Trustee.
"NOTEHOLDER" or "HOLDER" means the Person in whose name a Note shall be
registered in the Note Register, except that, solely for the purposes of giving
consent or granting approval pursuant to the Indenture or the Servicing
Agreement, the interest evidenced by any Note registered in the name of the
Company, a Seller or the Servicer, or any Affiliate of the Company, a Seller or
the Servicer, shall not be taken into account in determining whether the
requisite percentage necessary to effect any such consent shall have been
obtained.
-13-
"NOTE INTEREST RATE" means (i) with respect to the Class A Notes, 6.27%
per annum; (ii) with respect to the Class B Notes, 6.80% per annum; (iii) with
respect to the Class C Notes, 7.87% per annum; and with respect to the Class D
Notes, 11.00% per annum, as applicable, each based on a 360-day year consisting
of twelve 30-day months.
"NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement, dated as
of April 30, 1999, among the Company and the purchasers named therein.
"NOTE REGISTER" and "NOTE REGISTRAR" mean the register maintained and
the registrar appointed pursuant to Section 3.4 of the Indenture.
"OFFICER'S CERTIFICATE" means a certificate signed by the Chairman, the
President, the Executive Vice President, a Vice President, the Treasurer, an
Assistant Treasurer, the Controller, an Assistant Controller, the Secretary or
an Assistant Secretary, of the Person delivering such certificate.
"OPINION OF COUNSEL" means a written opinion of counsel reasonably
acceptable to the Trustee (who may, unless otherwise provided herein, be counsel
to the Company or the Servicer) reasonably acceptable in form and substance to
the Trustee.
"ORIGINAL PRINCIPAL BALANCE" means, with respect to any Mortgage Loan,
the principal balance of the related Mortgage Note at its date of origination.
"OUTSTANDING": With respect to the Notes, as of the date of
determination, all Notes theretofore authenticated and delivered under the
Indenture except:
(i) Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation; and
(ii) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to the Indenture;
provided, however, that for purposes of determining whether the Holders of the
requisite principal amount of the Outstanding Notes have given any request,
demand, authorization, direction, notice, consent or waiver, Notes owned by the
Company, the Servicer or a Seller or any Affiliate of the Company, the Servicer
or a Seller shall be disregarded and deemed not to be
-14-
outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent, or waiver, only Notes which the Trustee knows to be so owned shall be
so disregarded. Notes so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Company, the Servicer or a Seller or any Affiliate of the
Company, the Servicer or a Seller.
"OUTSTANDING NOTE BALANCE" means on any date of determination and with
respect to any class of Notes, the original principal balance of the Outstanding
Notes of such class as of the Closing Date, reduced by (a) the sum of all
payments of principal paid to such class of Outstanding Notes on all prior
Distribution Dates and (b) the amount equal to (i) any Realized Losses applied
to any such class of Outstanding Notes pursuant to Section 12.11 of the
Indenture LESS (ii) (A) with respect to the Class A Notes, any payment in
reimbursement of Realized Losses pursuant to clause "FIFTEENTH" of Section 13.11
of the Indenture, (B) with respect to the Class B Notes, any payment in
reimbursement of Realized Losses pursuant to clause "SIXTEENTH" of Section 13.11
of the Indenture, (C) with respect to the Class C Notes, any payment in
reimbursement of Realized Losses pursuant to clause "SEVENTEENTH" of Section
13.11 of the Indenture, and (D) with respect to the Class D Notes, any payment
in reimbursement of Realized Losses pursuant to clause "eighteenth" of Section
13.11 of the Indenture.
"OUTSTANDING POOL BALANCE" means, as of any date of determination, the
aggregate Outstanding Principal Balance of the Mortgage Loans.
"OUTSTANDING PRINCIPAL BALANCE" means, as of any date of determination,
with respect to any Mortgage Loan, the Original Principal Balance thereof as
reduced by the amount of principal payments made by or on behalf of the related
Mortgagor (excluding P&I Advances) prior to such date of determination.
"OWNERSHIP INTEREST" means as to any Note, any ownership or security
interest in such Note as the Holder thereof and any other interest therein,
whether direct or indirect, legal or beneficial, as owner or pledgee.
"PARENT": Sunterra Corporation, a Maryland corporation.
-15-
"PAYING AGENT": LaSalle National Bank, as paying agent under the
Indenture, or if LaSalle National Bank is not also the Trustee, any successor
Trustee appointed pursuant to the Indenture.
"P&I ADVANCES" has the meaning given in Section 2.6 of the Servicing
Agreement.
"PERCENTAGE INTEREST" means, as to any class of Notes, a fraction, the
numerator of which is equal to the aggregate Outstanding Note Balance of the
Notes of such class as of the Closing Date, and the denominator of which is
equal to the aggregate Outstanding Note Balance of the Notes as of the Closing
Date.
"PERMITTED ENCUMBRANCES" means, as to any Mortgaged Property, (a) the
lien of current real property taxes, ground rents, water charges, sewer rents
and assessments not yet due and payable, (b) covenants, conditions and
restrictions, rights of way, easements and other matters of public record, none
of which, individually or in the aggregate, materially interferes with the
current use of the Mortgaged Property or the security intended to be provided by
the related Mortgage or with the Mortgagor's ability to pay his or her
obligations when they become due or materially and adversely affects the value
of the Mortgaged Property and (c) the exceptions (general and specific) set
forth in the related title insurance policy, none of which, individually or in
the aggregate, materially interferes with the security intended to be provided
by such Mortgage or with the Mortgagor's ability to pay his or her obligations
when they become due or materially and adversely affects the value of the
Mortgaged Property.
"PERMITTED INVESTMENTS" means any one or more of the following
obligations or securities:
(i) direct obligations of, or obligations fully guaranteed as to
timely payment of principal and interest by, the United States or
any agency or instrumentality thereof (having original maturities of
not more than 365 days), provided such obligations are fully backed
by the full faith and credit of the United States. Such obligations
must be limited to those instruments that have a predetermined fixed
dollar amount of principal due at maturity that cannot vary or
change. If rated, such an obligation must not have an "r" or "t"
highlighter affixed
-16-
to its rating by Standard & Poor's or the equivalent indicator
affixed by any other Rating Agency. Interest may either be fixed or
variable. If such interest is variable, interest must be tied to a
single interest rate index plus a single fixed spread (if any), and
move proportionately with that index;
(ii) repurchase obligations with respect to any security described
in clause (i) above (having original maturities of not more than 365
days), provided that the short-term deposit or unsecured debt
obligations of the party agreeing to repurchase such obligations are
rated in the highest rating category of DCR, if rated by DCR, or if
not rated by DCR, by either of Moody's or Standard & Poor's or such
lower rating as will not result in qualification, downgrading or
withdrawal of the ratings then assigned to the Notes, as evidenced
in writing by the Rating Agencies. In addition, any such item must
not have an "r" or "t" highlighter affixed to its rating by Standard
& Poor's or the equivalent indicator affixed by any other Rating
Agency, and its terms must have a predetermined fixed dollar amount
of principal due at maturity that cannot very or change. Interest
may either by fixed or variable. If such interest is variable,
interest must be tied to a single interest rate index plus a single
fixed spread (if any), and move proportionately with that index;
(iii) Notes of deposit, time deposits, demand deposits and bankers'
acceptances of any bank or trust company organized under the laws of
the United States or any state thereof (having original maturities
of not more than 365 days), the unsecured short term obligations of
which are rated in the highest rating category of DCR, if rated by
DCR, or if not rated by DCR, by either of Xxxxx'x or Standard &
Poor's or such lower rating as will not result in qualification,
downgrading or withdrawal of the ratings then assigned to the Notes,
as evidenced in writing by the Rating Agencies. In addition, any
such item must not have an "r" or "t" highlighter affixed to its
rating by Standard & Poor's or the equivalent indicator affixed by
any other Rating Agency, and its terms should have a predetermined
fixed dollar amount of principal due at maturity that cannot vary or
change. Interest may either be fixed or variable. If such interest
is variable, interest must be tied to a single interest rate index
plus a single fixed spread (if any), and move proportionately with
that index;
-17-
(iv) commercial paper (having original maturities of not more than
365 days) of any corporation incorporated under the laws of the
United States or any state thereof (or if not so incorporated, the
commercial paper is United States dollar denominated and amounts
payable thereunder are not subject to any withholding imposed by any
non-United States jurisdiction) which is rated in the highest rating
category of DCR, if rated by DCR, or if not rated by DCR, in the
highest rating category of either of Xxxxx'x or Standard & Poor's,
or such lower rating as will not result in qualification,
downgrading or withdrawal of the ratings then assigned to the Notes,
as evidenced in writing by the Rating Agencies; the commercial paper
should not have an "r" or "t" highlighter affixed to its rating by
Standard & Poor's or the equivalent indicator affixed by any other
Rating Agency, and by its terms must have a predetermined fixed
dollar amount of principal due at maturity that cannot vary or
change. Interest may either by fixed or variable. If such interest
is variable, interest must be tied to a single interest rate index
plus a single fixed spread (if any), and move proportionately with
that index;
(v) units of money market funds rated in the highest rating category
of DCR, if rated by DCR, or if not rated by DCR, AAAm by Xxxxx'x or
AAAm or AAAm-G by Standard & Poor's or the equivalent indicator
affixed by any other Rating Agency (or such lower rating as will not
result in qualification, downgrading or withdrawal of the ratings
then assigned to the Notes, as evidenced in writing by DCR) and
which seek to maintain a constant net asset value;
provided that (1) no investment described hereunder shall evidence either the
right to receive (x) only interest with respect to such investment or (y) a
yield to maturity greater than 120% of the yield to maturity at par of the
underlying obligations; and (2) that no investment described hereunder may be
purchased at a price greater than par if such investment may be prepaid or
called at a price less than its purchase price prior to stated maturity.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), limited liability company, unincorporated organization or government
or any agency or political subdivision thereof.
-18-
"PLANTATION DECLARATION" means the Declaration of Condominium for The
Plantation at Fall Creek, a Condominium, dated as of February 5, 1993, and
recorded in Book 318, pages 8179-8282, in County at Taney, Missouri, as
modified, amended, supplemented and/or restated.
"POCO DIABLO DECLARATION" means the Declaration of Dedication of
Interval Ownership for The Villas at Poco Diablo Time Shared Resort, dated as of
March 6, 1989, and recorded under Document Number 1268, pages 929-958, in
Coconino County, Arizona, as modified, amended, supplemented and/or restated.
"PORT ROYAL DECLARATION" means the Master Deed for Royal Dunes Beach
Villas at Port Royal Resort Horizontal Property Regime, dated as of April 5,
1994, and recorded in Book 698, page 940, in County of Beaufort, South Carolina,
as modified, amended, supplemented and/or restated.
"POWHATAN PLANTATION DECLARATION" means the Declaration of Project and
Timeshare instruments for Powhatan Plantation Resort, dated January 22, 1984,
recorded in Deed Book 253, page 190, Clerk's Office of the Circuit Court for
Xxxxx City County, Virginia, as modified, amended, supplemented and/or restated.
"PREPAYMENT" means, with respect to any Mortgage Loan, any of the
following: (i) payment by or on behalf of the Mortgagor of the Outstanding
Principal Balance plus all accrued interest with respect to such Mortgage Loan
in advance of its Maturity Date (exclusive of any Defaulted Mortgage Loan), (ii)
payment by the Company to the Trustee of the Mortgage Purchase Price of such
Mortgage Loan in connection with the repurchase of such Mortgage Loan pursuant
to Section 4.3 or 12.6 of the Indenture, (iii) any partial prepayment of
principal received from or on behalf of the relevant Mortgagor, (iv) any
Insurance Proceeds deposited in the Collection Account pursuant to Section
11.13(m) of the Indenture or 2.5 of the Servicing Agreement.
"PROCEEDING": Any suit in equity, action at law or other judicial or
administrative proceeding.
"RATING AGENCY" means any of DCR, Xxxxx'x or Standard & Poor's.
"REALIZED LOSS" means as of any date of determination with respect to:
(1) each Charged-off Mortgage Loan, an amount (not less than zero) equal to (a)
the unpaid principal balance of such Mortgage Loan, as of the last day of the
Collection Period (the "Realized Loss Date"), immediately preceding such date of
-19-
determination, plus (b) without taking into account the amount described in
subclause (1)(d) of this definition, all accrued but unpaid interest on such
Mortgage Loan, at the related Mortgage Loan Coupon Rate to but not including the
Due Date immediately preceding the Realized Loss Date, plus (c) any related
unreimbursed P&I Advances as of the commencement of the Collection Period in
which the Realized Loss Date occurs, together with any new related P&I Advances
made during the Collection Period in which the date of determination occurs,
minus (d) all payments and proceeds, if any, received and deposited in the
Collection Account in respect of such Mortgage Loan, during the Collection
Period immediately preceding the Realized Loss Date, including, without
limitation, Liquidation Proceeds and other payments or recoveries on account of
such Mortgage Loan; (2) each Charged-off Mortgage Loan as to which any portion
of the principal payable thereunder was canceled in connection with a bankruptcy
or similar proceeding involving the related Mortgagor or a modification, waiver
or amendment of such Mortgage Loan granted or agreed to by the Servicer pursuant
to Section 2.9 of the Servicing Agreement, the amount of such principal so
canceled; and (3) each Mortgage Loan as to which the Mortgage Loan Coupon Rate
thereon has been permanently reduced and not recaptured for any period in
connection with a bankruptcy or similar proceeding involving the related
Mortgagor or a modification, waiver or amendment of such Mortgage Loan granted
or agreed to by the Servicer pursuant to Section 2.9 of the Servicing Agreement,
the amount of the consequent reduction in the interest portion of each
successive monthly payment due thereon. Each such Realized Loss determined
pursuant to clause (3) above shall be deemed to have been incurred on the Due
Date for each affected monthly payment.
"RECORD DATE" means (i) with respect to the Initial Distribution Date,
the Closing Date and (ii) thereafter, the close of business on the last Business
Day of a Collection Period.
"REDEMPTION DATE": Any Distribution Date on which Notes are to be
redeemed pursuant to Section 10.1 of the Indenture.
"REDEMPTION PRICE": The price at which a Note is to be redeemed
pursuant to the Indenture, equal to the Outstanding Note Balance of such Note
together with interest accrued thereon to the Redemption Date at the applicable
Note Interest Rate (exclusive of installments of interest and principal maturing
on or prior to such date, payment of which shall have been made to the Holder of
such Note on the applicable Record Date or as otherwise provided in the
Indenture).
-20-
"REMAINING SUBSTITUTION/PURCHASE AMOUNT" means, with respect to any
date, an amount equal to (i) 15% of the aggregate Outstanding Principal Balance
of the Mortgage Loans as of the Cut-off Date minus (ii) the aggregate
Outstanding Principal Balance of all Substitute Mortgage Loans and Subsequent
Loans Granted to the Trustee as of their respective Subsequent Cut-off Dates.
"REMITTANCE" means cash, a wire transfer, or a check, draft or money
order.
"REPURCHASE DATE" has the meaning provided in Section 12.6(a) of the
Indenture.
"REQUISITE RESERVE AMOUNT" means, as to any Distribution Date, an
amount equal to the lesser of (i) the greater of (a) the product of (x) the then
current aggregate Outstanding Note Balance and (y) the Reserve Account
Percentage and (b) $500,000, and (ii) the then current Outstanding Note Balance.
"RESERVE ACCOUNT" has the meaning set forth in Section 12.2(b) of the
Indenture.
"RESERVE ACCOUNT PERCENTAGE" means, with respect to any Distribution
Date (i) if no Trigger Event has occurred and is continuing, 5.0%, (ii) if a
Trigger Event (other than an event described in clause (ii) of the definition of
"Trigger Event") has occurred and the Class A Notes are outstanding, until a
Trigger Event Cure has occurred, 25.0%, (iii) if a Trigger Event (other than an
event described in clause (ii) of the definition of "Trigger Event") has
occurred, the Class A Notes have been retired and the Class B Notes are
outstanding, until a Trigger Event Cure has occurred, 20.0%, (iv) if a Trigger
Event (other than an event described in clause (ii) of the definition of
"Trigger Event") has occurred and the Class A and the Class B Notes have been
retired, until a Trigger Event Cure has occurred, 15.0% and (v) if the average
Delinquency Trigger Ratio calculated as of the three immediately preceding
Record Dates, exceeds 7.0%, 10.0%.
"RESORTS" means the respective land, buildings and appurtenant rights
of Sunterra Resorts Cypress Pointe, Sunterra Resorts Greensprings Plantation,
Sunterra Resorts Sedona Springs, Sunterra Resorts Sedona Summit, Sunterra
Resorts Scottsdale Villa Mirage, Sunterra Resorts Villas at Poco Diablo,
Sunterra Resorts Villas of Sedona, Sunterra Resorts The Ridge on Sedona Golf,
Sunterra Resorts Tahoe Beach and Ski, Tahoe Seasons Resort,
-21-
Sunterra Resorts Villas on the Lake, Sunterra Resorts Villas de Santa Fe,
Sunterra Resorts The Plantation at Fall Creek, Sunterra Resorts Powhatan
Plantation, Sunterra Resorts Royal Dunes, Sunterra Resorts The Savoy on South
Beach, Embassy Vacation Resort Grand Beach, Embassy Vacation Resort Lake Tahoe
and St. Augustine Beach Club.
"RESPONSIBLE OFFICER": With respect to the Trustee, any officer within
the Corporate Trust Office of the Trustee, including any Vice President,
Assistant Vice President, Secretary or Assistant Secretary, Managing Director,
or any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
"RIDGE DECLARATION" means the Declaration of Dedication and Covenants,
Conditions, Restrictions and Easements for the Ridge at Sedona Golf Resort (A
Timeshare Project Vacation Ownership Resort), dated as of December 18, 1996, and
recorded in Book 3330, page 445, in Yavapai County, Arizona, as modified,
amended, supplemented and/or restated.
"SALE": Has the meaning specified in Section 6.15 of the Indenture.
"SALE AGREEMENTS" means the Blue Bison Loan Sale Agreement, the SunSera
Loan Sale Agreement and the TerraSun Loan Sale Agreement.
"SAVOY DECLARATION" means the Declaration of Condominium for The Savoy
on South Beach, a Condominium which is recorded in O.R. Book 17924, Page 2575,
Official Records of Dade County, Florida, as modified, amended, supplemented
and/or restated.
"SCHEDULE OF MORTGAGE LOANS" means the list of Mortgage Loans
substantially in the form attached as SCHEDULE 1 to the Indenture or Schedule A
to a Loan Sale Agreement, as the case may be, which shall be amended from time
to time to include any Substitute Mortgage Loans and any Subsequent Loans and to
delete any Mortgage Loans released from the lien of the Indenture pursuant to
the terms thereof, which list shall be available in electronic format and shall
include the following information with respect to each such Mortgage Loan as of
the Cut-off Date and each Subsequent Loan as of the Subsequent Cut-off Date:
-22-
Loan Number
Name and Mailing Address of Mortgagor
Resort
Interest Rate Per Annum
Original Principal Balance
Maturity Date
Monthly Payment Amount
Outstanding Principal Balance
"SEDONA SPRINGS DECLARATION" means the Declaration of Covenants,
Conditions, Restrictions and Easements for Sedona Springs Resort (Townhouse
Units), dated as of June 6, 1994, and recorded in Book 2846, page 370, in
Yavapai County, Arizona, as modified, amended, supplemented and/or restated.
"SEDONA SUMMIT DECLARATION" means the Declaration of Dedication and
Covenants, Conditions, Restrictions and Easements for Sedona Summit Resort, a
Timeshare Resort, dated as of January 17, 1996, and recorded in Book 3142, page
775, in Yavapai County, Arizona, as modified, amended, supplemented and/or
restated.
"SELLER" means each of SunSera Funding Corp., TerraSun Holding, Inc.,
SunTerra Corporation and its successors and assigns.
"SERVICER EVENT OF DEFAULT": has the meaning given in Section 5.1 of
the Servicing Agreement.
"SERVICER" means, initially, Sunterra Financial Services, Inc., in its
capacity as the Servicer of the Mortgage Loans under Section 2.1 and,
thereafter, any successor servicer pursuant to Section 4.2(b), 4.4 or 5.2 of the
Servicing Agreement.
"SERVICER REPORT" means the report substantially in the form of EXHIBIT
A to the Servicing Agreement provided by the Servicer to the Trustee on each
Servicer Report Date pursuant to Section 3.1 of the Servicing Agreement.
"SERVICER REPORT DATE" means the twentieth day of each month in which a
Distribution Date occurs; PROVIDED, HOWEVER, that, if such twentieth day is not
a Business Day, the Servicer Report Date shall be the Business Day immediately
following such twentieth day.
"SERVICER REQUEST": A written order or request signed in the name of
the Servicer by its Chairman of the Board, president or a Vice President, and by
its Treasurer, an Assistant
-23-
Treasurer, Controller, an Assistant Controller, Secretary, or an Assistant
Secretary and delivered to the Trustee.
"SERVICING AGREEMENT": The Servicing Agreement, dated as of March 31,
1999, entered into by and among the Company, the Servicer, the Trustee and the
Back-up Servicer, as the same may be amended from time to time in accordance
with the provisions thereof.
"SERVICING FEE" means, with respect to any Distribution Date and the
related Collection Period, the product of (i) one twelfth, (ii) the Servicing
Fee Percent and (iii) the Outstanding Pool Balance on such Distribution Date
prior to the application of amounts to be distributed on such Distribution Date.
"SERVICING FEE PERCENT" means 1% per annum.
"SERVICING OFFICER" means any Vice President, Assistant Vice President,
Secretary, Assistant Secretary, or any other officer or assistant officer of the
Servicer or a Subservicer essentially performing functions similar to those
performed by persons who at the time shall be such officers, respectively, or to
whom any corporate matter is referred because of his or her knowledge of, and
familiarity with, the particular subject, and who is involved in, or responsible
for, the administration and servicing of the Mortgage Loans whose name appears
on a list of servicing officers furnished to the Trustee by the Servicer or a
Subservicer, as applicable, as such list may be amended or supplemented from
time to time.
"SHORTFALL AMOUNT" means, with respect to any Distribution Date, the
amount, if any, by which the amounts required to be distributed pursuant to
clauses "first" through "thirteenth" of Section 13.1(a) (excluding any amounts
to be deposited in the Reserve Account) of the Indenture exceed the amount on
deposit in the Collection Account with respect to such Distribution Date.
"ST. AUGUSTINE DECLARATION" means the Declaration of Condominium of The
Beach Club at St. Augustine Beach and Tennis Resort, a Condominium, dated March
17, 1984, recorded in O.R. Book 633, page 148, Public Records of St. John's
County, Florida, as modified, amended, supplemented and/or restated.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a
division of The XxXxxx-Xxxx Companies, Inc., or its successor in interest. If
neither such rating agency nor any successor remains in existence, "Standard &
Poor's" shall be
-24-
deemed to refer to such other nationally recognized statistical rating agency or
other comparable Person designated by the Company and approved in writing by the
Majority Holders, notice of which designation shall be given to the Trustee and
the Servicer, and specific ratings of Standard & Poor's herein referenced shall
be deemed to refer to the equivalent ratings of the party so designated.
"STATED MATURITY DATE" means the Maturity Date of the Mortgage Loan
which, as of the Cut-off Date, has the longest remaining amortization term.
"SUBSEQUENT CUT-OFF DATE" means with respect to any Substitute Mortgage
Loan and Subsequent Loans, the close of business on the last day of the month
preceding the month in which such Substitute Mortgage Loans and Subsequent Loans
are Granted to the Trustee for the benefit of the Noteholders.
"SUBSEQUENT LOANS" means the Mortgage Loans Granted to the Trustee
pursuant to Section 12.7 of the Indenture, each of which (i) bears a fixed rate
of interest, (ii) has a Mortgage Loan Coupon Rate at least equal to the Weighted
Average Coupon Rate, (iii) has a Maturity Date which is no later than the Stated
Maturity Date, (v) does not cause a breach of the representations and warranties
in the Indenture and the TerraSun Loan Sale Agreement, (vi) is not more than
thirty days past due with respect to any payment of interest or principal as of
the immediately preceding Record Date, (vii) has not been more than 90 days past
due with respect to any payment of interest or principal on more than one Record
Date during the preceding 12 months, (viii) has not been in default, (ix) the
related mortgagor (or successor thereto) was a Mortgagor as of the Cut-off Date
and (x) relates to one of the Resorts.
"SUBSEQUENT TRANSFER DATE" means the last Business Day of each
Collection Period.
"SUBSERVICER" means any Person which is subservicing one or more of the
Mortgage Loans pursuant to Section 2.2 or Section 5.2(c) of the Servicing
Agreement.
"SUBSERVICING AGREEMENT" means an agreement between the Servicer or the
Trustee and a Subservicer relating to the servicing of the Mortgage Loans.
"SUBSTITUTE MORTGAGE LOAN" means a loan substituted for a Mortgage Loan
having missing or defective documentation pursuant to Section 4.3 of the
Indenture or for a Defective
-25-
Mortgage Loan pursuant to Section 12.6(b) of the Indenture: (i) having as of the
time of substitution a principal balance, after deduction of the principal
portion of the monthly payment due in the month of substitution equal to or
greater than the Outstanding Principal Balance of the Mortgage Loan for which it
is being substituted, (ii) having a Mortgage Loan Coupon Rate equal to or
greater than the Mortgage Loan Coupon Rate of the Mortgage Loan for which it is
being substituted, (iii) otherwise satisfying the requirements of Section 12.6
of the Indenture, (iv) having a Maturity Date which is no later than the Stated
Maturity Date, (v) not causing a breach of the representations and warranties in
the Indenture and the TerraSun Loan Sale Agreement, (vi) not being more than
thirty days past due with respect to any payment of interest or principal as of
the immediately preceding Record Date, (vii) having not been more than 90 days
past due with respect to any payment of interest or principal on more than one
Record Date during the preceding 12 months and (viii) relating to one of the
Resorts.
"SUNSERA LOAN SALE AGREEMENT" means the Loan Sale Agreement, dated as
of March 31, 1999, between SunSera Funding, Corp. and TerraSun Holding, Inc.
"TAHOE BEACH DECLARATION" means the Declaration of Vacation Plan (The
Tahoe Beach and Ski Club), dated as of July 16, 1984, and recorded in Book 2319,
pages 158-226, in El Dorado County, California, as modified, amended,
supplemented and/or restated.
"TAHOE SEASONS DECLARATION" means the Declaration of Covenants,
Conditions and Restrictions of The Tahoe Seasons Resort, dated as of November
28, 1983, and recorded in Book 2232, page 431, in El Dorado County, California,
as modified, amended, supplemented and/or restated.
"TERRASUN LOAN SALE AGREEMENT" means the Loan Sale Agreement, dated as
of March 31, 1999, between TerraSun, L.L.C. and TerraSun Holding, Inc.
"TRANSACTION DOCUMENTS" mean the Note Purchase Agreement, the
Indenture, the Servicing Agreement and Sale Agreements.
"TRIGGER EVENT" means on any Distribution Date either (i) the
occurrence of Default Trigger I, Default Trigger II or Default Trigger III or
(ii) the average Delinquency Trigger Ratio as of the three immediately preceding
Record Dates, exceeds 7.0%.
-26-
"TRIGGER EVENT CURE" means (i) with respect to any Trigger Event which
has occurred (other than a Trigger Event in clause (ii) below) (A) such Trigger
Event has not continued for a period of three consecutive months, (B) all
amounts in respect of distributions due to the Class A, Class B, Class C and
Class D Notes as of such date have been paid or such amounts are on deposit in
the Reserve Account, (C) the Requisite Reserve Amount (without taking into
account such Trigger Event) is on deposit in the Reserve Account and (D) no
other Trigger Event has occurred, and
(ii) with respect to any Trigger Event that is of a Trigger Event Type
that has occurred and has been cured at least once since the Closing Date in
accordance with clause (i) above, (A) with respect to the Trigger Event related
to Default Trigger I, the average Default Trigger Ratio calculated on the basis
of the three immediately preceding Record Dates does not exceed 7.5%, with
respect to the Trigger Event related to Default Trigger II for a period of three
consecutive months, the average Default Trigger Ratio calculated on the basis of
the three immediately preceding Record Dates does not exceed 11.0% for a period
of three consecutive months, and with respect to the Trigger Event related to
Default Trigger III, the average Default Trigger Ratio calculated on the basis
of the three immediately preceding Record Dates does not exceed 13.5% for a
period of three consecutive months, (B) all amounts in respect of distributions
due to the Class A, Class B, Class C and Class D Notes as of such date have been
paid or such amounts are on deposit in the Reserve Account, (C) the Requisite
Reserve Amount (without taking into account such Trigger Event) is on deposit in
the Reserve Account and (D) no other Trigger Event has occurred. For purposes of
this description, "Trigger Event Type" shall mean either Default Trigger I,
Default Trigger II or Default Trigger III, as the case may be.
"TRUST ESTATE" means the property of every description Granted pursuant
to the "Granting Clauses" of the Indenture and all collections, distributions
and proceeds in respect thereof.
"TRUSTEE" means, initially, LaSalle National Bank, and, thereafter, any
successor trustee pursuant to Section 7.9 of the Indenture.
"TRUSTEE FEE" means, with respect to each Distribution Date, the
product of (i) one twelfth, (ii) two basis points and (iii) the Outstanding Pool
Balance on such Distribution Date prior to the application of amounts to be
distributed on such Distribution Date.
-27-
"UCC": The Uniform Commercial Code as enacted in the relevant state.
"UNPAID INTEREST SHORTFALL" means, with respect to any Distribution
Date and any class of Notes, the sum of (i) the Current Interest Shortfall and
(ii) the aggregate of the outstanding Current Interest Shortfalls incurred prior
to such Distribution Date.
"UNPAID PRINCIPAL SHORTFALL" means, with respect to any Distribution
Date and any class of Notes, the sum of (i) the Current Principal Shortfall and
(ii) the aggregate of the outstanding Current Principal Shortfalls incurred
prior to such Distribution Date.
"UPGRADE PREPAYMENT" means, with respect to any Mortgage Loan prepaid
in full by or on behalf of the related Mortgagor in connection with the purchase
of an additional Vacation Interval or a more expensive Vacation Interval, the
prepayment of principal received by the Trustee.
"USAP" means the Uniform Single Attestation Program for Mortgage
Bankers.
"VACATION INTERVAL" means a fee vacation ownership interest or
timeshare interest at or in a Resort.
"VILLAS DE SANTA FE DECLARATION" means the Declaration for Villas de
Santa Fe, a Condominium, recorded in Book T462, page 195-294, Records of Santa
Fe County, New Mexico, as modified, amended, supplemented and/or restated.
"VILLA MIRAGE DECLARATION" means the Declaration of Dedication and
Covenants, Conditions, Restrictions and Easements for Scottsdale Villa Mirage
Resort (Interval Ownership), dated as of February 27, 1996, and recorded under
Document Number 96-0156603, in Maricopa County, Arizona, as modified, amended,
supplemented and/or restated.
"VILLAS OF SEDONA DECLARATION" means the Declaration of Dedication and
Covenants, Conditions, Restrictions and Easements for Villas of Sedona, dated as
of September 11, 1992, and recorded in Book 2531, page 991, in Yavapai County,
Arizona, as modified, amended, supplemented and/or restated.
"VILLAS ON THE LAKE DECLARATION" means the Time Share Declaration of
Covenants and Restrictions for Colony Place Interval Ownership Plan known as
Villas On The Lake Resort, dated
-28-
as of May 30, 1996, and recorded under Document Number 9632539, in Xxxxxxxxxx
County, Texas, as modified, amended, supplemented and/or restated.
"WEIGHTED AVERAGE COUPON RATE" means, with respect to any Distribution
Date, the per annum rate of interest equal to the average, expressed as a
percentage and rounded to two decimal places, of the Mortgage Loan Coupon Rates
of all of the Mortgage Loans that were outstanding at the beginning of the
Collection Period immediately preceding such Distribution Date (or as of the
Cut-off Date with respect to the first Distribution Date), weighted on the basis
of their respective Outstanding Principal Balances as of the beginning of such
Collection Period.
"YEAR 2000 PROBLEM" means the risk that computer applications will be
unable to perform properly, including performance of date-sensitive functions
involving certain dates after December 31, 1999.
-29-
