<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
----------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended September 30, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
COMMISSION FILE NUMBER 0-29114
----------------
VISTANA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-3415620
(STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NUMBER)
8801 VISTANA CENTRE DRIVE
ORLANDO, FL 32821
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(407) 239-3100
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
----------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Number of shares outstanding of the issuer's Common Stock, par value $.01 per
share, as of November 2, 1998: 21,188,271 shares.
This quarterly report on Form 10-Q contains 20 pages, of which this is page 1.
1
<PAGE>
VISTANA, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets, September 30, 1998
(unaudited) and December 31, 1997 Page 3
Condensed Consolidated Statements of Income for the three month
periods ended September 30, 1998 and 1997 (unaudited) Page 4
Condensed Consolidated Statements of Income for the nine month
periods ended September 30, 1998 and 1997 (unaudited) Page 5
Condensed Consolidated Statements of Cash Flow for the nine
month periods ended September 30, 1998 and 1997 (unaudited) Page 6
Notes to Condensed Consolidated Financial Statements (unaudited) Page 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations Page 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings Page 19
Item 2. Changes in Securities Page 19
Item 3. Defaults upon Senior Securities Page 19
Item 4. Submission of Matters to a Vote of Security Holders Page 19
Item 5. Other Information Page 19
Item 6. Exhibits and Reports on Form 8-K Page 19
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISTANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
(unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 16,078 $ 9,878
Restricted cash 28,133 9,196
Customer mortgages receivable, net 208,930 155,048
Other receivables, net 7,699 4,953
Inventory of Vacation Ownership Interests 47,931 27,271
Construction in progress 24,248 17,026
-------- --------
Total Vacation Ownership Interests 72,179 44,297
-------- --------
Prepaid expenses and other assets 22,309 15,021
Land held for development 23,116 13,840
Intangible assets, net 19,544 17,275
Property and equipment, net 39,585 17,701
-------- --------
Total Assets $437,573 $287,209
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 15,222 $ 9,276
Income taxes payable 1,445 1,927
Accrued compensation and benefits 11,122 9,847
Customer deposits 26,138 9,423
Deferred income taxes 23,005 17,535
Other liabilities 9,735 6,265
Notes and mortgages payable 210,644 109,547
-------- --------
Total Liabilities 297,311 163,820
Minority interest 2,608 3,984
Shareholders' Equity
Common stock, $.01 par value:
Authorized 100,000,000 shares
Issued and outstanding 21,163,181 shares and 21,007,630
at September 30, 1998 and December 31, 1997, respectively 212 210
Additional paid-in capital 110,510 107,341
Retained earnings 26,932 11,854
-------- --------
Total Shareholders' Equity 137,654 119,405
-------- --------
Total Liabilities and Shareholders' Equity $437,573 $287,209
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
VISTANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------
1998 1997
----------- -----------
<S> <C> <C>
Revenues:
Vacation Ownership Interest sales $ 51,354 $ 28,632
Interest 6,943 4,619
Resort 5,299 4,378
Telecommunications 2,549 1,968
Other 1,294 115
----------- -----------
Total Revenues 67,439 39,712
----------- -----------
Costs and operating expenses:
Vacation Ownership Interest cost of sales 11,942 6,327
Sales and marketing 23,430 12,229
Interest expense--treasury 2,352 1,729
Provision for doubtful accounts 3,807 1,909
Resort 4,640 3,638
Telecommunications 2,070 1,566
General and administrative 4,452 3,227
Depreciation and amortization 1,775 751
Interest expense--other 1,487 283
Other 1,965 782
----------- -----------
Total Costs and Operating Expenses 57,920 32,441
----------- -----------
Operating income 9,519 7,271
Excess value recognized 21 18
Minority interest 797 7
----------- -----------
Income before income taxes 10,337 7,296
Provision for income taxes (3,928) (2,753)
----------- -----------
Net Income 6,409 $ 4,543
=========== ===========
Per Share Data:
Basic
Net income (loss) per share $ 0.30 $ 0.24
Weighted average number of shares outstanding 21,147,182 18,833,750
=========== ===========
Diluted
Net income (loss) per share $ 0.30 $ 0.24
Weighted average number of shares outstanding 21,383,891 19,141,904
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
VISTANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------
1998 1997
----------- -----------
<S> <C> <C>
Revenues:
Vacation Ownership Interest sales $ 127,485 $ 68,715
Interest 19,182 13,542
Resort 15,379 12,427
Telecommunications 6,650 5,164
Other 3,480 361
----------- -----------
Total Revenues 172,176 100,209
----------- -----------
Costs and operating expenses:
Vacation Ownership Interest cost of sales 28,362 15,603
Sales and marketing 60,567 30,516
Interest expense--treasury 6,623 4,858
Provision for doubtful accounts 9,433 4,717
Resort 13,216 10,201
Telecommunications 5,377 4,146
General and administrative 13,800 8,184
Depreciation and amortization 4,436 2,164
Interest expense--other 2,302 1,355
Other 5,200 2,252
----------- -----------
Total Costs and Operating Expenses 149,316 83,996
----------- -----------
Operating income 22,860 16,213
Excess value recognized 83 55
Minority interest 1,376 57
----------- -----------
Income before income taxes and extraordinary item 24,319 16,325
Provision for income taxes (9,241) (5,555)
Non-recurring charge associated with the change of tax status - (13,201)
----------- -----------
Income (Loss) before extraordinary item 15,078 (2,431)
Extraordinary item early extinguishment of debt (net of tax) - (825)
----------- -----------
Net Income (Loss) $ 15,078 $ (3,256)
=========== ===========
Per Share Data:
Basic
Income (Loss) per share before extraordinary item $ 0.71 $ (0.14)
Extraordinary item $ - $ (0.04)
----------- -----------
Net income (loss) per share $ 0.71 $ (0.18)
=========== ===========
Weighted average number of shares outstanding: 21,091,191 17,777,949
=========== ===========
Diluted
Income (Loss) per share before extraordinary item $ 0.70 $ (0.14)
Extraordinary item $ - $ (0.04)
----------- -----------
Net income (loss) per share $ 0.70 $ (0.18)
----------- -----------
Weighted average number of shares outstanding: 21,533,569 17,777,949
=========== ===========
Pro Forma Share Data:
Income before income taxes $ 16,325
Income tax provision ( 6,204)
-----------
Net income $ 10,121
===========
Net income per share $ 0.57
===========
Weighted average number of shares outstanding 17,777,949
===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
VISTANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------------
1998 1997
--------- --------
<S> <C> <C>
Operating activities
Net income (loss) $ 15,078 $ (3,256)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization expense 4,436 2,164
Amortization of discount on customer mortgages receivable (1,236) (2,296)
Provision for doubtful accounts 9,433 4,717
Minority interest (1,376) (57)
Deferred income taxes 5,470 16,737
Changes in operating assets and liabilities
Other receivables, net (2,746) (649)
Vacation ownership interests (37,158) (14,585)
Prepaid expenses and other assets (8,751) (3,637)
Accounts payable and accrued liabilities 5,946 3,015
Income taxes payable (482) --
Accrued compensation and benefits 1,275 (909)
Customer deposits 16,715 4,488
Other liabilities 3,468 708
--------- --------
Net cash provided by operating activities $ 10,072 $ 6,440
--------- --------
Investing activities
Expenditures for land, property and equipment $ (23,942) $ (1,870)
Business acquisition (1,111) (23,885)
Origination of customer mortgages receivable (62,079) (25,439)
Additions to restricted cash (18,937) (3,294)
Beginning cash balance of business acquisition -- 333
--------- --------
Net cash used in investing activities $(106,069) $(54,155)
--------- --------
Financing activities
Proceeds from notes and mortgages payable $ 262,495 $ 81,601
Payments on notes and mortgages payable (161,399) (78,029)
Proceeds from public offering -- 51,615
Payments of public offering costs -- (2,150)
Equity distributions/redemption -- (2,245)
Proceeds from option exercises 839 --
Proceeds from employee stock purchase plan 262 --
--------- --------
Net cash provided by financing activities $ 102,197 $ 50,792
--------- --------
Net increase in cash and cash equivalents $ 6,200 $ 3,077
Cash and cash equivalents, beginning of period 9,878 6,134
--------- --------
Cash and cash equivalents, end of period $ 16,078 $ 9,211
========= ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 7,370 $ 5,982
========= ========
Cash paid during the period for taxes $ 4,235 $ 1,512
========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
VISTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. General
Vistana, Inc. and its consolidated subsidiaries (the "Company") generate
revenues from the sale and financing of Vacation Ownership Interests ("VOI's")
in its resort properties which typically entitle the buyer to ownership of a
fully-furnished unit for a one week period on an annual or an alternate-year
basis. The Company's principal operations consist of (1) constructing,
furnishing, marketing, selling and financing the sale of VOI's, and (2) managing
the operations of its resorts and related amenities. The Company sells VOI's to
both domestic and foreign purchasers. All contracts relating to the sale of
VOI's are denominated in U. S. dollars.
The condensed consolidated financial statements shown herein for the Company and
its consolidated subsidiaries for 1997 include the operations of its
predecessors in interest. The Company became the parent company for all of the
operations of its predecessors in connection with its initial public offering
(the "Initial Offering") completed on February 28, 1997. At September 30, 1998
and 1997, the consolidated financial statements of the Company include the
accounts of the Company and its consolidated subsidiaries and two partnerships
between one or more subsidiaries and unaffiliated third party partners wherein
the Company exercises operational and financial control over such partnerships.
Interests of unaffiliated third parties are reflected as minority interests.
The condensed consolidated financial statements of the Company as of and for the
three months and nine months ended September 30, 1998 have not been audited. In
the opinion of management, the unaudited condensed consolidated financial
statements include all adjustments and accruals (consisting of normal recurring
adjustments) necessary to present fairly the Company's consolidated financial
position at September 30, 1998 and the consolidated results of its operations
for the three months and nine months ended September 30, 1998 and 1997. Results
for interim periods are not necessarily indicative of the results to be expected
during the remainder of the current year or for any future period. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted or condensed. All significant intercompany accounts and transactions
have been eliminated in consolidation. The accounting policies used in preparing
these condensed consolidated financial statements are the same as those
described in the Company's Annual Report on Form 10-K and the consolidated
financial statements incorporated by reference therein.
Note 2. Effect of New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
Share" which simplifies the calculation of earnings per share. Basic earnings
per share ("EPS") excludes dilution and is computed by dividing income available
to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue Common Stock were
exercised and shared in the earnings of the Company. The Company adopted this
Standard in December 1997 with prior interim periods restated as required. For
the three months and the nine months ended September 30, 1998, approximately 0.2
million and 0.4 million net shares, respectively, relative to options granted
were considered dilutive after giving effect for taxes and the application of
the treasury stock method and were included in the respective diluted EPS
calculations. An additional 0.2 million and 0.03 million net shares,
respectively, were considered anti-dilutive and therefore excluded from the
respective diluted EPS calculations.
In 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income" which
addresses the reporting requirements for presenting comprehensive income in
interim and annual financial statements. This Statement requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. Compliance with this
Statement is effective for fiscal years beginning after December 31, 1997. For
the three months and nine months ended September 30, 1998, the Company had no
amounts considered as "other" comprehensive income in accordance with SFAS No.
130. Therefore, comprehensive income is equivalent to net income as reported on
the face of the statement of income.
In June 1997, the FASB issued SFAS No. 131 "Disclosures About Segments of an
Enterprise and Related Information" which establishes standards for the way
public business enterprises are to report information about operating segments
in annual financial statements. This Statement requires reporting of selected
information about operating segments. This Statement is
7
<PAGE>
effective for fiscal years beginning after December 15, 1997, although it is not
required for interim financial statements in the initial year of application.
This Statement will not have a material impact on the Company.
On April 3, 1998, the Accounting Standards Executive Committee ("AcSEC") of the
American Institute of Certified Public Accountants issued Statement of Position
98-5, "Reporting on the Costs of Start-up Activities" (SOP 98-5). SOP 98-5 is
applicable for all nongovernmental entities and requires that costs of start-up
activities, including organization costs, be expensed as incurred. Except for
certain specified investment companies, SOP 98-5 is effective for financial
statements for fiscal years beginning after December 15, 1998, with earlier
application permitted. The Company's current accounting policy is to capitalize
pre-opening costs and amortize them generally over a one-year period. The effect
of initially applying the provisions of SOP 98-5 will be reported as a change in
accounting principle at the beginning of the period of adoption and thereafter
all such costs will be expensed as incurred. Amounts capitalized as pre-opening
costs as of September 30, 1998, were approximately $0.6 million.
In March 1998, the AcSEC issued SOP 98-1 "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 is applicable to all
nongovernmental entities and requires that external direct costs of materials
and services incurred in developing or obtaining internal use software, payroll
and payroll-related costs for employees who are directly associated with and who
devote time to the internal use software project, and interest costs be
capitalized. All other costs should be expensed as incurred. SOP 98-1 is
effective for financial statements for financial statements for fiscal years
beginning after December 15, 1998 with earlier application permitted. This
Statement will not have a material impact on the Company.
Note 3. Capital Transactions and Basis of Presentation
The Company became the parent for all of the operations of its predecessors in
connection with the Initial Offering. At the time of the Initial Offering, each
of the owners of the predecessor entities (the "Principal Shareholders")
transferred to the Company all of the existing common stock and partnership
interests owned by them in exchange for 14.2 million shares (20 shares of the
Common Stock of Vistana, Inc. were outstanding at the time of the Initial
Offering) of the Company (the "Formation Transactions"). A total of 5.6 million
shares of the Common Stock of the Company were offered (4.6 million shares by
the Company and 0.9 million shares by the Principal Shareholders) to the public
in the Initial Offering. In addition, in connection with the Initial Offering
and the Formation Transactions, former equity holders of the Company's
predecessor corporations and limited partnerships received a distribution of
approximately $2.6 million, $0.3 million of which represented the balance of
such holders' federal and state income tax liability attributable to their
ownership of such entities through the date of the Initial Offering, and $2.3
million of which represented the retained earnings of the Company's predecessor
corporations and limited partnerships for which such holders had previously paid
income tax. The Formation Transactions were accounted for as a reorganization of
entities under common control in a manner similar to a pooling of interests.
Accordingly, the net assets of the predecessor corporations and limited
partnerships were recorded at the predecessor entities' basis.
The majority of the consolidated subsidiaries were formed in 1991 by the
principal shareholders to acquire and own, either directly or indirectly, the
assets and certain liabilities of the predecessor operating entities from the
previous owner. The consolidated financial statements shown herein for the
Company and its consolidated subsidiaries for 1997 include the operations of its
predecessors in interest.
On September 16, 1997, the Company completed the acquisition of entities
comprising The Success Companies, Success Developments, L.L.C. and Points of
Colorado, Inc. (the "Business Acquisition"). The purchase method of accounting
was followed in accounting for this transaction and, therefore, operating
results of the acquired entities is included in the Company's results since the
acquisition date. The goodwill associated with the Business Acquisition is being
amortized on a straight-line basis over 20 years. During the nine month period
ended September 30, 1998, approximately $2.1 million of non-cash additions to
goodwill were recorded in connection with the issuance of contingent shares to
the selling parties relative to the achievement of certain quarterly operating
results.
Pro forma (unaudited) financial data presented on the face of the condensed
consolidated statement of income for the nine months ended September 30, 1997
reflect the elimination of the non-recurring charge for deferred taxes
pertaining to the predecessor entities relative to all years prior to 1997.
8
<PAGE>
Note 4. Customer Mortgages Receivable, Net
At September 30, 1998 and December 31, 1997, customer mortgages receivable, net,
consisted of:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
(In thousands)
Customer mortgages receivable, gross $227,560 $ 170,147
Less:
Unamortized discount on repurchased customer mortgages receivable (1,242) (2,478)
Unamortized excess value over consideration -- (27)
Allowance for loss on receivables (17,388) (12,594)
-------- ---------
Customer mortgages receivable, net $208,930 $ 155,048
======== =========
</TABLE>
As of September 30, 1998 and December 31, 1997, customer mortgages receivable,
gross, from buyers not residing in the United States or Canada were
approximately $40.4 million and $34.5 million, respectively, with buyers within
no single foreign country aggregating more than 5% of gross outstanding customer
mortgages receivable. Stated interest rates on customer mortgages receivable
outstanding at September 30, 1998 range from 00.0% to 17.9% per annum (averaging
approximately 14.46% per annum contractually). Interest is not imputed on
customer mortgages receivable with less than a market interest rate because such
amounts are immaterial. The activity in the customer mortgages receivable
allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
Nine months ended
September 30,
1998 1997
------- -------
<S> <C> <C>
(In thousands)
Balance, beginning of period $12,594 $10,191
Provision for doubtful accounts 9,433 4,717
Allowance related to the Business Acquisition - 1,076
Customer mortgages receivable charged off (4,639) (4,385)
------- -------
Balance, end of period $17,388 $11,599
======= =======
</TABLE>
Note 5. Notes and Mortgages Payable
At September 30, 1998 and December 31, 1997 notes and mortgages payable
consisted of:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- -----------
<S> <C> <C>
(In thousands)
Notes payable secured by customer mortgages receivable bearing
interest at rates which include fixed interest of 11.34% and 6.1%
(see Note 6), and variable rates ranging from prime plus 2% (10.25%
at September 30, 1998) LIBOR plus 2.5% (7.88% at September 30, 1998)
and LIBOR plus 1% (6.38% at September 30, 1998) $115,672 $ 79,202
Notes payable and mortgage obligations secured by real estate bearing
interest at variable rates which include prime plus 2%, LIBOR plus
3.25% (8.63% at September 30, 1998), LIBOR plus 2.85% (8.23% at
September 30, 1998) and fixed interest at 8.2% 75,033 27,527
Other notes and mortgage loans payable bearing primarily variable
interest at rates which include LIBOR plus 2.25% (7.63% at September
30, 1998) and prime plus 2% 19,939 2,818
-------- --------
Total notes and mortgages payable: $210,644 $109,547
======== ========
</TABLE>
9
<PAGE>
On July 9, 1998, the Company entered into a $60 million revolving construction
credit facility (the "Construction Facility"). The Construction Facility
provides a three-year borrowing term followed by a five-year provision for
repayment and bears interest at LIBOR (30 day) plus 2.85% per annum. The
Construction Facility matures on July 9, 2006.
During the quarter ended March 31, 1997, the Company repaid $39.7 million of
debt and related interest and prepayment penalties in connection with the
Initial Offering. The Company recorded an expense relating to the write-off of
previously capitalized fees and prepayment penalties of $0.8 million, net of
related tax benefits of $0.5 million.
Note 6. Receivable Securitization
On September 30, 1998, the Company completed the private placement of $66.2
million in principal amount of timeshare mortgage-backed notes (the `Notes').
The securitization was structured as two classes of fixed-rate notes, with
approximately $32.0 million of 5.89% notes being rated `AAA,' and $34.2 million
of 6.28% notes being rated `A,' by Duff & Phelps Credit Rating Co. ("DCR"). The
Notes are secured by approximately $71.1 million in first mortgage liens on
VOI's sold by Vistana subsidiaries in Florida and Colorado. Credit enhancement
for `AAA' rated notes is provided by subordination of the `A' rated notes, 7%
overcollaterization, a letter of credit (approximately $8.5 million at
execution) from Dresdner Bank AG (rated `AA' by DCR), and a reserve account that
grows from 0% to 5% of the pool balance derived from the excess interest spread
earned. The `A' rated notes are credit enhanced by the overcollaterization,
letter of credit, and reserve account. The weighted average cost of the Notes,
including the yield on the Notes and the cost of the letter of credit, is
approximately 6.30% per annum. The Notes were issued through a bankruptcy-remote
Vistana subsidiary, with no recourse back to Vistana for defaults experienced on
the underlying portfolio of receivables or for draws on the letter of credit.
The securitization was treated as an on balance sheet financing for accounting
purposes. No gain on sale will be recognized as a result of the transaction. The
net proceeds of the securitization were used primarily to repay $60.2 million of
outstanding debt secured by customer mortgages receivable and bearing interest
at LIBOR plus 2.5% and LIBOR plus 1.0%. The buildup of the reserve account will
be treated as restricted cash. The balance in the reserve account, once fully
funded, and the letter of credit level (subject to certain restrictions) will
decrease at a rate commensurate with the amortization of the receivable pool.
Note 7. Income Taxes
Upon completion of the Initial Offering, the Company became subject to federal
and state income taxes from the effective date of the sale of the Common Stock.
In addition, during the quarter ended March 31, 1997, the Company was required
to provide a deferred tax liability for cumulative temporary differences between
financial reporting and tax reporting in its consolidated statements of income
for the period following the effective date of the Initial Offering. Such
deferred taxes were based on the cumulative temporary differences at the date of
the Initial Offering and totaled $13.2 million.
The Company reports most of its sales of VOI's on the installment method for
federal income tax purposes. As a result, the Company does not recognize taxable
income on these sales until the installment payments have been received from the
Company's customers. In 1997, the Company became subject to the Alternative
Minimum Tax ("AMT") as a result of the deferred income which results from the
installment sales method. In 1998, the Company will continue to be subject to
state and federal AMT.
Under Section 453(l) of the Internal Revenue Code, interest may be imposed on
the amount of tax attributable to the installment payments on customer mortgages
receivable for the period beginning on the date of sale and ending on the date
the related tax is paid. If the Company is otherwise not subject to pay tax in a
particular year, no interest is imposed since the interest is based on the
amount of tax paid in that year. The Company has not included a provision for
this interest, as it is not currently subject to the tax. However, in the
future it may become so. The Company continues to monitor its tax provision and
may adjust it to provide for this interest in the future.
Note 8. Stock Plans
The Vistana, Inc. Stock Plan (the "Stock Plan") was adopted by the Company's
shareholders in December 1996, prior to the Initial Offering. As of September
30, 1998, the Stock Plan covered 2.5 million shares of Common Stock. The Stock
Plan permits the Company to grant to employees, directors, officers, and
consultants of the Company and its subsidiaries and affiliates: (i) incentive
stock options ("ISOs"); (ii) non-qualified stock options ("NSOs"); (iii) stock
appreciation rights; (iv) phantom stock awards; and (v) restricted stock. An
amendment increasing the number of shares covered by the Stock Plan from 1.9
million shares to 2.5 million shares was approved by the shareholders and became
effective on April 30, 1998. The Stock Plan is administered by the Compensation
Committee of the Board of Directors, which also selects the individuals who
receive grants under the plan. As of September 30, 1998, the only grants that
had been made under the Stock Plan were NSOs.
10
<PAGE>
In connection with the Initial Offering, the Principal Shareholders granted
certain executive officers and other employees of and a consultant to the
Company (i) immediately exercisable options to purchase an aggregate of 1.4
million shares of Common Stock at an exercise price equal to $12 per share, and
(ii) an option, which vests on February 10, 2001, to purchase an aggregate of
0.04 million shares of Common Stock at an exercise price equal to $12 per share.
Subsequent to the Initial Offering, the Principal Shareholders have granted
certain executive officers (i) an option, which vests over a period of four
years, to purchase 0.4 million shares of Common Stock at an exercise price equal
to $24.62 per share, and (ii) an option, which vests over a period of four
years, to purchase an aggregate of 0.04 million shares of Common Stock at an
exercise price equal to $24.25 per share. All of these options will terminate
ten years after the date of grant, subject to certain exceptions. The shares
covered by these options were included in shares issued and outstanding as of
September 30, 1998 and December 31, 1997.
Effective October 1, 1997, the Company adopted the Vistana, Inc. Employee Stock
Purchase Plan (the "Purchase Plan") to assist employees in acquiring a stock
ownership interest in the Company and to encourage employees to remain in the
employ of the Company. The Purchase Plan meets the requirements of an "employee
stock purchase plan" pursuant to section 423 of the Internal Revenue Code. A
maximum of 1 million shares of Common Stock is reserved for issuance under the
Purchase Plan. The first purchase period under the Purchase Plan occurred on
April 1, 1998.
Note 9. Land Acquisition
On July 30, 1998, the Company acquired approximately 45 acres of land with an
option for an additional 45 acres in Orlando, Florida at a total acquisition
cost of $12.7 million. The full 90 acres is zoned for up to 1,800 VOI's. The
Company plans to develop the land for a successor resort to the Company's
flagship property, Vistana Resort. Construction is expected to begin in the
third quarter of 1999. Financing of the acquisition was provided through the
Construction Facility.
Note 10. Subsequent Event
On October 9, 1998, the Company entered into a $40 million master revolving
construction credit facility (the "Master Facility"). The Master Facility
provides a three-year borrowing term followed by a maximum four-year provision
for repayment and bears interest at LIBOR (90 day) plus 2.65% per annum. The
Master Facility matures on October 9, 2005.
Note 11. Pro Forma Information
The following unaudited pro forma condensed consolidated statements of
operations for the nine months ended September 30, 1997 present the results of
operations of the Company. The pro forma adjustments, as described in the
related notes, are calculated as if the Initial Offering had been consummated on
January 1, 1997.
11
<PAGE>
VISTANA, INC. AND ITS SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
-------- ----------- ------------
<S> <C> <C> <C>
Revenue:
Vacation Ownership Interest sales $ 68,715 $ 68,715
Interest 13,542 13,542
Resort 12,427 12,427
Telecommunications 5,164 5,164
Other 361 361
-------- -----------
Total revenues 100,209 100,209
-------- -----------
Costs and operating expenses:
Vacation Ownership Interest cost
of Sales 15,603 15,603
Sales and marketing 30,516 30,516
Interest expense--treasury 4,858 $ (358)(a) 4,500
Provision for doubtful accounts 4,717 4,717
Resort 10,201 10,201
Telecommunications 4,146 4,146
General and administrative 8,184 8,184
Depreciation and amortization 2,164 2,164
Interest expense--other 1,355 (356)(a) 999
Other 2,252 2,252
-------- ------- -----------
Total costs and operating expenses 83,996 (714) 83,282
Operating income 16,213 714 16,927
Excess value recognized 55 55
Minority interest 57 57
-------- ------- -----------
Income (Loss) before income taxes and
extraordinary item 16,325 714 17,039
Provision for income taxes (5,555) (900)(b) (6,455)
Non-recurring charge associated
with the change of tax status (13,201) 13,201 (c)
-------- ------- -----------
Income before extraordinary item $ (2,431) $13,015 $ 10,584
Extraordinary item early
extinguishment of debt, Net of tax (825) 825 (d)
-------- ------- -----------
Net (Loss) Income $ (3,256) $13,840 $ 10,584
======== ======= ===========
Pro forma earnings per share - diluted $ 0.56
===========
Pro forma weighted average shares of
common stock outstanding - diluted 18,811,373
===========
</TABLE>
(a) Reflects the Company's Initial Offering and related reduction of interest
expense with the early extinguishment of debt as if these events had
occurred at the beginning of the period.
(b) Reflects the treatment of the Company as a C corporation for federal income
tax purposes as of the beginning of the period.
(c) Reflects the elimination of the non-recurring charge for deferred taxes
that relates to the conversion of tax status for the Company's predecessor
entities.
(d) Reflects the elimination of the extraordinary items related to the early
extinguishment of debt, net of taxes, referred to in (a) above.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion of the Company's results of operations is derived
from the condensed consolidated statements of income for the three and nine
months ended September 30, 1998 and September 30, 1997 (Unaudited).
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1998 1997 1998 1997
------- ------- ------- ------
<S> <C> <C> <C> <C>
Statement of operations:
As a percentage of total revenues:
VOI sales 76.1% 72.1% 74.1% 68.6%
Interest 10.3% 11.6% 11.1% 13.5%
Resort 7.9% 11.0% 8.9% 12.4%
Telecommunications 3.8% 5.0% 3.9% 5.1%
Other 1.9% 0.3% 2.0% 0.4%
------- ------- ------- --------
Total Revenues 100.0% 100.0% 100.0% 100.0%
======= ======= ======= ========
As a percentage of VOI Sales:
VOI cost of sales 23.3% 22.1% 22.2% 22.7%
Sales and marketing 45.6% 42.7% 47.5% 44.4%
Provision for doubtful accounts 7.4% 6.7% 7.4% 6.9%
As a percentage of interest revenues:
Loan portfolio:
Interest expense--treasury 33.9% 37.4% 34.5% 35.9%
As a percentage of total revenues:
General and administrative 6.6% 8.1% 8.0% 8.2%
Depreciation and amortization 2.6% 1.9% 2.6% 2.2%
Interest expense--other 2.2% 0.7% 1.3% 1.4%
Other 2.9% 2.0% 3.0% 2.2%
Total costs and operating expenses 85.9% 81.7% 86.7% 83.8%
As a percentage of resort revenues:
Resort expenses (1) 87.6% 83.1% 85.9% 82.1%
As a percentage of telecommunication revenues:
Telecommunications expenses (1) 81.2% 79.6% 80.9% 80.3%
Selected operating data:
Number of resorts at end of period 8 6 8 6
Number of VOI's sold actual (2) (4) 5,361 3,074 13,466 7,191
Average sales price per VOI sold actual (2) (4) $ 9,874 $10,020 $ 9,713 $ 9,931
Number of VOI's sold annualized (2) (4) 4,350 2,629 10,987 6,167
Average sales price per VOI annualized (2) (4) $12,169 $11,718 $11,905 $11,581
Number of VOI's in inventory at period end (3) 21,289 15,570 21,289 15,570
</TABLE>
- --------
(1) Does not include interest and depreciation expenses.
(2) Includes sales of both annual and alternate-year VOI's.
(3) Inventory classified as annual VOI's.
(4) Does not reflect the effects of percentage-of-completion accounting.
13
<PAGE>
RESULTS
Comparison of the three months ended September 30, 1998 to the three months
ended September 30, 1997.
Revenue:
For the three months ended September 30, 1998, the Company recognized total
revenues of $67.4 million compared to $39.7 million for the three months ended
September 30, 1997, an increase of $27.7 million, or 69.8%. This increase is
primarily due to a $22.8 million increase in sales of VOI's from $28.6 million
during 1997 to $51.4 million during 1998, an increase of 79.7%. VOI sales
increased due to a 74.4% increase in the number of VOI's sold, offset slightly
by a 1.5% decrease in the average sales price (both calculated utilizing actual
sales of annual and alternate year VOI's and without effect for percentage-of-
completion accounting). The increase in VOI's sold reflects the contribution of
the Company's western operations acquired in a September 1997 transaction
accounted for as a purchase, increases in VOI sales at the Company's Orlando
area resorts and Myrtle Beach, and VOI sales at the World Golf Village and
Scottsdale resorts which are included in revenues for the three month period in
1998, but not in the comparable period in 1997.
For the quarters ended September 30, 1997 and 1998, respectively, interest
income increased 50.0%, from $4.6 million to $6.9 million, due to a 64.5%
increase in the average principal amount of customer mortgages receivable from
$131.7 million to $216.6 million, and an increase in the average interest rate
on customer mortgages receivable from 14.0% to 14.5%. Also included in interest
income is the discount amortization on customer mortgages receivable recognized
during the comparable three month periods ended September 30, 1998 and September
30, 1997 of $0.4 million and $0.8 million, respectively, relating to the
repurchase of customer mortgages receivable. This discount resulted from a 1995
transaction in which the Company re-acquired customer mortgages receivable
(pursuant to a related clean up call provision) which had been previously sold
in 1991 as well as recognition of a discount on certain customer mortgages
receivable repurchased in 1996 (pursuant to a related clean up call provision)
from an investment partnership. As of September 30, 1998, $1.2 million of total
unamortized discount remained and is expected to be amortized through 1999.
Resort revenue increased 20.5%, from $4.4 million to $5.3 million, due to
the increase in rooms available and occupancy levels. Telecommunication revenues
(guest telephone charges relating to the existing resorts and revenues from
contracting services provided to third parties) increased 25.0% from $2.0
million at September 30, 1997 to $2.5 million at September 30, 1998, due to an
increase in contract revenues and higher resort occupancies.
Costs and Operating Expenses:
Total operating costs and expenses increased $25.5 million, or 78.7% from
$32.4 million in the third quarter of 1997 to $57.9 million in the comparable
1998 quarter, an increase as a percentage of total revenues from 81.7% in 1997
to 85.9% in 1998. VOI product costs, as a percentage of VOI revenues, increased
from 22.1% in 1997 to 23.3% in 1998, as a result of increased sales volume at
resorts with higher unit costs, offset by a broader product mix in sales and
increased sales of alternate year VOI's. Sales and marketing expenses increased
91.8% from $12.2 million for the three months ended September 30, 1997 to $23.4
million during the comparable period in 1998, principally due to the 79.7%
increase in related VOI sales, increased sales volume at certain of the
Company's newer properties with higher sales and marketing expenses, decreased
sales volume at the Hampton Vacation Resort - Oak Plantation, and increased
expenses related to international sales. As a percentage of VOI revenues, sales
and marketing expenses increased from 42.7% in the three months ended September
30, 1997, to 45.6% during the comparable three-month period in 1998.
Loan portfolio expenses consisting of interest expense--treasury increased
to $2.4 million in 1998 from $1.7 million in 1997, primarily as a result of
increased levels of debt offset by a lower average cost of funds. Provision for
doubtful accounts increased to 7.4% of VOI sales in 1998 compared to 6.7% in
1997. The Company periodically monitors its provision for doubtful accounts to
provide for future losses associated with any defaults on customer mortgages
receivable and provides for additions to the reserve as a percentage of VOI's
sold in the applicable period. Management believes that the provision is
adequate for such future losses. Resort expenses, as a percentage of revenues,
increased to 87.6% from 83.1% for the three months ended September 30, 1998 and
1997, respectively, as a result of increased occupancy levels at certain resorts
and higher resort costs associated with the Company's new properties at Myrtle
Beach and World Golf Village. Telecommunications expenses increased 2.0% as a
percentage of total telecommunication revenues due to increased operating costs.
General and administrative expenses increased from $3.2 million for the
three months ended September 30, 1997 to $4.5 million for the three months ended
September 30, 1998, decreasing as a percent of total revenues from 8.1% in 1997
to
14
<PAGE>
6.6% in 1998. The decrease in general and administrative expenses as a
percentage of total revenues is primarily the result of increased VOI sales
volumes and increasing levels of other revenues. The dollar increase in general
and administrative expenses primarily resulted from (1) increased revenue levels
and commensurate business activities, (2) the addition of a number of senior
managers and key executives in order to build the management and organizational
infrastructure necessary to efficiently manage the Company's future growth, (3)
the Company's expenses and reporting obligations as a public company, and (4)
added salary, travel and office expenses attributable to the current and planned
growth in the size of the Company. Depreciation and amortization increased as a
percentage of total revenues to 2.6% for the three months ended September 30,
1998 from 1.9% in the same period in 1997 primarily due to capital additions
during the current year for resort and sales facilities and information
technology assets. Interest expense--other increased as a percentage of total
revenues to 2.2% in 1998 from 0.7% in the same period of 1997 due to increased
levels of outstanding debt associated with the acquisition of land offset by
increased levels of capitalized interest.
Operating income, including the amounts for excess value recognized and
minority interest, increased 41.1% to $10.3 million, or 15.3% of total revenues,
during the three months ended September 30, 1998 from $7.3 million, or 18.4% of
total revenues, during the three months ended September 30, 1997.
Comparison of the nine months ended September 30, 1998 to the nine months ended
September 30, 1997.
Revenue:
For the nine months ended September 30, 1998, the Company recognized total
revenues of $172.2 million compared to $100.2 million for the nine months ended
September 30, 1997, an increase of $72.0 million, or 71.9%. This increase is
primarily due to a $58.8 million increase in sales of VOI's from $68.7 million
during 1997 to $127.5 million during 1998, an increase of 85.6%. VOI sales
increased due to an 87.3% increase in the number of VOI's sold, offset slightly
by a 2.2% decrease in the average sales price (both calculated utilizing actual
sales of annual and alternate year VOI's and without effect for percentage-of-
completion accounting). The increase in VOI's sold reflects the contribution of
the Company's western operations acquired in a September 1997 transaction
accounted for as a purchase, increases in VOI sales at the Company's Orlando
area resorts and Myrtle Beach, and VOI sales at the World Golf Village and
Scottsdale resorts which are included in revenues for the nine month period in
1998, but not in the comparable period in 1997.
For the periods ended September 30, 1997 and 1998, respectively, interest
income increased 42.2%, from $13.5 million to $19.2 million due to a 57.5%
increase in the average principal amount of customer mortgages receivable from
$127.2 million to $200.4 million, respectively, with a slight increase in the
average interest rate on customer mortgages receivable from 14.0% to 14.5%. Also
included in interest income is the discount amortization on customer mortgages
receivable recognized during the comparable nine month periods ended September
30, 1998 and September 30, 1997 of $1.2 million and $2.3 million, respectively,
relating to the repurchase of customer mortgages receivable. This discount
resulted from a 1995 transaction in which the Company re-acquired customer
mortgages receivable (pursuant to a related clean up call provision) which had
been previously sold in 1991 as well as recognition of a discount on certain
customer mortgages receivable repurchased in 1996 (pursuant to a related clean
up call provision) from an investment partnership. As of September 30, 1998,
$1.2 million of total unamortized discount remained and is expected to be
amortized through 1999.
Resort revenue increased 24.2%, from $12.4 million to $15.4 million, due to
increased rooms available and higher occupancy levels. Telecommunication
revenues (guest telephone charges relating to the existing resorts and revenues
from contracting services provided to third parties) increased $1.5 million or
28.9% to $6.7 million for the nine months ended September 30, 1998 from $5.2
million for the comparable nine-month period ended in 1997 due to an increase in
contract revenues and higher resort occupancies.
Costs and Operating Expenses:
Total operating costs and expenses increased $65.3 million or 77.7% from
$84.0 million in the period ending September 30, 1997 to $149.3 million in the
comparable 1998 period, increasing as a percentage of total revenue from 83.8%
in 1997 to 86.7% in 1998. VOI product costs, as a percentage of VOI revenues,
decreased from 22.7% in 1997 to 22.2% in 1998, as a result of increased sales
volumes, a broader product mix in sales and increased sales of alternate year
VOI's. Sales and marketing expenses increased 98.7% from $30.5 million for the
nine months ended September 30, 1997 to $60.6 million during the comparable
period in 1998 principally due to the 85.6% increase in related VOI sales levels
as well as operating inefficiencies and adverse effects of seasonality at the
Company's Myrtle Beach resort (which opened in May 1998), start-up costs at the
World Golf Village resort (which also opened in May 1998), and costs associated
with the expansion of the Company's
15
<PAGE>
international operations. As a percentage of VOI sales, sales and marketing
expenses increased from 44.4% in the period ended September 30, 1997 to 47.5% in
the period ended September 30, 1998.
Loan portfolio expenses consisting of interest expense--treasury increased
to $6.6 million in 1998 from $4.9 million in 1997 primarily as a result of
increased levels of debt offset by a lower average cost of funds. Provision for
doubtful accounts increased to 7.4% of VOI revenues in 1998 compared to 6.9% in
1997. The Company periodically monitors its provision for doubtful accounts to
provide for future losses associated with any defaults on customer mortgages
receivable and provides for additions to the reserve as a percentage of VOI's
sold in the applicable period. Management believes that the provision is
adequate for such future losses. Resort and telecommunication expenses increased
at a rate commensurate with that of related revenues.
General and administrative expenses increased from $8.2 million for the
nine months ended September 30, 1997 to $13.8 million for the nine months ended
September 30, 1998, decreasing as a percentage of total revenues from 8.2% in
1997 to 8.0% in 1998. The decrease in general and administrative expenses as a
percentage of total revenues is primarily the result of increased VOI sales
volume and increasing levels of other revenue. Depreciation and amortization
increased as a percentage of total revenues to 2.6% for the nine months ended
September 30, 1998, compared to 2.2% in the same period in 1997, primarily due
to capital additions during the current year for resort and sales facilities and
information technology assets. Interest expense--other decreased slightly as a
percentage of total revenue from 1.4% in 1997 to 1.3% in the same period of 1998
due to lower levels of outstanding debt and increased levels of capitalized
interest.
Operating income, including the amounts for excess value recognized and
minority interest, increased 49.1% to $24.3 million, or 14.1% of total revenues,
during the nine months ended September 30, 1998 from $16.3 million, or 16.3% of
total revenues, during the nine months ended September 30, 1997.
Extraordinary Item:
During the nine months ended September 30, 1997, the Company repaid $39.7
million of debt, related interest and prepayment penalties. The Company recorded
an expense relating to the write-off of previously capitalized fees and
prepayment penalties of $0.8 million, net of related tax benefits of $0.5
million.
LIQUIDITY AND CAPITAL RESOURCES
The Company generates cash from operations from the sales and financing of
VOI's, resort operations, management activities and telecommunication services.
With respect to the sale of VOI's, the Company generates cash for operations
from (i) customer down payments and (ii) third party financing of customer
mortgages receivable in amounts typically equal to 90% of the related customer
mortgage receivable. The Company generates additional cash from the financing of
VOI's equal to the difference between the interest charged on the customer
mortgages receivable (which averaged a stated contractual rate of 14.5% for the
quarter ended September 30, 1998) and the interest paid on the notes payable
secured by the Company's pledge of such customer mortgages receivable (which
averaged 8.3% for the quarter ended September 30, 1998). Cash provided by
operations for the nine months ended September 30, 1998 and 1997 increased from
$6.4 million to $10.1 million, respectively, primarily due to the net income
generated in 1998 as compared with a net loss incurred in the same period in
1997.
Net cash used in investing activities for the nine months ended September
30, 1998 and 1997 was $106.1 million and $54.2 million, respectively,
principally due to increased sales of VOI's and the related increase in
origination of customer mortgages receivable and restricted cash levels
associated with the escrow of customer deposits, as well as expenditures for
land, property and equipment.
Net cash provided by financing activities was $102.2 million during the
nine-month period ended September 30, 1998 versus net cash provided in 1997 of
$50.8 million. Net cash provided in the nine month period in 1998 was the result
of net borrowings primarily from the financing of customer mortgages receivable
and the financing of construction activities and land acquisitions. The increase
in 1998 reflects the securitization transaction (see Note 6), the increase in
overall customer mortgages receivable levels and associated borrowings,
significant increases in construction activities and the acquisition of land.
Net cash provided in the comparable period of 1997 was primarily due to the
Company's issuance in the first quarter of 1997 of 4.6 million shares of common
stock in the Initial Offering resulting in approximately $49.5 million of net
proceeds. The net proceeds of the Initial Offering were used by the Company to
repay $38.9 million of outstanding debt.
The Company requires funds to finance the acquisition and development of
vacation ownership resorts and related inventory, to finance customer purchases
of VOI's and to fund working capital. Historically, these funds have been
principally provided by indebtedness secured by a portion of the Company's
inventory of unsold VOI's, customer mortgages receivable and
16
<PAGE>
other assets. As of September 30, 1998, the Company had $75.0 million
outstanding under its notes payable secured by its land and VOI inventory,
$115.7 million outstanding under its notes payable secured by customer mortgages
receivable and $19.9 million of other secured and unsecured notes payable. As of
September 30, 1998, the Company's scheduled principal payments on its long-term
indebtedness through 2002 (excluding payments on credit facilities secured
primarily by customer mortgages receivable but including release payments
anticipated to be due on the closing of VOI sales in the relevant period) were
$12.5 million in 1998 (remaining three months), $21.1 million in 1999, $30.4
million in 2000, $18.1 million in 2001 and $12.9 million in 2002 and thereafter.
The Company's credit facilities as of September 30, 1998 (the "Credit
Facilities") provide for term loans, of which $101.2 million were outstanding as
of September 30, 1998, and revolving lines of credit, under which the Company
had borrowings of $109.4 million as of September 30, 1998 against total
available capacity under the revolving lines of credit (assuming the
availability of sufficient receivables) at that date of $241.4 million. Included
in the balance of revolving credit borrowings is the outstanding balance on a
$20 million unsecured line of credit which has a remaining capacity of $3
million as of September 30, 1998. As of September 30, 1998, the Company's term
loans accrued interest at various rates between 6.1% and 11.3%, and the
Company's revolving lines of credit accrued interest at rates between 6.4% and
10.25%. Approximately $143.8 million of the Company's indebtedness bears
interest at variable rates based on fixed spreads over a specified reference
rate. The Company's indebtedness under the Credit Facilities is secured by
pledges of the Company's receivables (primarily its customer mortgages
receivable), and mortgages on certain of the Company's unsold inventory of VOI's
and other owned real and personal property. The terms of certain of the Credit
Facilities impose certain operating and financial restrictions upon the Company,
including, without limitation, (1) maintenance of a minimum tangible net worth
by the Company and certain of its operating subsidiaries; (2) maintenance of
certain financial ratios, including the ratio of selling expenses to net VOI
sales; (3) limitations on cash distributions by certain of the Company's
operating subsidiaries to the amount of the subsidiary's net income or net cash
flow (subject to certain exceptions for tax and other permitted distributions);
and (4) subordination of certain intercompany obligations. The Company's credit
facilities are generally established for fixed terms and are also subject to
early termination under certain events. Because most of the Company's
indebtedness bears interest at variable rates and the Company's customer
mortgages receivable earn interest at fixed rates, the Company bears the risk of
increases in interest rates with respect to its indebtedness.
The Company intends to pursue a growth-oriented strategy; accordingly, the
Company may, from time to time acquire, among other things, additional vacation
ownership resorts and additional land upon which vacation ownership resorts may
be developed and companies operating resorts or having vacation ownership
assets, management, sales or marketing expertise commensurate with the Company's
operations in the vacation ownership industry. The Company is also currently
considering the acquisition of several land parcels for development of
additional VOI inventory. The Company from time to time evaluates additional
acquisitions of operating companies and related assets, but presently has no
contracts or capital commitments relating to any such potential acquisitions.
In the future, the Company may negotiate additional or renewed credit
facilities, issue debt, or execute additional securitizations of its customer
mortgages receivable. Any debt incurred or issued by the Company may be secured
or unsecured, bear interest at fixed or variable rates, and be subject to terms
and conditions approved by management. The Company has historically enjoyed good
credit relationships and has been successful in establishing new relationships
and expanding existing credit facilities as its growth and opportunities have
necessitated. Management believes the Company will continue to be able to borrow
in this manner. However, adverse conditions in the capital or other financial
markets could temporarily curtail or increase the cost of the Company's access
to debt.
The Company believes that the cash generated from operations and future
borrowings, including possible securitizations of customer mortgages receivable,
will be sufficient to meet the Company's working capital and capital expenditure
needs for its current operations for the next 12 months. However, depending upon
the Company's growth opportunities, the conditions in the capital and other
financial markets, and other factors, the Company from time to time may also
consider the issuance of debt, equity or other securities, the proceeds of which
may be used to finance acquisitions, to refinance debt or for general corporate
purposes.
During future periods, continued access to external funding will be
necessary for the Company to acquire, develop, and sell additional VOI inventory
and to finance customer purchases of its VOI's and may be necessary to provide
or supplement general working capital. If the Company were unable to obtain
credit facilities or debt or equity financing in amounts, and on terms and
conditions, satisfactory for such purposes, such event would have a material
adverse effect on the Company's business and results of operations.
17
<PAGE>
Inflation
Inflation and changing prices have not had a material impact on the
Company's revenues, operating income and net income during any of the Company's
three most recent fiscal years. Due to the current economic climate, the Company
does not expect that inflation and changing prices will have a material impact
on the Company's revenues, operating income or net income in the near term. To
the extent inflationary trends affect short-term interest rates, a portion of
the Company's debt service costs may be affected as well as the rates the
Company charges on its customer mortgages.
Seasonality
The Company's revenues are moderately seasonal. Owner and guest activity at
the Company's resorts in the eastern United States are currently the greatest
from February through April and September through August. Owner and guest
activity at the Company's resorts in the western United States are currently the
greatest from September 15 to Labor Day and Christmas to Easter. As a result of
this seasonality, the Company currently anticipates its weakest operating
results during the first quarter, and its strongest operating results during the
third quarter, of each calendar year. However, as the Company opens new resorts
and expands into new markets and geographic locations, it may experience
increased or different seasonality dynamics creating fluctuations in operating
results that are different from those experienced in the past.
Year 2000
The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures. Software failures due to
processing errors potentially arising from calculations using the Year 2000 date
are a risk. The Company has continued to assess this risk as it relates to the
availability and integrity of financial systems and the reliability of
operational systems. The Company has established processes for evaluating and
managing the risks and costs associated with this issue. The computing portfolio
was previously identified and an initial assessment has been completed. The
remaining cost of achieving Year 2000 compliance is estimated to be
approximately $0.3 million over the cost of normal software upgrades and
replacements and will be incurred through fiscal 1999.
FORWARD-LOOKING INFORMATION
Statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations regarding the Company's prospective business
opportunities, financial performance and expansion plans are forward-looking
statements that involve substantial risks and uncertainties. Such forward-
looking statements include, without limitation, (i) the plan to develop and sell
VOI's at additional resorts, (ii) the intention to acquire additional land for
the expansion of existing resorts and for the development of future resorts,
(iii) the anticipation of when construction will commence for existing and
future vacation resorts, and (iv) statements relating to the Company or its
operations that are preceded by terms such as "anticipates," "believes,"
"intends," "expects," and similar expressions. In accordance with the Private
Securities Litigation Reform Act of 1995, the following are important risk
factors that could cause the Company's actual results, performance, or
achievements to differ materially from those implied by such forward-looking
statements: (i) the Company lacks experience in certain of the markets where it
has purchased land and is developing vacation ownership resorts, (ii) the
Company is subject to significant and increasing competition from other entities
in the leisure and vacation industry, (iii) the construction and development of
vacation ownership resorts and the commencement and implementation of sales and
marketing programs are subject to extensive regulatory requirements which could
cause unanticipated expenses, delays and changes; (iv) the Company's success
depends to a significant extent on its ability to hire, train, and retain
qualified employees, (v) the Company's ability to acquire, develop and sell VOI
inventory and finance customer purchases of its VOI's requires access to
external funding on satisfactory terms, the availability and pricing of which is
dependent upon a number of factors, including general conditions in the economy,
the credit markets and the vacation ownership industry, the performance of the
customer mortgages receivable originated by the Company, and the Company's
financial condition and results of operations, and (vi) the Company's
indebtedness and related service obligations may increase its vulnerability to
adverse economic conditions.
18
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 10.3-A: Resignation Agreement dated as of September 30,
1998 between Vistana, Inc. and Matthew E. Avril.
Exhibit 10.3-B: Consulting Agreement dated as of September 30,
1998 between Vistana, Inc. and Matthew E. Avril.
Exhibit 10.23: Revolving Credit Facility Agreement dated as of
July 9, 1998 between FINOVA Capital Corporation
and Vistana, Inc.
Exhibit 10.24: Indenture dated as of July 31, 1998 between
Vistana 1998-A Timeshare Mortgage Corp. and
Norwest Bank Minnesota, National Association.
Exhibit 10.25: Servicing Agreement dated as of July 31, 1998
between Vistana 1998-A Timeshare Mortgage Corp.
and VCH Portfolio Services, Inc.
Exhibit 27: Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended September
30, 1998.
19
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
VISTANA, INC.
(Registrant)
Date: November 16, 1998 By: /S/ RAYMOND L. GELLEIN, JR.
----------------- -----------------------------------
Raymond L. Gellein, Jr.
Chairman and Co-Chief Executive
Officer
By: /S/ CHARLES E. HARRIS
----------------------------------
Charles E. Harris
Vice Chairman and Chief
Financial Officer
By: /S/ MARK E. PATTEN
----------------------------------
Mark E. Patten
Vice President and Chief
Accounting Officer
20
<PAGE>
RESIGNATION AGREEMENT
---------------------
This Resignation Agreement ("Agreement") is entered into this 30th day of
---------
September, 1998 by Matthew E. Avril ("Executive") and Vistana, Inc. ("Vistana"),
---------
with each party intending to be bound by it. In consideration of the mutual
covenants and promises set forth below, the parties agree as follows:
1. RESIGNATION. Executive will resign from employment with Vistana
-----------
effective as of the close of business on December 31, 1998 (the "Effective
---------
Date"). Executive and Vistana acknowledge that Executive's last day of
- ----
employment is the Effective Date, and that Executive hereby resigns as an
officer of Vistana and as an officer of all related Vistana entities as of that
date. This date shall apply to any and all documents associated with Executive's
relationship with the Company where effective dates of termination of employment
are required to be identified. Executive shall continue to receive his regular
salary and existing employee benefits through the Effective Date and shall also
be compensated for any earned, unused vacation hours due to him as of December
31, 1998. Moreover, by remaining employed through the Effective Date, Executive
shall be eligible to receive a bonus under the existing Vistana bonus program of
up to 60% of Executive's current base salary. The amount of such bonus will be
determined by Vistana's Board Compensation Committee in its good faith
discretion taking into account overall success of the Company and individual
contributions by Executive. Such bonus will be payable on January 31, 1999, or
as soon thereafter that such bonuses are paid to Raymond L. Gellein, Jeffrey A.
Adler, and Charles E. Harris. Executive shall also retain ownership after the
Effective Date of the home facsimile equipment, cellular telephone, and Palm
Pilot which were provided to him by Vistana.
2. CONSULTING AGREEMENT. Simultaneously with the execution of this
--------------------
Agreement, Executive and Vistana are entering into a Consulting Services
Agreement ("Consulting Agreement") which shall take effect on January 1, 1999.
--------------------
3. HEALTH INSURANCE. Beginning upon the Effective Date and continuing
----------------
through June 30, 2000, Vistana shall pay all premiums necessary to continue in
effect, with such insurance company as shall be otherwise utilized by Vistana
for similar insurance for its senior management employees, insurance covering
medical and dental care of Executive to the same extent (which includes
Executive's spouse and dependents) as was provided to Executive by Vistana
immediately prior to Executive's resignation from Vistana, or if such insurance
coverage is modified for Vistana's senior executives, the same coverage as it
provided for such executives; provided, however, that if Vistana is unable to
-------- -------
provide Executive with the ability to participate in Vistana's group medical
insurance program, Vistana shall reimburse Executive for the cost of equivalent
group plan "family coverage" to the same extent now provided by Vistana.
1
<PAGE>
4. ACKNOWLEDGMENT. Executive acknowledges that the commitment of Vistana
--------------
to pay the salary, bonus and earned vacation time specified in Section 1, to
provide the insurance coverage described in Section 3, and to pay the
compensation specified in the Consulting Agreement referenced in Section 2,
fully discharges and releases all responsibilities and obligations of Vistana
under the Executive's Employment Agreement with Vistana dated December 27, 1996,
and its revised Schedule B effective January 31, 1998 ("Employment Agreement"),
--------------------
and that this Agreement expressly terminates and supersedes the Employment
Agreement which shall be null, void and of no further force and effect upon the
execution of this Agreement; provided, however, that Executive's estate shall be
-------- -------
eligible to receive the death benefit specified in Section 8(b) of the
Employment Agreement in the event Executive dies prior to the Effective Date.
5. OPTIONS AND ADDITIONAL REMUNERATION.
-----------------------------------
(a) OPTIONS. Executive will stop vesting in stock options as of the
-------
close of business on December 31, 1998, and all unvested options shall be
forfeited as of that date. All vested company granted options shall continue to
be exercisable for three (3) months after the termination of the Consulting
Services Agreement. Attached hereto for reference purposes are the following
documents: Vistana Employee Non-qualified Stock Option Agreement (Exhibit A);
Vistana Stock Plan (Exhibit B); Shareholder Option Agreement (Exhibit C);
Registration Rights Agreement (Exhibit D); and Joinder to Registration Rights
Agreement (Exhibit E).
(b) DEFERRED COMPENSATION. Executive shall be entitled to receive
---------------------
previously earned special compensation in the amount of $500,000.00 on February
27, 1999, in accordance with the attached KEEP payment letter dated December 27,
1996 (Exhibit F).
6. RELEASE. In consideration of the payments and options described
-------
herein, the Consulting Agreement referenced in Section 2, and the other
consideration provided by this Agreement, Executive voluntarily and knowingly
releases and waives all rights and claims, both known and unknown, that
Executive may have against Vistana, its related companies, officers, directors,
agents and employees, regarding any aspect of Executive's employment with or
resignation from Vistana occurring on or before the date of this Agreement or
arising out of the Employment Agreement. These claims include, but are not
limited to, rights and claims arising under Title VII of the Civil Rights Act of
1964, the Americans with Disabilities Act, the Florida Civil Rights Act, any
other federal, state or local statutory or common law claims, and any and all
claims for compensation of any kind under the Employment Agreement. This release
does not encompass claims arising from the non-performance of this Resignation
Agreement. In like fashion, Vistana voluntarily and knowingly releases and
waives all rights and claims, both known and
2
<PAGE>
unknown, that Vistana may have against Executive regarding any aspect of
Executive's employment with or resignation from Vistana occurring on or before
the date of this Agreement or arising out of the Employment Agreement.
7. NO CLAIMS. Executive represents that Executive has no suits, claims,
---------
charges, complaints or demands of any kind currently pending against Vistana,
its related companies, officers, directors, agents or employees, with any local,
state or federal court or administrative, investigative, civil rights or other
agency or board, based upon events occurring before and up to the date of the
execution of this Agreement. Executive also agrees that Executive will not in
the future file, assist, encourage, aid or participate (unless compelled by
legal process) in any suit, claim, charge, complaint, investigation or demand of
any kind against Vistana, its related companies, officers, directors, agents or
employees, based upon any facts or events, known or unknown, which have occurred
at any time prior to the date of this Agreement. Executive understands that if
this Agreement were not signed, Executive would have the right to voluntarily
assist other individuals or entities in bringing such claims. Executive hereby
waives that right and agrees that Executive will not provide any such
assistance. Vistana represents that it has no suits, claims, charges,
complaints or demands of any kind currently pending against Executive based upon
events occurring before and up to the date of the execution of this Agreement.
8. CONFIDENTIALITY OF AGREEMENT. Executive agrees not to disclose the
----------------------------
terms of this Agreement to any individual or entity other than to Executive's
attorney, Executive's accountant or Executive's spouse. At the time Executive
discloses the terms to them, Executive agrees to communicate to these persons
that they must keep the terms of the Agreement strictly confidential. Vistana
agrees not to disclose the terms of this Agreement except to the extent required
in the conduct of its business. The terms of this Resignation Agreement may be
disclosed in any enforcement proceeding concerning this Resignation Agreement or
the Consulting Services Agreement.
9. COVENANT NOT TO COMPETE.
-----------------------
(a) COVENANT. From the Effective Date until December, 31, 2001, or,
--------
alternatively, until December 31, 2000 in the event Raymond L. Gellein, Jr., or
Jeffery A. Adler no longer jointly share or neither individually occupies the
position of Chief Executive Officer of Vistana or any successor entity,
whichever is earlier (the "Non-Compete Period"), Executive shall not:
i) directly or indirectly for Executive or for any other person
or entity engage, whether as owner, investor, creditor, consultant,
partner, shareholder, director, financial backer, agent, employee or
otherwise, in the business, enterprise or employment of owning, operating,
marketing or selling a timeshare, vacation plan, vacation ownership or
interval ownership project within
3
<PAGE>
the Territory (as defined below); or
ii) directly or indirectly for Executive or for any other
person or entity sell, or otherwise procure purchasers for, any timeshare,
vacation plan, vacation ownership or interval ownership project within the
Territory; or
iii) have any business (as owner, investor, creditor,
consultant, partner, debtor or otherwise) or be employed in any capacity by
a person or entity that is engaged or that proposes to engage or is
evaluating whether to engage, directly or indirectly, in (1) operating, or
providing sales, marketing or development services to, a timeshare,
vacation plan, vacation ownership or interval ownership project within the
Territory, or (2) in an activity formed or entered into for the primary
purpose of engaging in a timeshare, vacation plan, vacation ownership or
interval ownership business within the Territory; or
iv) directly or indirectly for Executive or for any other
person or entity become employed in any capacity by or otherwise render
services in any capacity to any national enterprise having time-share,
vacation plan, vacation ownership or interval ownership activities,
including, without limitation the following companies and their affiliates:
Walt Disney Company, Hilton Hotels Corporation, Hyatt Corporation, Four
Seasons Hotels and Resorts, Inc., Marriott International, Inc., Inter-
Continental Hotels and Resorts, Inc., Promus Hotels, Inc., Fairfield
Communities, Inc., Sunterra Corp., Silverleaf Resorts, Inc., Starwood
Hotels and Resorts, Bluegreen Corp., or Trendwest Resorts, Inc., or any of
their respective Affiliates; provided, however, that (subject to the non-
-------- -------
disclosure provisions of this Agreement) the foregoing is not intended to
limit Executive's participation in industry meetings, conferences and other
programs of an informational nature; or
v) directly or indirectly for Executive or for any other
person or entity pursue, consummate or otherwise interfere with any
Existing Project (as defined below); or
vi) directly or indirectly for Executive or for any other
person or entity pursue, consummate or otherwise interfere with any
Prospective Project (as defined below) or directly or indirectly, for
Executive or for any other person or entity become employed in any capacity
by or otherwise render services in any capacity to any other person or
entity (other than Vistana and its Affiliates), described in clause (B) of
the definition of Prospective Project.
Notwithstanding the foregoing, Executive may purchase stock as a stockholder in
any publicly traded company, including any company engaged in the timeshare or
vacation ownership business; provided, however, that Executive may not own
-------- -------
(individually or collectively with Executive's family members and affiliates)
more than 5% of any
4
<PAGE>
company (other than Vistana, Inc.) engaged in the timeshare or vacation
ownership business.
(b) ACKNOWLEDGEMENT. In light of the substantial remuneration
---------------
provided to Executive hereunder, and as required in the accompanying Consulting
Services Agreement, Executive hereby specifically acknowledges and agrees that
the provisions of this Section 9 (including, without limitation, its time and
geographic limits), as well as the provisions of Sections 10 and 11, below, are
reasonable and appropriate, and that Executive will not claim to the contrary in
any action brought by Vistana to enforce any of such provisions. Moreover, it is
expressly acknowledged and agreed as between Executive and Vistana that the
noncompetition covenant contained in this Section 9 is reasonable and necessary
to protect the legitimate business interests of Vistana. These legitimate
business interests may include, but are not limited to:
(i) Trade secrets of Vistana that Executive has obtained
and may obtain in the future in providing services under the Consulting
Agreement;
(ii) Confidential business information of Vistana, as set
forth in Section 10, below, that Executive has obtained and may obtain in
the future in providing services under the Consulting Agreement, which
otherwise does not qualify as "trade secrets" as defined in the Florida
Uniform Trade Secrets Act, Chapter 688, Florida Statutes;
(iii) Substantial business relationships which Executive has
developed with specific prospective or existing customers, clients and
representatives of Vistana, and may in the future develop in providing
services under the Consulting Agreement;
(iv) Customer or client goodwill that has been generated
over time by Vistana's ongoing business by way of its trade name in
specific market areas that are targeted by Vistana; and
(v) Specialized training concerning Vistana's products,
services, business practices and strategies to which Executive has been
exposed while in the employ of Vistana and to which he may be exposed in
providing services under the Consulting Agreement.
10. CONFIDENTIAL INFORMATION AND OWNERSHIP OF PROPERTY.
--------------------------------------------------
(a) CONFIDENTIAL INFORMATION. Executive agrees to use all
------------------------
Confidential Information (as defined below) solely in connection with the
performance of services for or on behalf of Vistana and its Affiliates.
Executive shall not, during the term of this Agreement, or at any time after the
termination of this Agreement, in any manner, either
5
<PAGE>
directly or indirectly, (i) disseminate, disclose, use or communicate any
Confidential Information to any person or entity, regardless of whether such
Confidential Information is considered to be confidential by third parties, or
(ii) otherwise directly or indirectly misuse any Confidential Information;
provided, however, that none of the provisions of this Section 9 shall apply to
- -------- -------
disclosures made for valid business purposes of Vistana and its Affiliates and
provided further that Executive shall not be obligated to treat as confidential
- -------- -------
any Confidential Information that (x) was publicly known at the time of
disclosure to Executive; (y) becomes publicly known or available thereafter
other than by means in violation of this Agreement or any other duty owned to
Vistana or any of its Affiliates by any person or entity; or (z) is lawfully
disclosed to Executive by a third party. Notwithstanding the foregoing,
Executive shall be permitted to disclose Confidential Information to the extent
required to enforce Executive's rights hereunder in any litigation arising
under, or pertaining to, this Agreement and the Consulting Services Agreement;
provided, however, that Executive shall give prior written notice to Vistana of
- -------- -------
any such disclosure so that Vistana may have an opportunity to protect the
confidentiality of such Confidential Information in such litigation.
(b) OWNERSHIP OF PROPERTY. Executive agrees that all works of
---------------------
authorship developed, authored, written, created or contributed to during
Executive's employment by Vistana (which for this purpose includes Vistana and
all Affiliates of Vistana) for the benefit of Vistana (which for this purpose
includes Vistana and all Affiliates of Vistana), whether solely or jointly with
others, shall be considered works-made-for-hire. Executive agrees that such
works shall be the sole and exclusive property of Vistana (or an appropriate
Affiliate of Vistana) and that all right, title and interest therein or thereto,
including all intellectual property rights existing or obtained in connection
therewith, shall likewise be the sole and exclusive property of Vistana (or such
other appropriate Affiliate of Vistana). Executive agrees further that, in the
event that any such work is not considered to be work-made-for-hire by operation
of law, Executive will immediately, and without further compensation, assign all
of Executive's right, title and interest therein to Vistana (or any Affiliate of
Vistana which it may designate), its successors and assigns. At the request and
expense of Vistana, Executive agrees to perform in a timely manner such further
acts as may be necessary or desirable to transfer, defend or perfect the
ownership of such work and all rights incident thereto by Vistana or such
Affiliate.
11. NON-SOLICITATION OF EMPLOYEES. During Executive's employment by the
-----------------------------
Company and during the Non-Compete Period, Executive shall not employ any
employees or agents or former employees or agents of Vistana or any of its
Affiliates or, directly or indirectly, solicit or otherwise encourage the
employment by Executive or by others of any employees or agents or former
employees or agents of Vistana or any of its Affiliates; provided, however, that
--------- -------
this restriction shall not apply to former employees or agents who, as of the
date of the employment or solicitation by Executive, have not worked for Vistana
or any of its Affiliates during the immediately preceding twelve months.
6
<PAGE>
12. REMEDIES FOR BREACH. It is understood and agreed by the parties that
-------------------
no amount of money would adequately compensate Vistana for damages which the
parties acknowledge would be suffered as a result of a violation by the
Executive of the covenants contained in Sections 9, 10, and 11, above, and that,
therefore, Vistana shall be entitled, upon application to a court of competent
jurisdiction, to obtain injunctive relief to enforce the provisions of Sections
9, 10, or 11, which injunctive relief shall be in addition to any other rights
or remedies available to Vistana. The provisions of this Section 12 shall
survive the termination of this Agreement.
13. CERTAIN DEFINED TERMS. For the purposes of this Agreement, the
---------------------
following terms and phrases have the following meanings:
i) "AFFILIATES" means any person or entity who or which,
----------
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, a specified person or entity
(the term "control" for these purposes meaning the ability, whether by ownership
of shares or other equity interests, by contract or otherwise, to elect a
majority of the directors of a corporation, to act as or select the managing or
general partner of a partnership, or otherwise to select, or have the power to
remove and then select, a majority of those persons exercising governing
authority over an entity).
ii) "CONFIDENTIAL INFORMATION" means all software, trade
------------------------
secrets, work products created by Executive for Vistana or any of its
Affiliates, know-how, ideas, techniques, theories, discoveries, formulas, plans,
charts, designs, drawings, lists of current or prospective clients, business
plans and proposals, compensation information, current or prospective business
opportunities, financial records, research and development, marketing strategies
and programs (including present and prospective OPC locations and the terms of
leases or similar arrangements), reports, report formats, forms, manuals,
computer software and other proprietary information created or obtained by
Executive for the benefit of Vistana or any of its Affiliates during the course
of employment by the Company or during the term of the Consulting Services
Agreement.
iii) "EXISTING PROJECT" means a timeshare, vacation plan,
----------------
vacation ownership or interval ownership resort or project which Vistana or any
of its Affiliates owns, operates or has commenced to develop, acquire or
otherwise undertake as of the date of termination of the Consulting Agreement
(the "Termination Date").
----------------
iv) "PROSPECTIVE PROJECT" means (A) a prospective timeshare,
-------------------
vacation plan, vacation ownership or interval ownership resort or project with
respect to which Executive has been made aware or has been advised prior to the
Termination Date that Vistana or any of its Affiliates is considering developing
or undertaking and (B) any person or entity, including its Affiliates, with
respect to which Executive has been made
7
<PAGE>
aware or has been advised prior to the Effective Date that Vistana or any of its
Affiliates has commenced to evaluate or negotiate with in connection with any
transaction involving (1) the acquisition by Vistana or any of its Affiliates of
all or a portion of such person or entity or its consolidated assets or (2) the
acquisition by such person or entity (or its Affiliates) of all or a portion of
Vistana or its consolidated assets.
v) "TERRITORY" means the total geographic area located within a
---------
150-mile radius of each Existing Project and each Prospective Project.
14. ACKNOWLEDGEMENTS; REPRESENTATIONS.
---------------------------------
(a) ACKNOWLEDGEMENTS. Having read this Agreement, Executive agrees
----------------
that Executive is entering into this Agreement knowingly, voluntarily and with
the intent to be bound by it. Executive acknowledges that Executive has read and
fully understands the Agreement's terms, conditions, meaning and intent,
including the final binding effect of the Agreement and of the waiver of rights
under this Agreement. Further, having read this Agreement in its entirety, and
having been advised by Vistana of Executive's right to consult with an attorney
before signing, Executive agrees that Executive is entering into this Agreement
knowingly and voluntarily and that no promises, representation, or inducement
not expressly set forth in this Agreement were made to Executive which caused
Executive to sign it. Executive further acknowledges that Executive has read and
fully understands the meaning and intent of all the provisions and terms of this
Agreement, including the final binding effect of the waiver of rights under this
Agreement.
(b) REPRESENTATIONS. Executive represents to Vistana that Executive
---------------
has no actual knowledge of: (i) any litigation, proceeding or governmental
investigation pending or overtly threatened against Vistana or any of its
Affiliates (each, a "Claim") which Claim is not known by Raymond L. Gellein,
-----
Jr., or Jeffrey A. Adler (collectively, Co-Chief Executive Officers ("Co-
CEO's"); or (ii) any other fact, event, act, omission, conduct or occurrence
directly involving the business of Vistana and its Affiliates or the operation
thereof which would have a material adverse effect on such business or
operations, which Claim, transaction, fact, event, act, omission, conduct or
occurrence is not known by the Co-CEO's or has not been disclosed by Executive
in writing to counsel for Vistana.
15. MISCELLANEOUS
-------------
(a) Carol Tittle will remain as Executive's administrative assistant
until the Effective Date, so long as she remains employed with Vistana through
that time. Should Carol Tittle's employment with Vistana cease prior to the
Effective Date, no replacement will be provided.
(b) On the Effective Date, or sooner if Vistana so chooses, Executive
agrees to resign as a Board Member on any HOA board and any other boards of
Vistana
8
<PAGE>
or any of its Affiliates on which he now serves, and will resign as trustee
of Vistana's 401(k) plan.
(c) Executive agrees to provide to the Co-CEO's as soon as
practicable after execution of this Agreement an estimate of the number of
vacation days that he intends to utilize through the Effective Date, and further
agrees to provide monthly updates regarding same.
16. GOVERNING LAW AND VENUE. This Agreement shall be governed by and
-----------------------
construed in accordance with the laws of the state of Florida. In the event of
any legal or equitable action arising under this Agreement, the venue of such
action shall be exclusively within either the state courts of Florida located in
Orange County, Florida, or the United States District Court for the Middle
District of Florida, Orlando Division, and the parties waive any other
jurisdiction and venue.
17. ATTORNEYS' FEES. In the event any action is instituted for breach of
---------------
this Agreement, the prevailing party shall be entitled to a reasonable
attorneys' fee and costs of action. For purposes hereof, Vistana shall be
deemed to have prevailed in any suit involving a breach or alleged breach by
Executive of any of the covenants contained in Sections 9, 10, or 11, above, if
Vistana prevails to any degree in such suit (even if such covenant or covenants
are not enforced to the fullest extent otherwise sought by Vistana).
18. FURTHER ASSURANCES. Executive agrees to execute and deliver, or cause
------------------
to be executed and delivered, to the other parties hereto all further documents
and to take all further action which may be required under applicable law, in
order to effectuate the termination of the Employment Agreement and Executive's
resignation as an officer of Vistana and its Affiliates.
19. SEVERABILITY. If any provision of this Agreement is, or shall at any
------------
time be, invalid and unenforceable in any jurisdiction, then, to the fullest
extent permitted by law, (i) the other provisions hereof shall remain in full
force and effect in such jurisdiction, and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
20. ENTIRE AGREEMENT. This Agreement and the simultaneously executed
----------------
Consulting Agreement are intended by the parties as a final expression of their
agreement with respect to the subject matter addressed in the respective
agreements, and the provisions of this Consulting Agreement and the Separation
Agreement supersede all prior agreements and understandings that may previously
have existed between the parties; provided, however, that the attached Exhibits
-------- -------
A through F shall continue to apply to the extent specified in this Agreement;
provided further that the attached Vistana, Inc. Indemnification Agreement
- -------- -------
(Exhibit G) shall continue in full force and effect pursuant to its terms.
9
<PAGE>
21. BINDING EFFECT. This Agreement shall be binding upon and inure to the
--------------
benefit of the respective parties hereto, their heirs, legal representatives,
successors and permitted assigns.
22. COUNTERPARTS. This Agreement may be executed in several counterparts,
------------
each of which shall be deemed an original, and all of which shall constitute but
one and the same instrument.
23. CAPTIONS. The captions appearing in this Agreement are inserted only
--------
as a matter of convenience and in no way define, limit, construe or describe the
scope or intent of any provisions of this Agreement or in any way affect this
Agreement.
24. NO WAIVER. No failure or delay on the part of any party to this
---------
Agreement in exercising any right OR power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or exercise of any other
right, power or remedy.
25. ASSIGNMENT. No party to this Agreement shall assign its rights and/or
----------
obligations hereunder without the prior written consent of each of the other
party.
IN WITNESS WHEREOF, intending to be legally bound, the parties have
executed this Agreement on the dates indicated.
EXECUTIVE
/s/ Matthew E Avril
--------------------------------
State of Florida }
County of Orange }
The foregoing instrument was acknowledged before me this 30th day of September,
1998 by Matthew E. Avril, who is personally known to me or who has produced
________________________, as identification.
(Identification)
/s/ Suzanne D Hedgecock
-----------------------
Notary Public
10
<PAGE>
VISTANA, INC.
By: /s/ Jeffrey A. Adler
-----------------------------------
Name: Jeffrey A. Adler
---------------------------------
Title: President
--------------------------------
Its Authorized Representative
State of Florida }
County of Orange }
The foregoing instrument was acknowledged before me this 30th day of September,
1998 by Jeffrey A. Adler, as President and Co-Chief Executive Officer of
Vistana, Inc. He is personally known to me.
/s/ Suzanne D. Hedgecock
--------------------------------------
Notary Public
11
<PAGE>
CONSULTING SERVICES AGREEMENT
-----------------------------
This CONSULTING SERVICES AGREEMENT ("Agreement") is entered into as of
---------
this 30th day of September, 1998, by and among Matthew E. Avril
("Consultant"), and Vistana, Inc. ("Vistana"), and will become effective on
----------
January 1, 1999 ("Effective Date").
WHEREAS, prior to the Effective Date, Consultant was an officer and
employee of Vistana and an officer of certain related corporations, partnerships
and other entities (the "Corporations");
------------
WHEREAS, by mutual agreement Consultant will upon the Effective Date
simultaneously resign as an officer of Vistana and of the Corporations and
terminate Consultant's employment with Vistana pursuant to the Resignation
Agreement which shall be executed by the parties simultaneously with the
execution of this Agreement;
WHEREAS, Vistana and the Consultant desire that the Consultant be
available to advise Vistana and its affiliated entities during the term of this
Agreement and upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements contained in this Agreement and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. SERVICES.
--------
(a) DESCRIPTION. Vistana hereby engages the Consultant, and the
-----------
Consultant hereby accepts such engagement, to provide consulting services on the
terms and conditions hereinafter set forth. Consultant agrees to be available
to provide consulting services for Vistana, or at Vistana's request for one or
more of its Affiliates (as defined in the Resignation Agreement) on specific
projects ("Projects") utilizing the Consultant's broad industry skill and
--------
knowledge in a manner that best fits the needs of Vistana and/or its Affiliates.
It is anticipated that the Projects may require out-of-town travel by
Consultant; otherwise Consultant shall be required to furnish his own office
accommodations although the Company may make temporary space available at no
charge if it chooses in its sole and absolute discretion. Any Projects
requiring out-of-town travel shall be coordinated with Consultant's schedule on
reasonable advance notice. Each Project's scope, timing and results shall be
mutually determined. Requests for consulting services may be made only by
Jeffrey A. Adler or Raymond L. Gellein, Jr. or in their absence, the Company's
Chief Executive Officer. The types of projects for which Vistana may request
Consultant's services include, but are not limited to: monthly review and
analysis of financial and operating reports with an emphasis on the areas of
sales and marketing; participation in sales and marketing management retreats,
projects and
1
<PAGE>
meetings; review and analysis of all industry public company quarterly and
annual financial statement filings; provision of quarterly reports to Vistana
management concerning sales, marketing, or other significant trends; review and
analysis of financial statements, financial projections, budgets, and similar
information concerning Vistana and entities that Vistana may possibly acquire.
(b) TIME COMMITMENT. It is envisioned that Consultant will provide
---------------
approximately 800 hours ("Retained Hours") of consulting services to Vistana
and/or its Affiliates each calendar year. Additional hours above the 800
Retained Hours may be made available subject to mutually acceptable terms
between the parties. Moreover, Vistana and Consultant acknowledge and recognize
that Consultant's availability to provide services will be significantly limited
between April 15 and October 15 of each year due to Consultant's golf
commitment. A sample, non-binding, estimate of hours by month is attached as
"Exhibit 1" as an indication of the seasonality of hours. Vistana acknowledges
that it will coordinate with Consultant so that his services can be provided in
a flexible manner and will notify Consultant as soon as possible of any need to
engage his services. Consultant agrees to produce to Vistana a summary of hours
of services provided on a monthly basis. If the Company consistently elects not
to utilize available hours, Consultant shall not be required to make
unreasonable time commitments to make up for passed time. Vistana is under no
obligation to utilize Consultant's services in any amount and, regardless of
amount, the compensation specified in Section 2, below, shall still be due and
payable to Consultant; provided, however, that if Consultant accepts other
-------- -------
consulting work or employment which, alone or together, equate to a full time
commitment to any entity other than Vistana and its Affiliates, Vistana's
obligation to provide the compensation contemplated in Section 2, below, shall
be reduced in an amount commensurate with the effect that the other consulting
work and/or employment has on Consultant's ability to provide the services
contemplated herein. Vistana retains the discretion to determine, in good
faith, whether Consultant's other consulting work and/or employment equates to a
full time commitment for purposes of this Section, and to adjust Consultant's
compensation accordingly, but in no event shall such adjustment be less than
$18,000.00 annually, paid monthly as may be applicable.
(c) INDEPENDENT CONTRACTOR. Consultant acknowledges that the services
----------------------
provided under this Agreement are provided as an independent contractor and not
as an employee of Vistana. As an independent contractor, Consultant has the
sole responsibility and control of the manner and means of providing the
services requested. Consultant is retained on a non-exclusive basis and has the
right to perform services for any other company so long as those services do not
violate the provisions of the Resignation Agreement. Consultant will bear the
costs of providing Consultant's services other than those costs specified in
Section 3 of this Agreement. Consultant is solely responsible for any and all
federal, state and local taxes associated with payments made to Consultant
hereunder.
(d) RESTRICTIVE COVENANTS. Vistana and Consultant expressly agree
---------------------
that Sections 9, 10 and 11 of the Resignation Agreement are incorporated in this
Agreement by reference and that these terms of the Resignation Agreement apply
to and are part of this Agreement as if specifically set forth herein.
2
<PAGE>
2. COMPENSATION. Vistana agrees to pay to Consultant twenty-four
------------
(24) equal consulting payments of $10,417.00 on the 1st day of each month,
beginning on January 1, 1999, such payments to be made irrespective of whether
Vistana requests or Consultant provides the services described in Section 1,
above.
3. REIMBURSEMENT OF EXPENSES. During the term of this Agreement,
-------------------------
Vistana shall promptly reimburse the Consultant for all reasonable out-of-pocket
expenses, including without limitation, travel (including airfare, hotels and
restaurants), attendance fees for participation in seminars and conferences on
Vistana's behalf, and long-distance telephone expenses, paid or incurred by the
Consultant in the course of the provision of services hereunder, provided that
travel and conference attendance shall be limited to those specific matters with
respect to which Consultant has been engaged to provide services and other
travel and conference attendance that is requested or approved in advance by
Vistana. In addition to such reimbursement, Vistana agrees to pass on to
Consultant (to the extent permitted by the vendor) any group membership or other
bulk rates available to Vistana for any memberships in industry associations
and/or participation in conferences or seminars which Consultant elects to join
or participate in at his own expense. It is also agreed that if Consultant is
requested by Vistana to utilize business travel in fulfillment of providing
consulting services hereunder, such trips may be extended at Consultant's sole
expense for the purpose of furthering Consultant's golf commitments.
4. TERM. This Agreement shall terminate as of the close of business
----
on December 31, 2000; provided, however, that Vistana may sooner terminate this
-------- -------
Agreement and the compensation and other benefits described herein upon written
notice to the Consultant if the Consultant breaches or defaults under the terms
and conditions of Sections 9, 10, or 11 of the Resignation Agreement which is
incorporated into this Agreement by reference.
5. NOTICES. All notices, requests, demands, approvals, directions
-------
and other communications provided for in this Agreement must be in writing and
shall be (a) personally delivered; (b) transmitted postage prepaid by certified
or registered mail; or (c) sent by receipted overnight express carrier; to the
appropriate party at its address as follows:
(1) If to Vistana or any of the Corporations:
8801 Vistana Centre Drive
Orlando, Florida 32821
Attn: President
3
<PAGE>
(2) If to Consultant:
3856 Hunters Isle Drive
Orlando, Florida 32837
Addresses for purposes of notice may be changed from time to time by written
notice sent to the other parties in accordance with this Section 5. Such change
of address notice shall be deemed received upon the earliest of the following to
occur: (a) upon personal delivery; (b) on the third Business Day following the
day sent, if sent by registered or certified U.S. mail; or (c) on the next
Business Day following the day sent, if sent by receipted overnight express
courier.
6. GOVERNING LAW AND VENUE. This Agreement shall be governed by and
-----------------------
construed in accordance with the laws of the state of Florida. In the event of
any legal or equitable action arising under this Agreement, the venue of such
action shall be exclusively within either the state courts of Florida located in
Orange County, Florida, or the United States District Court for the Middle
District of Florida, Orlando Division, as the case may be, and the parties waive
any other jurisdiction and venue.
7. ATTORNEYS' FEES. In the event any action is instituted for breach
---------------
of this Agreement, the prevailing party shall be entitled to a reasonable
attorneys' fee and costs of action. For purposes hereof, Vistana shall be
deemed to have prevailed in any suit involving a breach or alleged breach by
Consultant of any of the covenants contained in Sections 9, 10, or 11 of the
Separation Agreement, which is incorporated into this Agreement by reference, if
Vistana prevails to any degree in such suit (even if such covenant or covenants
are not enforced to the fullest extent otherwise sought by Vistana).
8. NO WAIVER. No failure or delay on the part of any party to this
---------
Agreement in exercising any right or power or remedy hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or exercise of
any other right, power or remedy.
9. ASSIGNMENT. No party to this Agreement shall assign its rights
----------
and/or obligations hereunder without the prior written consent of each of the
other party.
10. ENTIRE AGREEMENT. This Agreement and the simultaneously executed
----------------
Resignation Agreement are intended by the parties as a final expression of their
agreement with respect to the subject matter addressed in the respective
agreements, and the provisions of this Agreement and the Resignation Agreement
supersede all prior agreements and understandings that may previously have
existed between the parties except to the extent otherwise specified in the
Resignation Agreement.
4
<PAGE>
11. SEVERABILITY. If any provision of this Agreement is, or shall at
------------
any time be, invalid and unenforceable in any jurisdiction, then, to the fullest
extent permitted by law, (i) the other provisions hereof shall remain in full
force and effect in such jurisdiction, and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
12. BINDING EFFECT. This Agreement shall be binding upon and inure
--------------
to the benefit of the respective parties hereto, their heirs, legal
representatives, successors and assigns, as the case may be.
13. COUNTERPARTS. This Agreement may be signed in several
------------
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument.
14. HEADINGS. The headings appearing in this Agreement are inserted
--------
only as a matter of convenience and in no way define, limit, construe or
describe the scope or intent of any provisions of this Agreement or in any way
affect this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
the date first above written.
CONSULTANT
/s/ Matthew E. Avril
----------------------------------------
VISTANA , INC.
By: /s/ Jeffrey A. Adler
---------------------------------------
Name: Jeffrey A. Adler
Title: President
Its Authorized Representative
5
<PAGE>
SAMPLE
------
Month Hours
----- -----
January 100
February 100
March 80
April 40
May 40
June 40
July 40
August 40
September 60
October 80
November 80
December 100
---
TOTAL 800
===
EXHIBIT 1
<PAGE>
REVOLVING CREDIT FACILITY AGREEMENT
THIS REVOLVING CREDIT FACILITY AGREEMENT entered into as of July 9, 1998,
by FINOVA CAPITAL CORPORATION, a Delaware corporation, and VISTANA, INC., a
Florida corporation.
1. DEFINITIONS.
-----------
As used in this Agreement and the other Documents (as defined below) unless
otherwise expressly indicated in this Agreement or the other Documents, the
following terms shall have the following meanings (such meanings to be
applicable equally both to the singular and plural terms defined).
1.1 "Acquisition Component": that portion of a Loan allocated for the purpose
of paying, or reimbursing the Borrower under such Loan for, the Acquisition
Cost of the Real Property which is the subject of such Loan.
1.2 "Acquisition Cost": with respect to any Real Property, its actual cost of
acquiring such Real Property, all interests therein and all development
rights related thereto, including, without limitation, all reasonable and
ordinary closing costs, attorneys' fees and other due diligence expenses
incurred in connection with such acquisition. Due diligence expenses may
include, at Borrower's option, fees and expenses of land planners,
engineers, architects, surveyors and similar professionals engaged with
respect to the Real Property as well as the cost of environmental reports
and other diligence items required to be delivered to Lender with respect
to the Real Property.
1.3 "Advance": an advance of the proceeds of a Loan by Lender to the Borrower
under such Loan.
1.4 "Affiliate": with respect to any individual or entity, any other individual
or entity that directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with, such individual
or entity.
1.5 "Agreement": this Revolving Credit Facility Agreement, as it may be from
time to time renewed, amended, restated or replaced.
1.6 "Applicable Usury Law": the usury law chosen by the parties pursuant to the
terms of paragraph 7.9 or such other usury law which is applicable if such
usury law is not.
1.7 "Borrower": with respect to a Loan, the Vistana Entity which has requested
the Loan and to whom the Loan is to be or has been made.
1.8 "Borrowing Term": the period during which a Vistana Entity may obtain a
Loan, commencing on the date of this Agreement and ending on July 9, 2001.
<PAGE>
1.9 "Business Day": any day other than a Saturday, a Sunday, a national
holiday or a day on which banks in Phoenix, Arizona are required to be
closed.
1.10 "Collateral": with respect to a Loan, all collateral from time to time
serving as security for the Performance of any portion of the Obligations
under the Documents for such Loan, and all products and proceeds thereof.
1.11 "Construction Component": the portion of a Loan allocated to the payment
of the cost of Construction Work, excluding interest on the Loan.
1.12 "Construction Improvements": with respect to a Loan having a Construction
Component, the on-site and/or off-site improvements (including, without
limitation, renovations which are not part of the Renovation Work) to be
constructed upon or made to or for the benefit of the Real Property as
part of the Construction Work, which improvements shall consist of
purpose-built time-share buildings and related amenities and off-site
improvements.
1.13 "Construction Work": with respect to a Loan having a Construction
Component, the construction or making of Construction Improvements and the
acquisition and installation of any and all furniture, furnishings,
fixtures and/or equipment which are part of the Construction Improvements.
1.14 "Credit Facility": the credit facility made available pursuant to this
Agreement.
1.15 "Credit Facility Fee": Six Hundred Thousand Dollars ($600,000).
1.16 "Documents": with respect to a Loan, the Documents as defined in the
applicable Loan Agreement, as they may be from time to time renewed,
amended, restated or replaced.
1.17 "Event of Default": with respect to a Loan, the meaning given to it in the
applicable Loan Agreement.
1.18 "Incipient Default": with respect to a Loan, an event which after notice
and/or lapse of time would constitute an Event of Default under such Loan.
1.19 "Interest Reserve Component": that portion of a Loan allocated for the
monthly payment of monthly interest accrued on such Loan.
1.20 "Lender": FINOVA Capital Corporation and its successors and assigns.
1.21 "Loan": a loan made pursuant to the terms of this Agreement.
1.22 "Loan Agreement": with respect to a Loan, a loan agreement in form and
substance satisfactory to Lender, executed by Lender and the Borrower
under such Loan, as it may be from time to time renewed, amended, restated
or replaced.
-2-
<PAGE>
1.23 "Maximum Credit Facility Amount": at any time, the lesser of (a) Sixty
Million Dollars ($60,000,000) and (b) the positive difference between One
Hundred Million Dollars ($100,000,000) and the unpaid principal balance of
the VDI Receivables Loan.
1.24 "Maximum Loan Amount": with respect to a Loan, an amount equal to the sum
of (i) the Acquisition Cost of the Real Property which is the subject of
the Loan, if the Loan has an Acquisition Component; and (ii) the cost of
improving/renovating the Real Property which is the subject of the Loan as
shown in a budget which has been approved by Lender in writing prior to
the first Advance of the Loan, if the Loan has a Construction Component
and/or Renovation Component, as the case may be; provided, however, that
-------- -------
in no event shall the Maximum Loan Amount for a Loan exceed thirty-five
percent (35%) of the time-share sales projected on the date of the
applicable Loan Agreement from sales of the number of Time-Share Interests
which can be created on or within the Real Property being acquired,
renovated or constructed with the proceeds of such Loan, as determined by
Lender.
1.25 "Obligations": all obligations, agreements, duties, covenants and
conditions that VI is now or hereafter required to Perform under this
Agreement.
1.26 "Performance" or "Perform": full, timely and faithful performance.
1.27 "Real Property": real property which meets the criteria set forth in
EXHIBIT 8.
1.28 "Related Other Loans": with respect to a Loan, another Loan made for the
purpose of acquiring, renovating or improving real property which is part
of the same Time-Share Project.
1.29 "Remaining Cost of the Credit Facilities Work": at any time, the excess of
(a ) the remaining unpaid cost of final completion of the phases of the
Construction Work under each Loan as to which vertical construction has
commenced and final completion of the phases of the Renovation Work under
each Loan as to which substantial remodeling has commenced plus, without
duplication, if Borrower has sold or contracted to sell Time-Share
Interests in such phases, the remaining unpaid cost of final completion of
any phases of Construction Work and Renovation Work in which Borrower has
sold or contracted to sell Time-Share Interests over (b) the amount of any
Required Completion Assurance Deposits (as defined in EXHIBIT 1) held by
Lender to assure the completion of such phases of the Construction Work or
Renovation Work, as the case may be.
1.30 "Renovation Component": the portion of a Loan allocated to the payment of
the cost of Renovation Work, excluding interest on the Loan.
1.31 "Renovation Improvements": with respect to a Loan having a Renovation
Component, the renovations, consisting exclusively of furniture,
furnishings and equipment and, unless otherwise agreed in writing by
Lender, minor labor and structural work to or for the benefit of the Real
Property as part of the Renovation Work. For purposes of this paragraph,
labor and structural work shall be considered "minor" if the budgeted
costs of such labor and work
-3-
<PAGE>
is less than fifteen percent (15%) of the total budgeted "hard" and "soft"
costs (excluding interest) of the Renovation Improvements
1.32 "Renovation Work": with respect to a Loan having a Renovation Component,
the making of the renovations and acquisition and installation of any and
all furniture, furnishings, fixtures and/or equipment which are part of
the Renovation Improvements or required by the terms of this Agreement or
the Renovation Work Contract(s) or shown as costs in the Renovation
Budget.
1.33 "Resolution": a resolution of a corporation certified as true and correct
by an authorized officer of such corporation, a certificate signed by the
manager of a limited liability company and such members whose approval is
required under the applicable organizational documents and owners'
agreements, or a partnership certificate signed by all of the general
partners of such partnership and such other partners whose approval is
required under the applicable organizational documents and owners'
agreements.
1.34 "Third Party Consents": those consents which Lender reasonably requires VI
to obtain, or which VI is contractually or legally obligated to obtain,
from others in connection with the execution of this Agreement or the
Performance of the Obligations.
1.35 "Time-Share Interest": an undivided fractional fee simple interest as
tenant-in-common (or an estate for years with a remainder over in
fractional fee simple as tenant-in-common) either (a) in a unit (coupled
with an undivided fractional fee simple interest as tenant-in-common in
the common areas of the Time-Share Project to which the Time-Share
Interest relates) or (b) in the entire Time-Share Project to which the
Time-Share Interest relates, in both cases together with the exclusive
right to occupy and use a specific unit (or an equivalent unit) for a
period of at least seven (7) consecutive days every calendar year (i.e.,
an annual Time-Share Interest) or every other calendar year (i.e., a
biennial Time-Share Interest) (on a fixed or floating basis) and the non-
exclusive right to use such common elements during the same occupancy
period, as more specifically described in the recorded declaration
pursuant to which such Time-Share Interest is created.
1.36 "Time-Share Project": dwellings dedicated to time-share use and common
areas which are part of a common scheme of development by the same Vistana
Entity pursuant to a recorded declaration relating to such Time-Share
Project.
1.37 "VI": Vistana, Inc., a Florida corporation, and, subject to restrictions
on transfer or assignment contained herein, its successors and assigns.
1.38 "VDI Receivables Loan": that revolving receivables line of credit made
available by Lender to Vistana Development, Inc., a Florida corporation,
pursuant to that Loan and Security Agreement dated as of October 30, 1991,
and originally executed between Vistana Development, Ltd., and Greyhound
Real Estate Finance Company, as now or hereafter renewed, amended,
restated or replaced.
1.39 "Vistana Entity": VI or an Affiliate thereof.
-4-
<PAGE>
2. CREDIT FACILITY COMMITMENT; USE OF PROCEEDS.
-------------------------------------------
2.1 Credit Facility Commitment. Lender hereby agrees, if all of the
--------------------------
Obligations then due to be Performed have been Performed, to make Loans
having one or more Loan Components upon the terms and conditions set forth
in the form of Loan Agreement attached hereto as EXHIBIT 1.
2.2 Credit Facility a Revolver; Each Loan a Non-Revolver Borrowing Term. The
-------------------------------------------------------------------
Credit Facility is a revolving line of credit (i.e., Advances may be
obtained in accordance with the terms and conditions of this Agreement; and
as those Advances are repaid, other Advances may be obtained), provided,
--------
however, that Lender shall have no obligation to make an Advance under a
-------
Loan if, after giving effect thereto, the principal balance outstanding
under all Loans plus the Remaining Cost of the Credit Facilities Work
exceeds the Maximum Credit Facilities Amount; and provided, further, that
-------- -------
the aggregate Advances under a Loan may not exceed the Maximum Amount for
such Loan (i.e., each Loan is non-revolving). Each Loan shall be viewed as
a separate loan. Vistana Entities shall not be entitled to obtain Loans or
Advances of Loans after the expiration of the Borrowing Term unless Lender
agrees in writing with VI to make Loans thereafter on terms and conditions
satisfactory to Lender.
2.3 Use of Advances. Unless otherwise permitted in the applicable Loan
---------------
Agreement, the proceeds of a Loan Component may be used only for the
purposes specified in the Loan Agreement attached hereto as EXHIBIT 1.
3. SECURITY.
--------
3.1 Maintenance of Security; Cross Collateralization. With respect to each
------------------------------------------------
Loan, the required security for the Loan shall be the Collateral (as that
term is defined in the Loan Agreement attached hereto as EXHIBIT 1) unless
otherwise provided in the applicable Loan Agreement. The required security
for a Loan shall, at Lender's option, secure the repayment of all Related
Other Loans and the payment and performance of all other obligations under
the Documents executed in connection with the Related Other Loans.
However, if neither an Event of Default nor an Incipient Default then
exists under any Document executed by such Borrower in connection with such
Loan, the security documents executed by a Borrower in connection with a
Loan shall be released when the obligations (other than those arising from
a cross-collateralization provision) under the Documents executed in
connection with such Loan have been paid and performed in full and no
default exists under any other obligation owing to Lender which is secured
under such security documents.
3.2 Determination of Partial Release Fee. As used in this Agreement, the term
------------------------------------
"Partial Release Fee" means an amount to be paid under a Loan in
consideration of the partial release of a Time-Share Interest as security
for such Loan. The Partial Release Fees for Time-Share Interests encumbered
by a Mortgage which is part of the security for a Loan shall be determined
by Lender prior to the time of the first Advance under such Loan and shall
be in amounts sufficient to repay such Loan (based upon the Maximum Loan
Amount for such Loan) when ninety percent (90%) of all Time-Share Interests
into which the Real Property has been or will be subdivided have been sold.
-5-
<PAGE>
4. CONDITIONS PRECEDENT TO THIS AGREEMENT AND TO LOANS AND ADVANCES.
----------------------------------------------------------------
4.1 Conditions Precedent to This Agreement. Lender's obligation to enter into
--------------------------------------
this Agreement shall be subject to and conditioned upon VI having delivered
to Lender the Articles of Organization of VI and following Documents, duly
executed, delivered and in form and substance satisfactory to Lender:
(a) the Resolutions of VI;
(b) a favorable opinion from independent counsel for VI, in form and
substance reasonably satisfactory to Lender as to the formation and
good standing of VI, the due authorization, execution and delivery of
this Agreement by VI and the enforceability of this Agreement against
VI.
(c) this Agreement;
(d) any and all Third Party Consents required with respect to execution by
VI of this Agreement and Performance of its Obligations under this
Agreement; and
(e) such other documents as Lender may reasonably require.
4.2 Conditions Precedent to be Satisfied Prior to Each First Advance of a Loan.
--------------------------------------------------------------------------
With respect to each Loan, Lender's obligation to make the first Advance of
such Loan shall be subject to and conditioned upon the Borrower under such
Loan having satisfied the following conditions:
(a) Documents. The Borrower under such Loan shall have delivered, or
---------
caused to be delivered, to Lender, property completed, duly executed,
delivered, recorded/filed, if applicable, and otherwise in form and
substance satisfactory to Lender, the loan documents required to be
executed and delivered to Lender pursuant to the terms of the Loan
Agreement attached hereto as EXHIBIT 1. Such Documents shall be
delivered to Lender by the time required pursuant to the Loan
Agreement attached hereto as EXHIBIT 1. Lender acknowledges that
except as provided below in this subparagraph, the requirements under
the Loan Agreement attached hereto as EXHIBIT 1 for the delivery of an
"Agreement," a "Note," a "Mortgage," an "Environmental Certificate," a
"Subordination Agreement" and a "Guaranty" shall be satisfied by the
delivery of the Loan Agreement, the Promissory Note, the Mortgage and
Financing Statement (With Security Agreement and Assignment of Leases,
Rents, Sales Documents, Sales Proceeds and Developer's Rights), the
Environmental Certificate, the Subordination Agreement and the
Guaranty attached hereto as EXHIBITS 2-6, respectively; and the
requirements for the delivery of a Security Agreement and Assignments
shall be satisfied through the delivery of the Mortgage and Financing
Statement (With Security Agreement and Assignment of Leases, Rents,
Sales Documents, Sales Proceeds and Developer's Rights) and the
Assignment of Contracts, Licenses, Permits and Other Intangibles
attached hereto as
-6-
<PAGE>
EXHIBIT 2 and EXHIBIT 7, respectively. However, as a condition to the
first Advance of a Loan, Lender may require changes to any or all of
the Documents it deems necessary or appropriate (i) to assure the
enforceability of the terms and conditions of such Documents or (ii)
to conform to customs and practices of prudent lenders doing business
in the jurisdiction where the applicable Real Property is located
pertaining to the creation and perfection of liens, security
interests, assignments and other charges upon the applicable
Collateral. Without limiting the generality of the foregoing, Lender
may require the use of a deed of trust or deed to secure debt in
jurisdictions where it is the custom or practice of prudent lenders in
the jurisdiction where the Real Property is located to do so.
(b) Other Due Diligence Documents. Unless otherwise provided in the
-----------------------------
applicable Loan Agreement, the Borrower under such Loan shall have
delivered to Lender, at Borrower's expense, the due diligence items
required pursuant to the Loan Agreement attached hereto as EXHIBIT 1.
Such items shall be delivered to Lender by the times required pursuant
to the terms of the Loan Agreement attached hereto as EXHIBIT 1.
(c) Other Conditions Precedent. Unless otherwise provided in the
--------------------------
applicable Loan Agreement, the Borrower under such Loan shall have
satisfied at its expense the other applicable conditions to the
initial Advance of such Loan which are set forth in the Loan Agreement
attached hereto as EXHIBIT 1.
4.3 Conditions Precedent to Subsequent Advances of Loan. Unless otherwise
---------------------------------------------------
provided in the applicable Loan Agreement, for each Advance of a Loan after
the initial Advance, Lender's obligation to make such Advance shall be
subject to the terms and conditions set forth in the Loan Agreement
attached as EXHIBIT 1, including delivery to Lender of the items called for
therein by the dates required pursuant to the terms of the Loan Agreement
attached hereto as EXHIBIT 1.
5. MANDATORY REPAYMENT OF LOANS; PREPAYMENT.
----------------------------------------
5.1 Repayment of Loans. Unless otherwise provided in the applicable Loan
------------------
Agreement, each Loan shall be evidenced by a separate promissory note; and
unless otherwise provided in the applicable Loan Agreement and/or in the
applicable promissory note, each Loan shall accrue interest and be repaid
in immediately available funds with interest according to the terms of the
form of Loan Agreement and Promissory Note attached hereto as EXHIBITS 1
and 2, respectively.
5.2 Prepayments. Except as permitted pursuant to the terms of the form of Loan
-----------
Agreement and Promissory Note attached hereto as EXHIBITS 1 and 2,
respectively, or unless otherwise provided in the applicable Loan Agreement
or Note, no Loan shall be entitled to be prepaid in whole or in part.
-7-
<PAGE>
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF VISTANA, INC.
----------------------------------------------------------
6.1 (a) Financial Information. VI will furnish or cause to be furnished to
---------------------
Lender, within one hundred twenty (120) days after the end of each
fiscal year of VI, a copy of the current annual consolidated financial
statements of VI; and will furnish to Lender, within forty-five (45)
days after the end of each interim quarterly fiscal period of VI, a
copy of the current consolidated financial statements of VI, for the
period commencing with the first day of the fiscal year and concluding
with such quarter end. Such financial statements shall contain a
balance sheet as of the end of the relevant fiscal period and
statements of income and of cash flow for such fiscal period
(together, in each case, with the comparable figures for the
corresponding period of the previous fiscal year), all in reasonable
detail. All financial statements shall be prepared in accordance with
generally accepted accounting principles, consistently applied. All
financial statements required pursuant to this paragraph shall be
certified by the chief financial officer or chief accounting officer
of VI. Annual statements shall be audited and certified by a
recognized firm of certified public accountants reasonably
satisfactory to Lender. Together with such financial statements, VI
will deliver to Lender a certificate signed by VI's chief financial
officer or chief operating officer stating that there exists no Event
of Default under any Loan or Incipient Default under any Loan or, if
any such Event of Default or Incipient Default exists, specifying the
nature and period of its existence and what action VI and any
pertinent VI Entity proposes to take with respect to it.
(b) Right to Inspect. VI will permit, and will cause each VI Entity which
----------------
is a Borrower to permit, Lender and its representatives at all
reasonable times, upon reasonable prior notice to inspect, audit and
copy, its records as shall be relevant to the Performance of the
terms, covenants or conditions of this Agreement or the financial
condition of VI or such VI Entity.
(c) Additional Information. VI will make available, and will cause each
----------------------
VI Entity which is a Borrower to make available, to Lender such
further information as Lender may from time to time reasonably
request.
6.2 Net Worth Maintenance. VI will at all times maintain as of the end of each
---------------------
calendar quarter a tangible net worth, as reflected on VI's annual audited
financial statements and interim quarterly financial statements delivered
pursuant to paragraph 6.1 and determined in accordance with generally
accepted accounting principles, in an amount not less than Seventy-Five
Million Dollars ($75,000,000).
6.3 Payment of Taxes. VI has filed (or has requested extensions of the time
----------------
within which to file) returns for all federal, state, local and other taxes
which are required to be filed and taxes shown to be due and payable on
such filed returns have been paid or have been reserved against as required
by generally accepted accounting principles.
6.4 Credit Facility Fee, Non-Utilization Fee and Other Fees and Expenses.
--------------------------------------------------------------------
Unless one or more of the other Vistana Entities have paid such amounts, VI
will pay to Lender the Credit
-8-
<PAGE>
Facility Fee in three (3) installments equal to Two Hundred Thousand
Dollars each (each such payment amount, a "Credit Facility Fee Installment
Payment"). Credit Facility Installment Payments shall be due and payable on
July 9, 1998, and on the next two (2) anniversaries of such date; provided,
--------
however, that unless one or more of the other Vistana Entities have paid
-------
such amount, VI will pay to Lender upon the acceleration of any Loan under
which VI is the Borrower, a default by VI under a guaranty given by it for
a Loan beyond any applicable cure period, the filing of bankruptcy or
similar proceeding by or against VI, or the termination by VI of the Credit
Facility, whichever event first occurs, the excess of the Credit Facility
Fee over the aggregate of all Credit Facility Fee Installment Payments
previously received by Lender. After Lender has received the full amount of
the Credit Facility Fee, no further Credit Facility Fee Installment
Payments will be due. Furthermore, VI will pay to Lender on the first
anniversary (or if not a Business Day, the first Business Day thereafter)
of the date of this Agreement, a fee equal to two percent (2%) of the
excess, if any, of (a) Fifteen Million Dollars ($15,000,000) over (b) the
aggregate principal amount of Advances made during the period ending on the
day preceding the first anniversary of this Agreement. VI will also pay on
demand any and all reasonable costs and expenses incurred by Lender in
connection with negotiation of this transaction and the preparation and
negotiation of this Agreement (including, without limitation, the Exhibits
hereto) including, without limitation: all reasonable attorneys' and other
professionals' fees and charges (including, without limitation, normal
charges for photocopy, telecopy and computer services). Without limiting
the generality of the foregoing, if a bankruptcy proceeding is commenced by
or against VI, Lender shall, to the extent not already provided for herein,
be entitled to recover, and VI shall be obligated to pay, Lender's
reasonable attorneys' fees incurred in connection with: (i) any
determination of the applicability of the bankruptcy laws to the terms of
this Agreement; (ii) any attempt by Lender to enforce or preserve its
rights under the bankruptcy laws or to prevent such Borrower or any other
person from seeking to deny Lender its rights thereunder; or (iii) any
proceeding(s) arising under the bankruptcy laws or arising in or related to
a case under bankruptcy laws.
6.5 Indemnification. VI will INDEMNIFY, PROTECT, HOLD HARMLESS, and defend
---------------
Lender, its successors, assigns and shareholders (including corporate
shareholders), and the directors, officers, employees, agents and servants
of the foregoing, for, from and against, except to the extent arising from
the indemnitee's gross negligence or willful misconduct, any and all
losses, costs, expenses (including, without limitation, court costs and
attorneys' fees), demands, claims, suits, proceedings (whether civil or
criminal), orders, judgments, penalties, fines and other sanctions arising
from or brought in connection with (a) any of the Collateral, the terms of
the Documents or the transactions related thereto, or any act or omission
of VI or any Vistana Entity which is a Borrower or their respective
employees or agents, whether actual or alleged, and (b) any and all
brokers' commissions or finders' fees or other costs of similar type by any
party engaged by VI or any Vistana Entity which is a Borrower in connection
with the Credit Facility. On written request by a person or other entity
covered by the above agreement of indemnity, VI will undertake, at its own
cost and expense, on behalf of such indemnitee, using counsel satisfactory
to the indemnitee, the defense of any legal action or proceeding to which
such person or entity shall be a party and for which such indemnitee is
entitled to be indemnified pursuant to this paragraph.
-9-
<PAGE>
6.6 Survival and Additional Representations, Warranties and Covenants. The
-----------------------------------------------------------------
representations, warranties and covenants contained in this Article VI are
in addition to, and not in derogation of, the representations, warranties
and covenants contained elsewhere in the Documents for the Loans and shall
be deemed to be made and reaffirmed prior to the making of each Advance.
7. CONSTRUCTION AND GENERAL TERMS.
------------------------------
7.1 Payment Location. All monies payable under this Agreement shall be paid to
----------------
Lender at its address set forth on the signature page of this Agreement in
lawful monies of the United States of America, unless otherwise designated
by Lender by notice.
7.2 Entire Agreement. This Agreement and the Documents executed from time to
----------------
time in connection with the Loans shall exclusively and completely state
the rights and obligations of Lender, VI and Borrower with respect to the
transactions contemplated hereby. No modification, variation, termination,
discharge, abandonment, or waiver of any of the terms or conditions of this
Agreement shall be valid unless in writing and signed by duly authorized
representatives of the party sought to be bound by such action. This
Agreement shall supersede any and all prior representations, warranties
and/or inducements, written or oral, heretofore made by Lender concerning
the transaction contemplated hereby, including any commitment for
financing.
7.3 Counterparts. This Agreement may be executed simultaneously in any number
------------
of identical copies, each of which shall constitute an original for all
purposes.
7.4 Notices. All notices, requests or demands required or permitted to be
-------
given under this Agreement shall be in writing, and shall be deemed
effective (a) upon hand delivery, if hand delivered; (b) one (1) Business
Day after such are deposited for delivery via Federal Express or other
nationally recognized overnight courier service; or (c) three (3) Business
Days after such are deposited in the United States mails, certified or
registered mail, all with delivery charges and/or postage prepaid, and
addressed as shown below, or to such other address as the party being
notified may have designated in a notice given to the other party, which
notice shall be effective on the day of receipt if received prior to the
expiration of the recipient's normal business hours on the day of the
receipt or otherwise on the next Business Day. Written notice may be given
by telecopy to the telecopier number shown below or to such other
telecopier number as the party being notified may have designated in a
notice given to the other party, provided that such notice shall not be
deemed effective unless not later than the next Business Day, a copy of
such notice is hand delivered, or deposited for delivery via courier or in
the United States mail in accordance with the requirements set forth above.
If to Lender: FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attn: Vice President-Resort Finance
Telecopy: (602) 874-6444
-10-
<PAGE>
with a copy to:
FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attn: Vice President-Associate General Counsel
Telecopy: (602) 874-6445
If to VI Vistana, Inc.
8801 Vistana Centre Drive
Orlando, Florida 32821
Attn: Chief Financial Officer
Telecopy No.: (407) 239-3222
with a copy to: Susan Werth, Esq.
Vistana, Inc.
701 Brickell Avenue, Suite 2100
Miami, Florida 33131
Telecopy No.: (305) 374-7159
7.5 Successors and Assigns. All the covenants of VI and all the rights and
----------------------
remedies of Lender contained in this Agreement shall bind VI, and, subject
to the restrictions on merger, consolidation and assignment contained in
the Documents, its successors and assigns, and shall inure to the benefit
of Lender, its successors and assigns, whether so expressed or not. VI may
not assign its rights in this Agreement in whole or in part. Except as may
be expressly provided in this Agreement, no person or other entity
(including, without limitation, any Affiliate of VI) shall be deemed a
third party beneficiary of any provision of this Agreement.
7.6 Severability. If any one or more of the provisions contained in this
------------
Agreement shall be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions
contained in this Agreement shall not in any way be affected or impaired
thereby. In lieu of each such illegal, invalid or unenforceable provision,
there shall be added automatically as a part of this Agreement a provision
that is legal, valid, binding and enforceable and as similar in terms to
such illegal, invalid and unenforceable provision as may be possible.
7.7 Time of the Essence. Time is of the essence in the Performance of the
-------------------
Obligations.
7.8 Miscellaneous. All headings are inserted for convenience only and shall
-------------
not affect any construction or interpretation of this Agreement. Unless
otherwise indicated, all references in this Agreement to clauses and other
subdivisions refer to the corresponding paragraphs, clauses and other
subdivisions of this Agreement; the words "herein," "hereof," "hereto,"
"hereunder" and words of similar import refer to this Agreement as a whole
and not to any particular paragraph, clause or other subdivision; and
reference to a numbered or lettered subdivision of an Article or paragraph,
or paragraph shall include relevant matter within the
-11-
<PAGE>
Article or paragraph which is applicable to but not within such numbered or
lettered subdivision. All Schedules and Exhibits referred to in this
Agreement are incorporated in this Agreement by reference.
7.9 (A) CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS, DUTIES AND OBLIGATIONS
-------------
OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF ARIZONA (WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS) AND TO THE EXTENT THEY PREEMPT THE
LAWS OF SUCH STATE, THE LAWS OF THE UNITED STATES.
(B) CHOICE OF JURISDICTION AND VENUE. EACH OF LENDER AND VI: (A) HEREBY
--------------------------------
IRREVOCABLY SUBMITS ITSELF TO THE PROCESS, JURISDICTION AND VENUE OF
THE COURTS OF THE STATE OF ARIZONA, MARICOPA COUNTY, AND TO THE
PROCESS, JURISDICTION, AND VENUE OF THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA, FOR THE PURPOSES OF SUIT, ACTION OR OTHER
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
SUBJECT MATTER HEREOF, AND, IF LENDER INITIATES SUCH ACTION, ANY COURT
IN WHICH LENDER SHALL INITIATE SUCH ACTION, AND THE CHOICE OF SUCH
VENUE SHALL IN ALL INSTANCES BE AT THE LENDER'S ELECTION; AND (B)
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, HEREBY WAIVES AND
AGREES NOT TO ASSERT BY WAY OF MOTION, DEFENSE OR OTHERWISE IN ANY
SUCH SUIT, ACTION OR PROCEEDING ANY CLAIM THAT SUCH PERSON IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT
SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR
THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH
OF VI AND LENDER HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY
JUDGMENT OR ACTION IN ANY OTHER FORUM.
(C) WAIVER OF JURY TRIAL. LENDER AND VI ACKNOWLEDGE AND AGREE THAT ANY
--------------------
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES; AND, THEREFORE, THE PARTIES AGREE THAT
ANY LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED BY A
JUDGE SITTING WITHOUT A JURY, AND KNOWINGLY AND VOLUNTARILY WAIVE
TRIAL BY JURY IN ANY SUCH PROCEEDING.
(D) INDUCEMENT TO LENDER. ALL OF THE PROVISIONS SET FORTH IN THIS
--------------------
PARAGRAPH ARE MATERIAL INDUCEMENTS FOR LENDER'S EXTENDING THE CREDIT
FACILITY TO VI AND MAKING ADVANCES TO BORROWERS.
-12-
<PAGE>
(________ VI INITIALS)]
7.10 Compliance With Applicable Usury Law. It is the intent of the parties
------------------------------------
hereto to comply with the Applicable Usury Law. Accordingly,
notwithstanding any provisions to the contrary in this Agreement, in no
event shall this Agreement require the payment or permit the collection of
interest in excess of the maximum contract rate permitted by the
Applicable Usury Law.
7.11 NO PARTNERSHIP OR JOINT VENTURE. THE RELATIONSHIP OF EACH BORROWER AND VI
-------------------------------
ON ONE HAND AND LENDER ON THE OTHER HAND WILL BE THAT OF DEBTOR AND
CREDITOR. IT IS NOT THE INTENTION OF EITHER OF VI OR LENDER TO ESTABLISH A
PARTNERSHIP BETWEEN VI AND LENDER OR ANY BORROWER AND LENDER, AND VI AND
LENDER AND THE BORROWERS AND LENDER SHALL NOT UNDER ANY CIRCUMSTANCES BE
CONSTRUED TO BE PARTNERS OR JOINT VENTURERS.
7.12 Standards Applied to Lender's Action. Unless otherwise specifically
------------------------------------
stipulated elsewhere in this Agreement, if a matter is left in this
Agreement to the decision, requirement, request, determination, judgment,
opinion, approval, consent, waiver, satisfaction, acceptance, agreement,
option or discretion of Lender, its employees, Lender's counsel or any
agent for or contractor of Lender, such action shall be deemed to be
exercisable by Lender or such other person in its sole and absolute
discretion and according to standards established in its sole and absolute
discretion. Without limiting the generality of the foregoing, "option" and
"discretion" shall be implied by use of the words "if" or "may."
7.13 Scope of Reimbursable Attorney's Fees. As used in the Documents, the term
-------------------------------------
"attorneys' fees" includes the fees of attorneys licensed to practice law
in any jurisdiction, the fees of law clerks, paralegals, investigators and
others not admitted to the bar but performing services under the
supervision of a licensed attorney, and the expenses incurred by them in
the performance of their services. As used in the Documents, attorneys'
fees incurred by Lender in the enforcement of any remedy or covenant
include, without limitation, attorneys' fees incurred in any foreclosure
of the Documents, in protecting or sustaining the lien or priority of the
collateral, or in any proceeding arising from or connected with any such
matter, including any bankruptcy, receivership, injunction or other
similar proceeding, or any appeal from or petition for review of any such
matter, and with or without litigation.
7.14 Publicity. Lender routinely advertises the transactions to which it is a
---------
party in newspapers, industry periodicals, and other miscellaneous print
and electronic literature. Without the prior written consent of VI, not to
be unreasonably withheld, Lender will not use VI's name, logo, insignia,
descriptive art work, trade name, trademark, or other similar material,
whether or not protected by copyright (or otherwise), in any such
advertisement.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their respective name, personally or by their duly authorized
representatives as of the date above written.
VI: VISTANA, INC., a Florida corporation
By: /s/ Susan Werth
-----------------------------------------
Type/Print Name: SUSAN WERTH
----------------------------
Title: Senior Vice President
--------------------------------------
LENDER: FINOVA CAPITAL CORPORATION, a
Delaware corporation
By: /s/ Jeffrey A. Owings
-----------------------------------------
Type/Print Name: JEFFREY A. OWINGS
----------------------------
Title: Vice President
--------------------------------------
-14-
<PAGE>
LIST OF EXHIBITS
EXHIBIT 1 Form of Loan Agreement
EXHIBIT 2 Form of Promissory Note
EXHIBIT 3 Form of Mortgage
EXHIBIT 4 Form of Environmental Certificate
EXHIBIT 5 Form of Subordination Agreement
EXHIBIT 6 Form of Guaranty
EXHIBIT 7 Form of Assignment of Contracts, Licenses, Permits and Other
Intangibles
EXHIBIT 8 Real Property Suitability Standards
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<PAGE>
EXHIBIT 1
FORM OF LOAN AGREEMENT
<PAGE>
LOAN AGREEMENT
--------------
This LOAN AGREEMENT is entered into as of (Month, Day) ,
------------------
(Year), by and between FINOVA CAPITAL CORPORATION, a Delaware corporation, and
- ------
(Name of Borrower) , an (State Where Borrower Organized and Type of
- -------------------- -----------------------------------------------
Business Organization).
- -----------------------
INTRODUCTION
This Loan Agreement is entered into pursuant to a Credit Facilities
Agreement dated as of July 9, 1998, between FINOVA Capital Corporation, a
Delaware corporation, and Vistana, Inc., a Florida corporation. The Credit
Facilities Agreement provides for the making of loans which include one or more
of the following components: an Acquisition Component, an Interest Reserve
Component, a Construction Component and a Renovation Component (as those terms
are defined in Article 1). The loan made pursuant to this Loan Agreement
contains the components identified in the SCHEDULE (as that term is defined in
Article 1) as the Loan Components.
1. DEFINITIONS
-----------
As used in this Agreement and the other Documents (as defined below) unless
otherwise expressly indicated in this Agreement or the other Documents, the
following terms shall have the following meanings (such meanings to be
applicable equally both to the singular and plural terms defined):
1.1 "Acquisition": the acquisition of the Property.
1.2 "Acquisition Advance": if the Loan includes an Acquisition Component,
an advance by Lender of the proceeds of the Acquisition Component.
1.3 "Acquisition Cost": the actual cost of acquiring the Real Property,
all interests therein and all development rights related thereto,
including, without limitation, all reasonable and ordinary closing
costs, attorneys' fees and other due diligence expenses incurred in
connection with such acquisition. Due diligence expenses may include,
at Borrower's option, fees and expenses of land planners, engineers,
architects, surveyors and similar professionals engaged with respect
to the Real Property as well as the cost of environmental reports and
other diligence items required to be delivered to Lender with respect
to the Real Property.
1.4 "Acquisition Component": if the Loan includes an Acquisition
Component, that portion of the Acquisition Loan, not to exceed the
Maximum Acquisition Component Amount, allocated to pay the Acquisition
Cost.
<PAGE>
1.5 "Additional Retainage": the meaning given to it in paragraph 2.1(c).
1.6 "Advances": as applicable, the Acquisition Advance(s), the Interest
Reserve Advances, the Construction Work-Related Advances and the
Renovation Work-Related Advances; and "Advance": one of the Advances.
1.7 "Affidavit of Borrower": a sworn Affidavit of Borrower (and such
other parties as Lender may require) in the form of EXHIBIT I-3, to
accompany a Construction Work-Related Advance Request.
1.8 "Affiliate": with respect to any individual or entity, any other
individual or entity that directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such individual or entity.
1.9 "Agreement": this Loan Agreement, as it may be from time to time
renewed, amended, restated or replaced.
1.10 "Applicable Usury Law": the usury law chosen by the parties pursuant
to the terms of paragraph 9.10 or such other usury law which is
applicable if such usury law is not.
1.11 "Approved Pre-Sales Financing": the meaning given to it in paragraph
6.8(a).
1.12 "Architect/Engineer": an architect, design professional or engineer
employed by Borrower to perform architectural, design or engineering
services for any portion of the Construction Work.
1.13 "Architect/Engineer Agreement": a contract (written or oral, now or
hereafter in effect) between Borrower and an Architect/Engineer for
the performance of architectural, design or engineering services, as
approved by Lender in writing and modified from time to time in
accordance with the terms of the Documents.
1.14 "Articles of Organization": the charter, articles, operating
agreement, limited partnership agreement, by-laws and any other
written documents evidencing the formation, organization and
continuing existence of an entity.
1.15 "Assignments": collectively, a written assignment or assignments
(which may be separate from and/or included within the Mortgage),
executed by Borrower pursuant to the terms of this Agreement and
creating in favor of Lender, to facilitate Performance of the
Obligations, a perfected, direct, first and exclusive assignment
(subject only to the Permitted Encumbrances) of all Contracts,
Licenses, Permits and Other Intangibles and other portions of the
Mortgaged Property (as defined in the Mortgage) exclusive of the Real
Property; as such assignments may be from time to time renewed,
amended, restated or replaced.
-2-
<PAGE>
1.16 "Basic Retainage": the meaning given to it in paragraph 2.1(c).
1.17 "Borrower": (Name of Borrower) , a(n) (State Where
------------------------- -----------------
Borrower Organized and Type of Business Organization) , and, subject
------------------------------------------------------
to the restrictions on assignment and transfer contained in this
Agreement, its successors and assigns.
1.18 "Business Day": any day other than a Saturday, a Sunday, a national
holiday or a day on which banks in Phoenix, Arizona are required to
be closed.
1.19 "CLPI Assignment": the Assignment of Contracts, Licenses, Permits and
Other Intangibles executed and delivered by Borrower pursuant to the
terms of this Agreement and creating in favor of Lender, to
facilitate Performance of the Obligations, a perfected, direct, first
and exclusive assignment (subject only to the Permitted Encumbrances)
of the Contracts, Licenses, Permits and other Intangibles.
1.20 "Collateral": the Real Property, the Personal Property, the Insurance
Policies, any and all other property now or hereafter serving as
security for the Performance of the Obligations, and all products and
proceeds thereof.
1.21 "Completion of the Construction Work Phase": with respect to a
Construction Work Phase, the occurrence of both the Substantial
Completion of such Work Phase and final completion of the
Construction Work Phase (including "punch-list" items) remaining
incomplete at the time of Substantial Completion of such Work Phase.
1.22 "Completion of the Renovation Work": the occurrence of final
completion of the Renovation Work in substantial compliance with the
Renovation Work Contract(s), applicable Legal Requirements, the
Documents, and otherwise in a good and workmanlike manner, lien free
and free from defective materials and workmanship.
1.23 "Construction Budget": with respect to a Construction Work Phase, the
detailed budget cost itemization for such Construction Work Phase
prepared by Borrower and approved in writing by Lender and modified
from time to time in accordance with the terms of the Documents,
which specifies by item the cost and source of payment of: (a) all
labor, materials and services necessary for Completion of the
Construction Work Phase in accordance with the applicable Plans and
Specifications, the applicable Construction Work Contract(s), the
Documents, all Legal Requirements, sound construction, engineering
and architectural principles, and commonly accepted safety standards;
(b) interest on the Construction Component allocated to such
Construction Work Phase and on any portion of the Acquisition Cost
that Lender reasonably requires be allocated to such Construction
Work Phase; and (c) all other expenses incidental to the Completion
of the Construction Work Phase. The Construction Budget shall include
within the costs
-3-
<PAGE>
of the Construction Work Phase to be paid from the Construction
Component an interest reserve and a contingency reserve determined to
be adequate by Lender. The total costs within a Construction Work
Phase to be paid from the Construction Component shall not exceed on
a per Unit basis the Maximum Per Unit Cost for Units within such
Construction Work Phase. Without limiting Lender's discretion in
approving a Construction Budget, Lender shall be satisfied that any
"construction overhead" contained therein does not constitute a
developer fee of any kind.
1.24 "Construction Component": if the Loan includes a Construction
Component, that portion of the Loan, not to exceed the Maximum
Construction Component Amount, allocated to payment of the cost of
the Construction Work, excluding interest on the Loan.
1.25 "Construction Component Borrowing Term": the period commencing on the
date of this Agreement and ending on the close of Lender's normal
business day on July 9, 2001.
1.26 "Construction Improvements": the on-site and/or off-site improvements
(including, without limitation, renovations which are not part of the
Renovation Work) to be constructed upon or made to or for the benefit
of the Real Property as part of the Construction Work, all as set
forth in the Plans and Specifications and the Construction Work
Contract(s) and as described in the Construction Budget, which
improvements are generally described in the SCHEDULE as the
Construction Improvements.
1.27 "Construction Work": if the Loan includes a Construction Component,
the construction or making of the Construction Improvements and the
acquisition and installation of any and all furniture, furnishings,
fixtures and/or equipment which are part of the Construction
Improvements or required by the terms of this Agreement or shown on
or described in the Plans and Specifications or the Construction Work
Contract(s) or shown as costs in the Construction Budget(s).
1.28 "Construction Work Contract": if the Loan includes a Construction
Component, a contract (written or oral, now or hereafter in effect)
between Borrower and a Construction Work Contractor or between a
Construction Work Contractor and any other person or entity relating
in any way to the Construction Work, including the performing of
labor and the furnishing of equipment, materials or services (other
than architectural, design or engineering services).
1.29 "Construction Work Contractor": if the Loan includes a Construction
Component, a contractor employed by Borrower to provide labor and/or
to furnish equipment, materials or services (other than
architectural, design or engineering services) for any portion of the
Construction Work.
-4-
<PAGE>
1.30 "Construction Work Phase": a phase of the Construction Work which
consists of (a) the construction of (i) some or all of the time-share
buildings which are part of the Construction Improvements or of the
renovating (other than as part of the Renovation Work) of some or all
of the Units or a portion but not all of the Time-Share Project or
(ii) some (but not less than those which are necessary to the use of
the time-share buildings being constructed as part of the same
Construction Phase) or all of the on-site and off-site improvements
which are part of the Construction Work (including, without
limitation, amenities and ancillary buildings) and (b) the
acquisition and installation of any and all furniture, furnishings,
fixtures and/or equipment which are part of the improvements being
constructed or made in such Construction Work Phase or required by
terms of this Agreement or shown on or described in the applicable
Plans and Specifications or the applicable Construction Work
Contract(s) or as costs in the applicable Construction Budget; and
each Construction Work Phase is more specifically described in the
SCHEDULE.
1.31 "Construction Work Phase Progress Schedule": with respect to a
Construction Work Phase, the schedule for the Completion of the
Construction Work Phase and parts thereof, as approved by Lender in
writing.
1.32 "Construction Work-Related Advance": if the Loan includes a
Construction Component, an advance by Lender of the proceeds of the
Construction Component for the purpose of paying or reimbursing
Borrower for costs of the Construction Work, excluding interest on
the Loan.
1.33 "Construction Work-Related Advance Request": if the Loan includes a
Construction Component, the written application of Borrower on the
forms described on EXHIBIT I specifying by name and amount all
parties to whom Borrower is obligated for labor, materials, equipment
or services supplied for the performance of the Construction Work and
all other expenses incidental thereto, the Real Property and the
Completion of the Construction Work, and requesting a Work-Related
Advance for payment of such items.
1.34 "Contracts, Licenses, Permits and other Intangibles": all contracts,
licenses, and other intangibles now or hereafter held or owned by
Borrower and used in connection with the Property and/or the business
of Borrower conducted on the Real Property or with respect thereto,
excluding those items excluded from the definition of "Assigned
Assets" in the CLPI Assignment.
1.35 "Declaration": collectively, the Time-Share Declaration and any and
all other declarations of covenants, conditions and restrictions
governing the Real Property.
1.36 "Developer's Rights": all special rights and privileges of Borrower
under any declaration of covenants, conditions and restrictions
and/or other documents
-5-
<PAGE>
governing the Real Property which are not enjoyed by all other owners
of portions of the Real Property.
1.37 "Default Rate": as defined in and determined under the Note.
1.38 "Documents": this Agreement, the Note, the Mortgage, the Security
Agreement, the Assignments, the Subordination Agreement(s), the
Guaranty, the Environmental Certificate, and all other documents,
excluding the Master Credit Facilities Agreement and the Other Loan
Documents, now or hereafter executed in connection with the Loan, as
they may be from time to time renewed, amended, restated or replaced.
1.39 "Environmental Certificate": an environmental certificate executed
pursuant to this Agreement by Borrower and such other persons or
parties as required by Lender, as it may be from time to time
renewed, amended, restated or replaced.
1.40 "Event of Default": the meaning set forth in paragraph 7.1.
1.41 "Force Majeure Event": an "act of God," a fire, a strike, a law, a
regulation, a governmental order and/or injunction which is issued by
a court of competent jurisdiction for reasons other than for
Borrower's acts or omissions which would constitute a default under
this Agreement, an inability to obtain materials or supplies which is
beyond Borrower's reasonable control, an inability to obtain
necessary permits or other governmental approvals for reasons which
are beyond Borrower's reasonable control, or any similar event beyond
Borrower's reasonable control.
1.42 "Guaranty": if Borrower is an entity other than VI, a primary, joint
and several guaranty made by VI, guarantying the repayment of the
Loan, together with interest thereon as provided in the Note, and the
payment and performance of all other Obligations, in accordance with
the requirements of this Agreement.
1.43 "Incipient Default": an event which after notice and/or lapse of time
would constitute an Event of Default.
1.44 "Insurance Policies": the insurance policies that Borrower is
required to maintain and deliver pursuant to paragraph 6.9.
1.45 "Interest Reserve Advance": if the Loan includes an Interest Reserve
Component, an advance by Lender of the proceeds of the Interest
Reserve Component.
1.46 "Interest Reserve Component": if the Loan includes an Interest
Reserve Component, that portion of the Loan, not to exceed the
Maximum Interest Reserve
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Amount, which is allocated for the monthly payment of interest
accrued on the Loan.
1.47 "Legal Requirements": (a) all present and future judicial decisions,
statutes, regulations, permits or certificates of any governmental
authority in any way applicable to Borrower or any of the Collateral;
(b) all covenants, conditions and restrictions contained in any
document by which any of the Collateral is bound; (c) all business
association agreements forming, or granting and/or limiting the
powers of, Borrower; and (d) all contracts or agreements (written or
oral) by which Borrower is bound or, if compliance therewith would
otherwise be in conflict with any of the Documents for the Loan, by
which Borrower becomes bound with Lender's prior written consent.
1.48 "Lender": FINOVA Capital Corporation and its successors and assigns.
1.49 "Lender's Inspector": the meaning given to it in paragraph 8.1.
1.50 "Loan": the Loan made pursuant to paragraph 2.1.
1.51 "Loan Components": collectively, the Acquisition Component, the
Construction Component, the Interest Reserve Component and the
Renovation Component but only to the extent identified in the
SCHEDULE as Loan Components; and "Loan Component": one of the Loan
Components.
1.52 "Manager/General Partner": if Borrower is a limited liability company
and is not member-managed, each manager of the limited liability
company, individually and collectively, or if Borrower is a
partnership, each general partner of the partnership, individually
and collectively.
1.53 "Master Credit Facilities Agreement": that Revolving Credit
Facilities Agreement dated as of July 9, 1998, between Lender and VI,
as it may be from time to time renewed, amended, restated or
replaced.
1.54 "Material Construction Work Contract": a Construction Work Contract
requiring payments in the aggregate of more than Two Hundred Fifty
Thousand Dollars ($250,000).
1.55 "Material Renovation Work Contract": a Renovation Work Contract
requiring payments in the aggregate of more than Two Hundred Fifty
Thousand Dollars ($250,000).
1.56 "Maturity Date": if the Loan has only an Acquisition Component, the
date which is sixty (60) months from the date of the initial
Acquisition Advance; and otherwise July 9, 2006.
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1.57 "Maximum Acquisition Component Amount": if the Loan includes an
Acquisition Component, the amount identified in the SCHEDULE as the
Maximum Acquisition Component Amount.
1.58 "Maximum Construction Component Amount": if the Loan includes a
Construction Component, the amount identified in the SCHEDULE as the
Maximum Construction Component Amount.
1.59 "Maximum Credit Facility Amount": the meaning given to it in the
Master Credit Facilities Agreement.
1.60 "Maximum Interest Reserve Amount": if the Loan has an Interest
Reserve Component, the amount identified in the SCHEDULE as the
Maximum Interest Reserve Amount.
1.61 "Maximum Loan Amount": the amount identified in the SCHEDULE as the
Maximum Loan Amount.
1.62 "Maximum Per Unit Cost": if the Loan includes a Construction
Component or a Renovation Component, the amount identified in the
SCHEDULE as the Maximum Per Unit Cost for such Loan Component.
1.63 "Maximum Renovation Component Amount": if the Loan includes a
Renovation Component, the amount identified in the SCHEDULE as the
Maximum Renovation Component Amount.
1.64 "Minimum Initial Equity Contribution": the amount identified in the
SCHEDULE as the Minimum Initial Equity Contribution, which equals the
amount, if any, by which (a) the sum of the Acquisition Cost, the
costs necessary to be incurred to cause Completion of the
Construction Work Phases and the costs necessary to be incurred to
cause Completion of the Renovation Work Phases exceeds (b) the
Maximum Loan Amount; provided, however, that costs which have been
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paid by Borrower and are not to be reimbursed from the Loan shall be
excluded in making the calculation required pursuant to subparagraph
(a).
1.65 "Minimum Required Time-Share Approvals": all approvals required from
governmental agencies in the state where the Real Property is located
in order to subdivide the Real Property into Time-Share Interests and
to sell Time-Share Interests and offer them for sale at the Time-
Share Project.
1.66 "Mortgage": a mortgage, deed to secure debt or deed of trust executed
and delivered by Borrower pursuant to the terms of this Agreement and
under the terms of which Borrower has conveyed or granted in favor of
Lender, as security for the Performance of the Obligations, a
perfected, direct, first and exclusive lien (subject
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only to the Permitted Encumbrances), upon the Real Property, as it
may be from time to time renewed, amended, restated or replaced.
1.67 "Note": the promissory note in form and substance identical to
EXHIBIT A to be made and delivered by Borrower to Lender pursuant to
paragraph 4.1, as it may from time to time be renewed, amended,
restated or replaced.
1.68 "Obligations": all obligations, agreements, duties, covenants and
conditions of Borrower to Lender which Borrower is now or hereafter
required to Perform under the Documents.
1.69 "Other Loan": a loan which has been requested from Lender under the
Master Credit Facilities Agreement and which Lender is committed to
make thereunder, but excluding the Loan.
1.70 "Other Loan Documents": with respect to an Other Loan, all documents
now or hereafter entered into by Lender and a Vistana Entity in
connection with such Other Loan.
1.71 "Partial Release Fee": the amount identified in the SCHEDULE as the
Partial Release Fee.
1.72 "Performance" or "Perform": full, timely and faithful performance.
1.73 "Permitted Encumbrances": ad valorem real property taxes and
assessments, a lien not yet due and payable; inchoate liens for ad
valorem real property taxes; inchoate assessments; and inchoate
mechanics', artisans' and similar liens; zoning and use laws and
related regulations, to the extent any non-compliance therewith does
not violate any representations, warranty, covenant or agreement of
Borrower contained in the Documents; a lien on the Property in favor
of the holder of the indebtedness owing under the Approved Pre-Sales
Financing but only to the extent permitted pursuant to paragraph
6.7(a), and the other rights, restrictions, reservations,
encumbrances, easements and liens of record which Lender has agreed
to accept as set forth in EXHIBIT B or in any other written agreement
by Lender.
1.74 "Personal Property": that portion of the Mortgaged Property (as
defined in the Mortgage) consisting of personal property.
1.75 "Plans and Specifications": if the Loan includes a Construction
Component or a Renovation Component, the architectural, structural,
mechanical, electrical and other plans and specifications which are
for the construction of the Construction Improvements or Renovation
Improvements, as applicable, and the completion of the rest of the
Construction Work or Renovation Work, as applicable, and have
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<PAGE>
been prepared by Architect(s)/Engineer(s), as approved in writing by
Lender and modified from time to time in accordance with the terms of
the Documents.
1.76 "Principal Construction Work-Related Items": if the Loan includes a
Construction Component, the Plans and Specifications, all agreements
between Borrower and third parties pertaining to the Construction
Work, and all other Contracts, Licenses, Permits and other
Intangibles pertaining to the Construction Work, including, without
limitation, Construction Work Contract(s) and Architect/Engineer
Agreement(s).
1.77 "Property": the Real Property and Personal Property.
1.78 "Purchase Contract": a contract pursuant to which Borrower has agreed
to sell and a third party has agreed to purchase a Time-Share
Interest created or to be created from the Real Property.
1.79 "Purchaser": a purchaser of a Time-Share Interest from Borrower
pursuant to a Purchase Contract.
1.80 "Real Property": the real property described in EXHIBIT C.
1.81 "Related Other Loan": an Other Loan which was made for the purpose of
acquiring real property within or to be added to the Time-Share
Project or financing the construction or renovation of improvements
on such Real Property or within such Time-Share Project.
1.82 "Renovation Budget": with respect to a Renovation Work Phase, the
detailed budget cost itemization for such Renovation Work Phase
prepared by Borrower and approved in writing by Lender and modified
from time to time in accordance with the terms of the Documents,
which specifies by item the cost and source of payment of: (a) all
labor, materials and services necessary for Completion of the
Renovation Work Phase in accordance with the applicable Plans and
Specifications, the applicable Renovation Contract(s), the Documents,
all Legal Requirements, sound construction, engineering and
architectural principles, and commonly accepted safety standards; (b)
interest on the Renovation Component allocated to the Renovation Work
Phase and any portion of the Acquisition Cost that Lender reasonably
requires to be allocated to the Renovation Work Phase; and (c) all
other expenses incidental to the Completion of the Renovation Work
Phase. The Renovation Budget shall include within the costs of the
Renovation Work Phase to be paid from the Renovation Component an
interest reserve and a contingency reserve determined to be adequate
by Lender. The total costs within a Renovation Work Phase to be paid
from the Renovation Component shall not exceed on a per Unit basis
the Maximum Per Unit Cost for Units within such Renovation Work
Phase. Without limiting Lender's discretion in approving the
Renovation Budget,
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Lender shall be satisfied that any "construction overhead" contained
therein does not constitute a developer fee of any kind.
1.83 "Renovation Component": if the Loan includes a Renovation Component, that
portion of the Loan, not to exceed the Maximum Renovation Component
Amount, allocated to payment of the cost of the Renovation Work, excluding
interest on the Loan.
1.84 "Renovation Component Borrowing Term": the period commencing on the
date of this Agreement and ending on July 9, 2001.
1.85 "Renovation Improvements": the renovations, consisting exclusively of
furniture, furnishings and equipment and, unless otherwise agreed in
writing by Lender, minor labor and structural work to be or for the
benefit of the Real Property as part of the Renovation Work, all as set
forth in the Plans and Specifications and the Renovation Work Contract(s)
and as described in the Renovation Budget, which improvements are
generally described in the SCHEDULE as the Renovation Improvements. For
purposes of this paragraph, labor and structural work shall be considered
"minor" if the budgeted costs of labor and work is less than fifteen
percent (15%) of the total budgeted "hard" and "soft" costs (excluding
interest) of the Renovation Improvements .
1.86 "Renovation Work": if the Loan includes a Renovation Component, the making
of the renovations and the acquisition and installation of any and all
furniture, furnishings, fixtures and/or equipment which are part of the
Renovation Improvements or required by the terms of this Agreement or the
Renovation Work Contract(s) or shown as costs in the Renovation Budget(s).
1.87 "Renovation Work Contract": if the Loan includes a Renovation Component, a
contract (written or oral, now or hereafter in effect) between Borrower
and a Renovation Work Contractor, between a Renovation Work Contractor and
any other person or entity relating in any way to the Renovation Work,
including the performing of labor and the furnishing of equipment,
materials or services.
1.88 "Renovation Work Contractor": if the Loan includes a Renovation Component,
a contractor employed by Borrower to provide labor and/or to furnish
equipment, materials or services for any portion of the Renovation Work.
1.89 "Renovation Work Phase": a phase of the Renovation Work which consists of
the renovation of some or all of the Units or some or all of the Time-
Share Project and the acquisition and installation of any and all
furniture, furnishings, fixtures, and/or equipment which are part of such
phase or required by the terms of this Agreement or the applicable
Renovation Work Contract(s) or shown as costs in the applicable
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Renovation Budget; and each Renovation Work Phase is more specifically
described in the SCHEDULE.
1.90 "Renovation Work Phase Progress Schedule": if the Loan includes a
Renovation Component, the schedule for the final completion of each
Renovation Work and parts thereof, as approved by Lender in writing.
1.91 "Renovation Work-Related Advance": with respect to Renovation Work Phase,
an advance by Lender of the proceeds of the Renovation Component for the
purpose of paying or reimbursing Borrower for costs of the Renovation
Work, excluding interest on the Loan.
1.92 "Renovation Work-Related Advance Request": if the Loan includes a
Renovation Component, the written application of Borrower in the form
attached as EXHIBIT K-1.
1.93 "Required Completion Assurance Deposits": collectively, all Required
Completion Assurance Deposits (Construction) and all Required Completion
Assurance Deposits (Renovation); and "Required Completion Assurance
Deposit": one of the Required Completion Assurance Deposits.
1.94 "Required Completion Assurance Deposit (Construction)": if the Loan
includes a Construction Component, the meaning given to it in paragraph
6.4(k).
1.95 "Required Completion Assurance Deposit (Renovation)": if the Loan includes
a Renovation Component, the meaning given to it in paragraph 6.5(f).
1.96 "Required Completion Date (Construction)": with respect to a Construction
Work Phase, the date ["Anticipated Required Completion Date
(Construction)"] which occurs the number of months specified in the
SCHEDULE as the Required Completion Period (Construction) from the earlier
of (i) the date on which Borrower commences vertical construction in the
Construction Work Phase or (ii) the date on which Borrower first sells or
contracts to sell Time-Share Interests in time-share buildings being
constructed as part of such Construction Work Phase, plus such additional
time which is necessary to achieve Completion of the Construction Work
Phase and is due solely to the occurrence of one or more Force Majeure
Events, but in no event (regardless of the length of delay resulting from
Force Majeure Events) later than the later of (a) July 9, 2001 or (b) one
hundred twenty (120) days after the Anticipated Required Completion Date
(Construction).
1.97 "Required Completion Date (Renovation)": with respect to a Renovation Work
Phase, the date ["Anticipated Required Completion Date (Renovation)"]
which occurs the number of months specified in the SCHEDULE as the
Required Completion Period (Renovation) from the earlier of (i) the date
on which Borrower commences
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substantially remodeling the Renovation Work Phase or (ii) the date on
which Borrower first sells or contracts to sell Time-Share Interests
in time-share buildings being constructed as part of such Renovation
Work Phase, plus such additional time which is necessary to achieve
Completion of the Renovation Work Phase and is due solely to the
occurrence of one or more Force Majeure Events, but in no event
(regardless of the length of delays resulting from Force Majeure
Events) later than the later of (a) July 9, 2001 or (b) one hundred
twenty (120) days after the Anticipated Required Completion Date
(Renovation).
1.98 "Resolution": a resolution of a corporation certified as true and
correct by an authorized officer of such corporation, a certificate
signed by the manager (if any) of a limited liability company and such
members whose approval is required under the applicable Articles of
Organization and owners' agreements, or a partnership certificate
signed by all of the general partners of such partnership and such
other partners whose approval is required under the applicable
Articles of Organization and owners' agreements.
1.99 "SCHEDULE": the Schedule of Additional Terms which follows the
signature pages of the parties.
1.100 "Security Agreement": a written security agreement which may be
separate from and/or included within the Mortgage, an Assignment or
this Agreement, executed by Borrower and creating in favor of Lender,
as security for the Performance of the Obligations, a perfected,
direct, first and exclusive security interest (subject only to the
Permitted Encumbrances) in the Personal Property, as it may be from
time to time renewed, amended, restated or replaced.
1.101 "Security Documents": the Mortgage, the Security Agreement, the
Assignments, and all other documents now or hereafter securing the
Obligations, as they may be from time to time renewed, amended,
restated or replaced.
1.102 "Security Interest": with respect to any Collateral, a perfected,
direct, first and exclusive (subject only to the Permitted
Encumbrances) lien on, security interest in and charge upon such
Collateral.
1.103 "Subordination Agreement(s)": the subordination agreement(s) made and
delivered pursuant to the terms of this Agreement, as it/they may be
from time to time renewed, amended, restated or replaced.
1.104 "Substantial Completion of the Construction Work": if the Loan
includes a Construction Component,
(a) substantial completion (as defined in AIA Document 201, most
current version) of the Construction Work, in accordance with the
Plans and
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Specifications, the Construction Work Contract(s), the Documents,
all applicable Legal Requirements, sound construction,
engineering and architectural principles and commonly accepted
safety-standards, free of liens (except for Permitted
Encumbrances) and defective materials and workmanship; and
(b) receipt by Lender of the following in form and substance
satisfactory to it: (i) a certificate from Borrower and
Architect(s)/ Engineer(s) and, if Lender elects, from Lender's
Inspector to the effect that Construction Work has been so
completed, all utilities necessary to serve the Real Property
have been connected and are operating, the Construction
Improvements are fully furnished and ready for occupancy for
time-share or other intended purposes, and final payment is due
under all Construction Work Contracts between Borrower and all
Construction Work Contractors; (ii) a certificate of occupancy
(or its equivalent) from the appropriate governmental authority
having jurisdiction over the Construction Work which has the
effect of allowing the use of Construction Improvements for time-
share or other intended purposes, to the extent such a
certificate is customarily issued or available; (iii) if
applicable Legal Requirements provide that the recording of a
notice of completion will cause the expiration upon a date
certain of the statutory period within which mechanics' and
similar liens can be filed, verification of the recording of such
notice in the manner prescribed by such laws; (iv) final lien
waivers, other than lien waivers for Construction Work remaining
to be performed prior to Completion and for which Lender is still
holding any Basic Retainage or Additional Retainage; (v) the as-
built survey required pursuant to paragraph 6.4(g) after
substantial completion of the Construction Work; (vi) the title
policy endorsements required pursuant to paragraph 6.4(h) after
substantial completion of the Construction Work; and (vii) if any
portion of the Construction Improvements is required to be
dedicated to a governmental authority, evidence that such
dedication has occurred and that the governmental authority has
accepted such Construction Improvements, subject only to
customary warranty obligations on the part of Borrower.
1.105 "Substantial Completion of the Construction Work Phase": with respect
to a Construction Work Phase,
(a) substantial completion of the Construction Work Phase (as defined
in AIA Document 201, most current version), in accordance with
the applicable Plans and Specifications, the applicable
Construction Work Contract(s), the Documents, all applicable
Legal Requirements, sound construction, engineering and
architectural principles and commonly accepted safety-standards,
free of liens (except for Permitted Encumbrances) and defective
materials and workmanship; and
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<PAGE>
(b) receipt by Lender of the following in form and substance
satisfactory to it: (i) a certificate from Borrower and
Architect(s)/ Engineer(s) and, if Lender elects, from Lender's
Inspector to the effect that Construction Work has been so
completed, all utilities necessary to serve the portions of the
Real Property improved as part of such Construction Work Phase
have been connected and are operating, the applicable
Construction Improvements are fully furnished and ready for
occupancy for time-share or other intended purposes, and final
payment is due under all applicable Construction Work Contracts
between Borrower and all applicable Construction Work
Contractors; (ii) a certificate of occupancy (or its equivalent)
from the appropriate governmental authority having jurisdiction
over the Construction Work Phase which has the effect of allowing
the use of applicable Construction Improvements for time-share or
other intended purposes, to the extent such a certificate is
customarily issued or available; (iii) if applicable Legal
Requirements provide that the recording of a notice of completion
will cause the expiration upon a date certain of the statutory
period within which mechanics' and similar liens can be filed,
verification of the recording of such notice in the manner
prescribed by such laws; (iv) final lien waivers, other than lien
waivers for work in such Construction Work Phase remaining to be
performed prior to Completion and for which Lender is still
holding any Basic Retainage or Additional Retainage; (v) the as-
built survey required pursuant to paragraph 6.4(g) after
substantial completion of the Construction Work Phase; (vi) the
title policy endorsements required pursuant to paragraph 6.4(h)
after substantial completion of the Construction Work Phase; and
(vii) if any portion of the applicable Construction Improvements
is required to be dedicated to a governmental authority, evidence
that such dedication has occurred and that the governmental
authority has accepted such Construction Improvements, subject
only to customary warranty obligations on the part of Borrower.
1.106 "Term": the duration of this Agreement, commencing on the date as of
which this Agreement is entered into and ending when all of the
monetary Obligations shall have been Performed.
1.107 "Third Party Consents": those consents which Lender reasonably
requires Borrower to obtain, or which Borrower is contractually or
legally obligated to obtain, from others in connection with the
transaction contemplated by the Documents.
1.108 "Time-Share Association": the association provided for in the Time-
Share Declaration to manage the Time-Share Project and in which all
owners of Time-Share Interests are members.
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1.109 "Time-Share Declaration": the declaration identified in the SCHEDULE
as the Time-Share Declaration, which has established or, if identified
in the SCHEDULE as to be recorded, will establish, the Time-Share
Program with respect to the Real Property.
1.110 "Time-Share Interest": an undivided fractional fee simple interest as
tenant-in-common (or an estate for years with a remainder over in
fractional fee simple as tenant-in-common) either (a) in a Unit
(coupled with an undivided fractional fee simple interest as tenant-
in-common in the common areas of the Time-Share Project) or (b) in the
entire Time-Share Project, in both cases together with the exclusive
right to occupy and use a specific Unit (or an equivalent Unit) for a
period of at least seven (7) consecutive days every calendar year
(i.e., an annual Time-Share Interest) or every other calendar year
(i.e., a biennial Time-Share Interest) (on a fixed or floating basis)
and the non-exclusive right to use such common elements during the
same occupancy period, as more specifically described in the Time-
Share Declaration.
1.111 "Time-Share Management Agreement": the management agreement from time
to time entered into between the Time-Share Association and the Time-
Share Manager for the management of the Time-Share Program.
1.112 "Time-Share Manager": the person from time to time employed by the
Time-Share Association to manage the Time-Share Program.
1.113 "Time-Share Program": the program established by the Time-Share
Declaration, by which purchasers may own Time-Share Interests in fee
simple, enjoy their respective Time-Share Interests on a recurring
basis not less often than seven (7) days every year or every other
year, and share the expenses associated with the operation and
management of such program.
1.114 "Time-Share Program Consumer Documents": the Purchase Contract,
promissory note, purchase money mortgage, deed of conveyance, credit
application (if any), credit disclosure, rescission right notices,
final subdivision public reports/ prospectuses/public offering
statements, receipt for public report, and other documents used or to
be used by Borrower in connection with the sale of Time-Share
Interests created or to be created from the Real Property.
1.115 "Time-Share Program Governing Documents": the Time-Share Declaration,
the Articles of Organization for the Time-Share Association, any and
all rules and regulations from time to time adopted by the Time-Share
Association, the Time-Share Management Agreement and any subsidy
agreement by which Borrower is obligated to subsidize shortfalls in
the budget of the Time-Share Program in lieu of paying assessments.
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1.116 "Time-Share Project": the time-share resort or part of the resort
described in the SCHEDULE as the Time-Share Project.
1.117 "Title Insurer": a title company which is acceptable to Lender and
issues the Title Policy.
1.118 "Title Policy": an ALTA lender's policy of title insurance in an
amount not less than the Maximum Loan Amount (or, if less, due to
Borrower performing the Construction Work and/or Renovation Work in
Work Phases, the sum of all Advances made by Lender and the committed
and undisbursed portion of the Loan with respect to such Work Phases),
insuring Lender's interest in the Mortgage as a perfected, direct,
first and exclusive lien on the Real Property, subject only to the
Permitted Encumbrances, issued by Title Insurer and in form and
substance acceptable to Lender.
1.119 "Uncovered Cost of the Construction Work Phase": with respect to a
Construction Work Phase, at any time, the amount equal to the excess
(if any) of (a) the remaining unpaid cost of Completion of the
Construction Work Phase over (b) the committed and undisbursed portion
of the Construction Component and the balance of any Required
Completion Assurance Deposits (Construction) held by Lender with
respect to such Construction Work Phase.
1.120 "Uncovered Cost of the Renovation Work Phase": with respect to a
Renovation Work Phase, at any time, the amount equal to the excess (if
any) of (a) the remaining unpaid cost of final completion of the
Renovation Work Phase over (b) the committed and undisbursed portion
of the Renovation Component and the balance of any Required Completion
Assurance Deposits (Renovation) held by Lender with respect to such
Renovation Work Phase.
1.121 "Uncovered Cost of the Work": at any time, the sum of the Uncovered
Cost of the Construction Work Phases and the Uncovered Cost of the
Renovation Work Phases.
1.122 "Unit": a dwelling unit in which a Time-Share Interest has been
created or is intended to be created within the Real Property.
1.123 "VI": Vistana, Inc. a Florida corporation.
1.124 "Work-Related Advances": collectively, the Construction Work-Related
Advances and the Renovation Work-Related Advances; and "Work-Related
Advance": one of the Work-Related Advances.
1.125 "Work Phase": a Construction Work Phase or a Renovation Work Phase.
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In addition, when the term "vertical construction" is used in connection with a
Construction Work Phase including remodeling, the term shall also be interpreted
to include, as to such remodeling segment, "substantial remodeling."
2. LOAN COMMITMENT; USE OF PROCEEDS
--------------------------------
2.1 Loan Commitment.
---------------
(a) Acquisition Advance Commitment; Determination of Acquisition
------------------------------------------------------------
Advance Amount. Lender hereby agrees, if the Loan includes an
--------------
Acquisition Component and Borrower has Performed all Obligations
then due, Lender will make the Acquisition Advance(s) as provided
for in the SCHEDULE. Unless otherwise expressly provided in the
SCHEDULE or Lender otherwise agrees in writing to do so, Borrower
will not be not be entitled to obtain any Acquisition Advance
after the Required Closing Date
(b) Interest Reserve Advances. Lender hereby agrees that if the Loan
-------------------------
has an Interest Reserve Component and Borrower has Performed all
Obligations then due, Lender will make Interest Reserve Advances
for the purpose of paying interest due on the Loan. Subject to
the provisions of paragraph 4.3, the amount of each Interest
Reserve Advance shall be in the amount of interest then accrued
and unpaid on the Loan. Interest Reserve Advances shall be
available from and after the initial Advance made hereunder.
Borrower shall not be entitled to obtain Interest Reserve
Advances after the expiration of the Interest Reserve Borrowing
Term unless Lender, in its discretion, agrees in writing with
Borrower to make such Advances thereafter on terms and conditions
satisfactory to Lender.
(c) Construction Component Commitment; Determination of Construction
----------------------------------------------------------------
Work-Related Advance Amounts; Retainage. Lender hereby agrees
---------------------------------------
that if the Loan has a Construction Component and Borrower has
Performed all the Obligations then due, Lender will make
Construction Work-Related Advances to Borrower for the purpose of
paying or reimbursing Borrower for costs of the Construction
Work, exclusive of interest on the Loan. The maximum amount of
each Construction Work-Related Advance shall be equal to the
costs of the Construction Work covered by the applicable
Construction Work-Related Advance Request and allocated within
the applicable Construction Budget for payment out of the
Construction Component and, unless otherwise waived by Lender in
writing or expressly provided for below in this paragraph, less
an amount equal to the sum of (a) ten percent (10%) of the costs
of such Construction Work until at least fifty percent (50%) of
the Construction Work to be performed under the applicable
Construction Contract has been completed and five percent (5%) of
such costs thereafter ("Basic Retainage") and (b) any additional
retainage
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("Additional Retainage") required under the Construction Work
Contract(s); provided, however, that Construction Work-Related
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Advances shall not be made for stored or ordered materials not
yet incorporated into the Construction Improvements unless stored
at the Real Property in accordance with the terms of this
Agreement, except that Borrower shall be entitled to Construction
Work-Related Advances for the payment of deposits of up to fifty
percent (50%) of the purchase price of furniture and furnishings
consisting a part of the Construction Work; and provided,
--------
further, that Basic Retainage shall not be required with respect
-------
to work performed under a Construction Work Contract if there is
no general contractor (i.e., Borrower acts as its own "general
contractor") or an Affiliate of Borrower is the general
contractor and Borrower does not request progress payments or
reimbursement for work to be performed under a Construction
Contract unless the work has been substantially completed to the
extent of the requested reimbursement or progress payment. The
Basic Retainage, if applicable, shall apply to all "hard" costs
of the Construction Work and to such soft costs as Lender, in the
exercise of its reasonable discretion, deems necessary until
Lender has reviewed and approved the Construction Budget. The
Additional Retainage shall be disbursed as part of the next
Advance occurring after Lender and Borrower have reasonably
determined that a Construction Work Contractor is entitled to it
under the applicable Construction Work Contract. The Basic
Retainage from Construction Work-Related Advances for a
Construction Work Phase shall be disbursed at the time of
Substantial Completion of the Construction Work Phase to the
extent Construction Work Contractor(s) are then entitled to it
under the Construction Work Contract(s) between Borrower and such
Construction Work Contractor(s) prior to final payment, subject
to Lender's right to keep such additional portion of the Basic
Retainage as it may determine to be necessary to ensure
Completion of the Construction Work, with such retained portion
to be disbursed promptly after Completion of the Construction
Work. Lender shall have no obligation to make any Construction
Work-Related Advance with respect to a Construction Work Phase
if, after giving effect to such Advance, the cost of Completion
of the Construction Work Phase exceeds the sum of (i) remaining
undisbursed balance of the Construction Component allocated to
the Construction Work Phase and (ii) all Required Assurance
Deposits (Construction) held with respect to such Construction
Work Phase. Borrower shall not be entitled to obtain Constructed
Work-Related Advances after the expiration of the Construction
Component Borrowing Term unless Lender, in its discretion, agrees
in writing with Borrower to make such Advances thereafter on
terms and conditions satisfactory to Lender.
-19-
<PAGE>
(d) Renovation Component Commitment; Determination of Renovation
------------------------------------------------------------
Work-Related Advance Amounts. Lender hereby agrees that if the
----------------------------
Loan has a Renovation Component and Borrower has Performed all
the Obligations then due, Lender will make Renovation Work-
Related Advances to Borrower for the purpose of paying or
reimbursing Borrower for costs of the Renovation Work, exclusive
of interest on the Loan. The maximum amount of each Renovation
Work-Related Advance shall be equal to the costs of the
Renovation Work covered by the applicable Renovation Work-Related
Advance Request and allocated within the applicable Renovation
Budget for payment out of the Loan; provided, however, that
-------- -------
Renovation Work-Related Advances shall not be made for stored or
ordered materials not yet incorporated into the improvements
being renovated (other than goods stored at the Real Property in
accordance with the terms of this Agreement), except that
Borrower shall be entitled to Renovation Work-Related Advances
for the payment of deposits of up to fifty percent (50%) of the
purchase price of furniture and furnishings constituting a part
of the Renovation Work. Lender shall have no obligation to make
any Renovation Work-Related Advance with respect to a Renovation
Work Phase if, after giving effect to such Advance, the cost of
Completion of the Renovation Work Phase exceeds the sum of (i)
remaining undisbursed balance of the Renovation Component
allocated to the Renovation Work Phase and (ii) all Required
Assurance Deposits (Renovation) held with respect to such
Renovation Work Phase. Borrower shall not be entitled to obtain
Renovation Work-Related Advances after the expiration of the
Renovation Component Borrowing Term unless Lender, in its
discretion, agrees in writing with Borrower to make such Advances
thereafter on terms and conditions satisfactory to Lender.
(e) Limitations on Total Advances of Loan. Lender shall have no
-------------------------------------
obligation to make any Advance if after giving effect to such
Advance the aggregate amount of all Advances exceeds the Maximum
Loan Amount. If the Loan has a Construction Component or a
Renovation Component, Lender shall have no obligation to make any
Advance if, after giving effect to such Advance, the sum of (i)
the aggregate amount of all Advances, (ii) the committed and
undisbursed portion of the Loan, and (iii) the Uncovered Cost of
the Work exceeds the Maximum Loan Amount. Furthermore, Lender
shall have no obligation to make an Advance if, after giving
effect to such Advance, the sum of (i) the unpaid principal
balance of the Loan and the Other Loans and (ii) the Remaining
Cost of the Credit Facilities Work (as defined in the Master
Credit Facilities Agreement) exceeds the Maximum Credit Facility
Amount.
2.2 Loan Non-Revolving. The Loan shall be non-revolving. All Advances
------------------
shall be viewed as a single loan.
-20-
<PAGE>
2.3 Use of Advances.
---------------
(a) Acquisition Advances. If the Loan includes an Acquisition
--------------------
Component, Borrower will use the proceeds of the Acquisition
Advance(s) only to pay or reimburse Borrower for Acquisition
Costs.
(b) Interest Reserve Advances. If the Loan includes an Interest
-------------------------
Reserve Component, Borrower will use the proceeds of Interest
Reserve Advances only to pay interest due on the Note.
(c) Construction Work-Related Advances. If a Loan includes a
----------------------------------
Construction Component, Borrower will use proceeds of
Construction Work-Related Advances only to pay or reimburse
Borrower for applicable line-item expenses in the Construction
Budget. If no Event of Default exists and the re-allocation will
not result in any Uncovered Cost of the Construction Work,
Borrower may re-allocate line items in a Construction Budget
without first obtaining Lender's consent. If no Event of Default
exists and Lender's consent to re-allocation is required, such
consent shall not be unreasonably withheld. Borrower will notify
Lender of all line item re-allocations within the Construction
Budget within a reasonable period of time.
(d) Renovation Work-Related Advances. If the Loan includes a
--------------------------------
Renovation Component, Borrower will use proceeds of Renovation
Work-Related Advances only to pay or reimburse Borrower for
applicable line-item expenses shown in the Renovation Budget.
Unless no Event of Default exists and the re-allocation will not
result in any Uncovered Cost of the Renovation Work, Borrower may
not re-allocate line items in the Renovation Budget without first
obtaining Lender's consent, which consent shall not be
unreasonably withheld or delayed. Borrower will notify Lender of
all line item re-allocations within the Renovation Budget within
a reasonable period of time.
3. SECURITY
--------
3.1 Delivery and Maintenance of Security. Borrower will deliver or cause
------------------------------------
to be delivered to Lender and will maintain or cause to be maintained
in full force and effect throughout the Term (except as otherwise
expressly provided in any Document), the Security Documents and all
other security required to be given to Lender pursuant to the terms of
this Agreement. Lender reserves the right, at its option, to require
that this Loan and all Related Other Loans be cross-collateralized.
However, if neither an Event of Default nor an Incipient Default then
exists, Collateral shall be released when the Obligations (other than
those arising from a cross-collateralization provision) have been
performed.
-21-
<PAGE>
3.2 Sale and Partial Release of Time-Share Interests. Notwithstanding
------------------------------------------------
anything in any of the Documents to the contrary, Borrower may enter
into Purchase Contracts providing for the sale of Time-Share Interests
to Purchasers upon the terms and conditions set forth in this
paragraph. The sale shall be made in the ordinary course of Borrower's
business in a bona fide transaction when no Event of Default exists
---- ----
and the sale shall comply with all applicable Legal Requirements.
Borrower shall be entitled to close a Purchase Contract and have the
Time-Share Interest(s) covered by such Purchase Contract released from
the Mortgage only upon satisfaction of the following conditions: (a)
the sale in connection with which the Purchase Contract was executed
satisfies the criteria set forth in the preceding sentence; (b)
Borrower has paid all recording and escrow fees incurred in connection
with the partial releases; and (c) Lender has received (i) a written
request from Borrower certifying to Lender that the sale and partial
release satisfy the criteria set forth in this paragraph at least five
(5) Business Days prior to the date of the requested release, (ii) a
completed partial release document in recordable form and otherwise
satisfactory to Lender, and (iii) the appropriate Partial Release Fee
and all its reasonable out-of-pocket expenses incurred in connection
with the partial release. Borrower shall also be entitled to the
partial release of a Time-Share Interest when the condition satisfied
in clause (a) of the preceding sentence has not been satisfied so long
as (x) no Event of Default then exists, (y) the conditions set forth
in clauses (b) and (c) of the preceding sentence have been satisfied
with respect to such Time-Share Interest and (z) the Partial Release
Fee results from a prepayment permitted pursuant to paragraph 5.3(a);
provided, however, that the Time-Share Interest being released shall
-------- -------
be determined by Lender in its discretion. Borrower and Lender will
cooperate in developing a system for processing the partial release
requests and Partial Release Fees that is as administratively
efficient and cost effective as possible.
3.3 Other Developmental Matters Affecting Security. If a Borrower desires
----------------------------------------------
Lender to give its consent to or take any other action concerning a
matter affecting the zoning, platting, development or sale of or title
to any of its Real Property encumbered by a Mortgage, it shall comply
with the procedures set forth in EXHIBIT D. The provisions of the
preceding sentence shall not apply to Borrower's desire to obtain
Partial Releases or to obtain Advances, the procedures for which are
set forth elsewhere in this Agreement.
4. ADVANCES
--------
4.1 General Conditions Precedent to Initial Advance. Lender's obligation
-----------------------------------------------
to make the initial Advance shall be subject to and conditioned upon
the terms and conditions set forth in the following subparagraphs and
elsewhere in this Agreement having been satisfied:
-22-
<PAGE>
(a) Documents. Borrower shall have delivered to Lender the following
---------
Documents duly executed, delivered, recorded/filed, if
applicable, and otherwise in form and substance satisfactory to
Lender: (i) this Agreement; (ii) the Note; (iii) the Mortgage;
(iv) the Assignments; (v) the Environmental Certificate; (vi) the
Subordination Agreement; (vii) if Borrower is not VI, the
Guaranty; (viii) UCC-1 financing statements for filing and/or
recording, as appropriate, where necessary to perfect the
Security Interest in the Collateral; (ix) the Title Policy (or an
unconditional commitment to issue the Title Policy promptly); (x)
the Third Party Consents; (xi) a favorable opinion from
independent counsel for Borrower and, if Borrower is not VI, for
VI, with respect to the matters set forth in EXHIBIT E; (xii) a
request for the Advance in the form required by Lender (EXHIBIT
G-1, EXHIBIT I-1 and EXHIBIT K-1, as applicable); and (xiii) such
other documents as are identified in the SCHEDULE as Additional
Loan Documents.
(b) Organizational, Time-Share Project and Other Due Diligence
----------------------------------------------------------
Documents. Borrower shall have delivered to Lender at least five
---------
(5) Business Days (unless a longer period is expressly specified
in the Master Credit Agreement) prior to the date of the Advance,
the following items and such other items as are identified in the
SCHEDULE as Additional Due Diligence Documents, all in form and
substance satisfactory to Lender:
(i) the Resolutions of Borrower, any Manager/General Partner
of Borrower; any other member or partner of Borrower or
any Manager/General Partner of Borrower whose approval or
acknowledgment of the Loan is required under the Articles
of Organization of Borrower or any General Partner/Manager
of Borrower or by Lender; and the Resolutions of each
surety for the Loan (including, without limitation, VI if
Borrower is not VI);
(ii) if they have not been previously delivered to Lender in
connection with the Articles of Organization of Borrower,
any Manager/General Partner of Borrower, any other member
or general partner of Borrower or of any Manager/General
Partner of Borrower whose approval or acknowledgment of
the Loan is required by the Articles of Organization of
Borrower of any General Partner/Manager of Borrower or by
Lender; and the Articles of Organization of each surety
for the Loan (including, without limitation, VI if
Borrower is not VI);
(iii) current certificates of good standing for Borrower and any
Manager/General Partner of Borrower, and, if Borrower is
not VI, for VI, from the state identified in the SCHEDULE
as State of
-23-
<PAGE>
Organization for such person, and, in the case of such
Borrower and any Manager/General Partner of Borrower, in
the state where the Real Property is located;
(iv) a Level I environmental assessment of the Real Property
and a "Haz Map Report" for the Real Property;
(v) evidence that taxes and assessments on the Real Property
and the Personal Property have been paid;
(vi) evidence that Borrower has good and marketable title to an
undivided fee simple interest in the Real Property,
together with a title commitment or preliminary title
report for the issuance of the Title Policy and legible
copies of all documents referred to therein;
(vii) a 1992 ALTA/ACSM survey of the Real Property certified to
Lender and prepared by a licensed land surveyor acceptable
to Lender, showing the Real Property, all easements
necessary to the operation and use of the Real Property
and such other details as Lender may reasonably require;
(viii) a written summary description of Borrower's plan for the
sale of Time-Share Interests into which the Real Property
has been or will be subdivided and, unless the Real
Property is fully improved for time-share and Borrower
plans no further improvements, for the improvements
reasonably satisfactory Lender;
(ix) evidence that Borrower has received Minimum Required Time-
Share Approvals from the state where the Real Property is
located or that Borrower will be able to obtain them by
the date identified in the SCHEDULE as the Minimum
Required Time-Share Approvals Delivery Date and all other
licenses and certificates (exclusive of licenses and
certificates which are dependent upon the construction or
making of any Construction Improvements or Renovation
Improvements), for the time-share intended use of the Real
Property, including environmental permits;
(x) evidence that the Real Property is zoned for time-share
and other intended uses and that all approvals under
applicable Legal Requirements, exclusive of approvals
which are dependent upon the construction or making of any
Construction Improvements or Renovation Improvements, have
been obtained for such uses or that Borrower will be able
to obtain all such approvals for the Construction
Improvements or Renovation Improvements, as
-24-
<PAGE>
applicable, prior to commencement of construction of such
improvements;
(xi) the Insurance Policies;
(xii) evidence that the Real Property is not located within a
flood prone area, except for such portion thereof which
does not materially adversely affect the development,
intended use or value of the Real Property (taken as a
whole) or evidence that flood insurance is available and
has been obtained;
(xiii) evidence of the current and expected continued
availability of adequate utilities to serve the Real
Property for time-share and other intended uses;
(xiv) evidence of legal access to the Real Property, which is
adequate to serve the Real Property for time-share and
other intended uses;
(xv) if such Loan includes an Acquisition Advance, a copy of
the purchase contract pursuant to which such Borrower
purchased or is to purchase the Real Property which is
the subject of such Loan, and closing settlement
statements reasonably satisfactory to Lender to verify
the Acquisition Cost of the Real Property;
(xvi) to the extent the same have been entered into, a copy of
all marketing contracts, management contracts, and other
material agreements which have been entered into with
respect to the Real Property and the sale of Time-Share
Interests created or to be created from the Real Property
not otherwise expressly required with respect to the
terms of this Agreement;
(xvii) market data with respect to the Real Property, including
data or the price and absorption of time-share interests
in competing projects within such market;
(xviii) if the Loan includes an Acquisition Component, the
applicable items listed in EXHIBITS F and G;
(xix) if the Loan includes a Construction Component, the
applicable items listed in EXHIBITS H and I;
(xx) if the Loan includes a Renovation Component, the
applicable items listed in EXHIBITS J and K; and
-25-
<PAGE>
(xxi) such other items as Lender requests which are reasonably
necessary to evaluate the Collateral, the request for the
Advance and the satisfaction of the conditions precedent
to the Advance.
(c) Financial Statements; Litigation and Judgment Searches. Lender shall
------------------------------------------------------
have received the following in form and substance satisfactory to
Lender:
(i) good standing certificates for Borrower and, if Borrower is not
VI, for, VI; and the results of current UCC, lien, litigation,
judgment and bankruptcy searches for Borrower, any
Manager/General Partner of Borrower and, if Borrower is not VI,
for VI, conducted in such jurisdictions as Lender deems
appropriate;
(ii) current financial statements and credit reports for Borrower
and, if Borrower is not VI, for VI, including, without
limitation, if Borrower has few or no assets prior to closing of
the Loan, a pro-forma balance sheet as of the closing of the
Loan; and
(iii) the results of a site inspection of the Real Property which is
made by Lender's employees.
4.2 Conditions Precedent to Subsequent Acquisition Advances. If the Loan
-------------------------------------------------------
includes an Acquisition Component and the Acquisition Component is
entitled to be disbursed in more than one Acquisition Advance,
Lender's obligation to make an Acquisition Advance after the initial
Acquisition Advance shall be subject to the terms and conditions
identified in EXHIBIT G as Subsequent Acquisition Advance Conditions.
4.3 Conditions Precedent to Interest Reserve Advances. Notwithstanding
-------------------------------------------------
anything herein to the contrary, if the Loan includes an Interest
Reserve Component and neither an Event of Default nor an Incipient
Default exists, then during the Borrowing Term and, in Lender's
discretion, after expiration of the Borrowing Term to the extent that
the Interest Reserve Component has not been exhausted, if Borrower
fails to make a payment of interest on the Note when due, Lender will
charge the Interest Reserve Component for monthly interest billings on
the Loan until it has been exhausted. If the Interest Reserve
Component is exhausted, Borrower will pay to Lender the monthly
installments of interest on the Note in accordance with the terms of
the Note.
4.4 Conditions Precedent to Subsequent Construction Work-Related Advances.
---------------------------------------------------------------------
If the Loan includes a Construction Component, Lender's obligation
to make Construction Work-Related Advances shall be subject to
Borrower's satisfaction of the terms and conditions set forth in
EXHIBIT I, including delivery to Lender of the items called for
therein at least three (3) Business Days prior to the date of such
-26-
<PAGE>
Construction Work-Related Advance or such longer period as may be
described in EXHIBIT I.
4.5 Conditions Precedent to Subsequent Renovation Work-Related Advances.
--------------------------------------------------------------------
If the Loan has a Renovation Component, Lender's obligation to make
Renovation Work-Related Advances shall be subject to Borrower's
satisfaction of the terms and conditions set forth in EXHIBIT K,
including delivery to Lender of the items called for therein at least
three (3) Business Days prior to the date of such Renovation Work-
Related Advance or such longer period as may be described in EXHIBIT
K.
4.6 General Conditions Precedent to All Advances. Lender's obligation to
--------------------------------------------
fund any Advance is subject to and conditioned upon the additional
terms and conditions set forth in the following subparagraphs
remaining satisfied at the time of such Advance:
(a) No material adverse change shall have occurred in the Time-Share
Project or in the business or financial condition of Borrower
and, if Borrower is not VI, of VI since the date of the latest
financial and operating statements given to Lender by or on
behalf of Borrower or VI, as the case may be.
(b) There shall have been no material adverse change in the
warranties and representations made in the Documents by Borrower
or any surety (including, without limitation, VI if Borrower is
not VI) for the performance of the Obligations.
(c) Neither an Event of Default nor Incipient Default shall have
occurred and be continuing.
(d) The interest rate applicable to the Advance (before giving effect
to any savings clause) will not exceed the maximum rate permitted
by the Applicable Usury Law.
(e) Lender shall have received all fees (or installments thereof)
required to be paid to Lender on or before the time of the
Advance pursuant to this Agreement or the Master Credit
Facilities Agreement.
4.7 Conditions Satisfied at Borrower's Expense. The conditions to each
------------------------------------------
and every Advance shall be satisfied by Borrower at its expense.
4.8 Minimum Amount and Maximum Frequency of Advances. Advances other than
------------------------------------------------
Interest Reserve Advances shall be made in amounts not less than One
Hundred Thousand Dollars ($100,000), except for the final Work-Related
Advance under any Loan Component and the final Work-Related Advance
under the portion of a Construction Component or a Renovation
Component allocated to a Work Phase.
-27-
<PAGE>
Advances shall be made no more frequently than twice per calendar
month; provided, however, that three such Advances may be made in a
-------- -------
calendar month, so long as one such Advance is an Interest Reserve
Advance.
4.9 Disbursement of Advances. Advances shall be payable to Borrower; or
------------------------
if either requested by Borrower and approved in writing by Lender or
required by Lender in connection with Work-Related Advances, to
others, either severally or jointly with Borrower, for the credit or
benefit of Borrower. Unless otherwise directed by Borrower to be
disbursed by check or draft, advances shall be disbursed by wire
transfer or, at Borrower's option exercised by written request to
Lender, by wire transfer. Borrower will pay Lender's reasonable charge
in connection with any wire transfer, which is currently the amount
identified in the SCHEDULE as the Current Wire Transfer Fee. Lender
may, at its option, withhold from any Advance any fees then due Lender
under the Documents or the Master Credit Facilities Agreement and any
other sum (including costs and expenses) then due Lender under the
terms of the Documents or for which Borrower would be obligated to
reimburse Lender pursuant to the Documents if first paid directly by
Lender.
4.10 No Waiver. Although Lender shall have no obligation to make an
---------
Advance unless and until all of the conditions precedent to the
Advance have been satisfied, Lender may, at its discretion, make
Advances prior to that time without waiving or releasing any of the
Obligations.
5. NOTE; PRE-PAYMENTS
------------------
5.1 Repayment of Loan. The Loan shall be evidenced by the Note and shall
-----------------
be repaid in immediately available funds according to the terms of the
Note and the Documents.
5.2 Minimum Required Principal Payments Prior to Maturity Date. Until the
----------------------------------------------------------
principal of the Loan has been paid in full, Borrower will make to
Lender at the time of each partial release of a Time-Share Interest
from the Mortgage a principal payment on the Loan equal to the Partial
Release Fee required to be paid in connection with such partial
release.
5.3 (a) Prepayment. Borrower shall have the option to repay the Loan in
----------
full or in part on any Interest Adjustment Date (as defined in
the Note) upon thirty (30) days prior written notice, provided,
--------
however, Borrower may not prepay the Loan pursuant to this
-------
paragraph if after giving effect to such prepayment, the
aggregate advances of the Loan and the Other Loans would be less
than Fifteen Million Dollars ($15,000,000) unless the aggregate
unpaid principal balances of the Loan and the Other Loans
exceeded Fifteen Million Dollars ($15,000,000) for a period of
least one hundred eighty (180) days at any time prior to the
repayment.
-28-
<PAGE>
(b) Exceptions to Prepayment Prohibitions. Notwithstanding anything
-------------------------------------
in paragraph 5.3(a) to the contrary, principal payments required
pursuant to paragraph 5.2 shall not be deemed to be prepayments
prohibited pursuant to paragraph 5.3(a) and such principal
payments shall not be taken into account when determining
compliance with the provisions of Section 5.3(a).
(c) Prepayment Premium Payable for Involuntary Prepayments. If a
------------------------------------------------------
prepayment of the Loan occurs which is not permitted pursuant to
paragraph 5.3(a), then Borrower will pay to Lender a prepayment
premium in an amount identified in the SCHEDULE as the Prepayment
Premium; provided, however, that such requirement is not intended
-------- -------
to imply or infer a right on the part of Borrower to make a
prepayment if it pays such prepayment premium. Such prepayment
premium shall be payable regardless of whether the prepayment of
the Loan is voluntary or is required because repayment of such
Loan has been accelerated pursuant to any of Lender's rights
under the Documents (including, without limitation, any right to
accelerate following an Event of Default).
(d) Return of Prepayment. If Borrower makes a partial prepayment of
--------------------
principal on the Loan and such prepayment is not permitted under
this Agreement, such prepayment may, at Lender's option, be
returned to Borrower within three (3) Business Days after receipt
by Lender; and if such payment is so returned, basic interest
shall accrue on the full principal balance of Loan which from
time to time is outstanding and shall be calculated as if such
prepayment had never been made.
5.4 General Provisions Pertaining to Application of Payments. Partial
--------------------------------------------------------
Release Fees shall be applied first to the principal balance of the
Loan, next to accrued and unpaid interest under the Loan, and then to
all other sums owing in connection with the Loan in such order and
manner as Lender may determine. Notwithstanding anything in the
Documents to the contrary other than the provisions of the preceding
sentence, the amount of all payments or amounts received by Lender
with respect to the Loan shall be applied to the extent applicable
under the Documents: (i) first, to any past due payments of interest
on the Loan and to accrued interest on the Loan through the date of
such payment, including any default interest; (ii) then, to any
interest on delinquent interest, late fees, overdue risk assessments,
examination fees and expenses, collection fees and expenses and any
other fees and expenses due to Lender under the Documents; and (iii)
then, to the unpaid principal balance of such Loan; provided, however,
-------- -------
while an Event of Default or Incipient Default exists, each payment
shall be applied to such amounts owed to Lender by Borrower as Lender
in its discretion may determine. In calculating interest and applying
payments as set forth above: (i) interest on the outstanding balance
of the Loan shall be calculated and collected through the date payment
is actually received by Lender; (ii) interest on the outstanding
balance of
-29-
<PAGE>
the Loan shall be charged during any grace period permitted under the
Documents; (iii) on each annual anniversary of the closing date of the
Loan, all past due interest and other past due charges provided for
under the Documents shall be added to the principal balance of the
Loan; and (v) to the extent that Borrower makes a payment or Lender
receives any payment or proceeds of the Collateral for Borrower's
benefit that is subsequently invalidated, set aside or required to be
repaid to any other person or entity, then, to such extent, the
Obligations in connection with such Loan intended to be satisfied
shall be revived and continue as if such payment or proceeds had not
been received by Lender and Lender may adjust such Loan balance as
Lender, in its discretion, deems appropriate under the circumstances.
5.5 Borrower's Unconditional Obligation to Make Payments. Whether or not
----------------------------------------------------
the proceeds from the Collateral shall be sufficient for that purpose,
Borrower will pay when due all payments required to be made pursuant
to any of the Documents, Borrower's Obligation to make such payments
being absolute and unconditional.
6. BORROWER'S GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
------------------------------------------------------------
6.1 (a) Good Standing. Each of Borrower and, if Borrower is a limited
-------------
liability company or partnership, each Manager/General Partner,
as the case may be, is, and will remain at all times, duly
organized, validly existing and in good standing as a business
organization of the type identified in the SCHEDULE as Type of
Business Organization for such person under the laws of the state
identified in the SCHEDULE as the State of Organization for such
person; and in the case of Borrower, in each jurisdiction in
which it is selling Time-Share Interests or where the location or
nature of its properties or its business makes such qualification
necessary. Borrower has full authority to Perform the Obligations
and to carry on its business and own its property.
(b) Power and Authority; Enforceability. Borrower has full power and
-----------------------------------
authority to grant the Security Interest and to execute and
deliver the Documents and to Perform the Obligations. All action
necessary and required by the Articles of Organization of
Borrower and, if Borrower is a limited liability company or
partnership, of each Manager/General Partner and all other Legal
Requirements for the obtaining of the Loan and for the execution
and delivery of the Documents executed and delivered in
connection with the Loan has been duly and effectively taken; and
the Documents are and shall be, legal, valid, binding and
enforceable against Borrower and do not violate the Applicable
Usury Law, or constitute a default or result in the imposition of
any lien under the terms or provisions of any other agreement to
which Borrower is a party. Except for the Third Party Consents
delivered pursuant to Article 4 and the consents evidenced by the
Resolutions delivered pursuant to Article 4, no consent of any
-30-
<PAGE>
governmental agency or any other person not a party to this
Agreement is or will be required as a condition to the execution,
delivery or enforceability of the Documents.
(c) Borrower's Principal Place of Business. Borrower's principal
--------------------------------------
place of business and chief executive office are located at the
address identified in the SCHEDULE as Borrower's Principal Place
of Business and Chief Executive Office. Borrower will not move its
principal place of business or chief executive office to another
location except upon not less than sixty (60) days prior written
notice to Lender.
6.2 No Litigation. There is no action, litigation or other proceeding
-------------
pending or, to Borrower's knowledge, threatened before any arbitration
tribunal, court, governmental agency or administrative body against
Borrower or any Manager/General Partner, or, if Borrower is not VI,
against VI, which might materially adversely affect the Performance of
the Obligations, any of the Collateral, the business or financial
condition of Borrower or (if Borrower is not VI) Guarantor, or the
ability of Borrower to Perform the Obligations. Borrower will promptly
notify Lender if any such action, litigation or proceeding is pending
or threatened.
6.3 (a) Applicability of Paragraphs 6.3(b)-(c). The representations,
--------------------------------------
warranties and covenants in paragraphs 6.3(b)-(c), inclusive,
shall be applicable only if the Loan includes a Construction
Component.
(b) Adequacy of Principal Construction Work-Related Items. At the
-----------------------------------------------------
time of the initial Advance for a Work Phase and at all times
thereafter until Completion of the Construction Work for the Work
Phase: (i) the Principal Construction Work-Related Items
applicable to the Construction Work Phase shall be adequate for
Completion of the Construction Work Phase; (ii) unless no Event
of Default exists and the third party's default will not result
in any Uncovered Cost of the Construction Work Phase the
Principal Construction Work-Related Items will be in full force
and effect; (iii) unless no Event of Default exists and the
third-party's default will not result in any Uncovered Cost of
the Construction Work Phase, no third party bound by the
Principal Construction Work-Related Items applicable to the
Construction Work Phase shall be in default of its obligations
thereunder or shall have threatened to terminate Borrower's
rights thereunder; (iv) unless no Event of Default exists and
failure to do so will not result in any Uncovered Cost of the
Construction Work Phase, Borrower shall have paid all sums and
performed all other obligations it has under the Principal
Construction Work-Related Items applicable to the Construction
Work Phase to the extent then due; and (v) unless no Event of
Default then exists and the third-party's defense will not result
in any Uncovered Cost of the
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<PAGE>
Construction Work Phase, no third party bound by the Principal
Construction Work-Related Items shall have any defense to the
enforcement of Borrower's rights thereunder. No moratorium or
other legal impediment exists or, to the knowledge of Borrower,
is threatened with respect to the issuance of any permit or
approval necessary to use the Real Property for intended time-
share purposes upon Completion of the Construction Work.
(c) Adequacy of Construction Budget. At the time of the initial
-------------------------------
Work-Related Advance for a Construction Work Phase and at all
times thereafter until Completion of the Construction Work Phase,
the Construction Budget for the Construction Work Phase will
accurately and completely set forth the types and estimated
maximum amounts of all costs which must be incurred for
Completion of the Construction Work Phase to occur.
(d) Adequacy of Streets and Utilities. Either all streets, drainage
---------------------------------
systems, easements, and utilities (including potable water, storm
and sanitary sewer, gas, electric, telephone and cable television
facilities and garbage removal) necessary for the Completion of
the Construction Work (if the Loan includes a Construction
Component) and use of the Real Property for time-share and other
intended purposes have been completed, paid for in full and are
available at the boundaries of the Real Property; or if the Loan
includes a Construction Component, (i) all necessary easements
(including, without limitation, easements for streets and
utilities) have been obtained and paid for, (ii) commitments to
extend and provide all necessary utilities and rights to hook-up
such utilities have been obtained, (iii) all necessary utilities
will be available to the Real Property and Construction
Improvements for a Work Phase and will be adequate for time-share
and other intended purposes upon Completion of the Construction
Work Phase, and (iv) the Construction Component as allocated to
each Construction Work Phase is adequate for the final
completion, lien free, of such portion of the Construction Work.
All water and sewer treatment plants and power generation
facilities intended to serve the Real Property have been
constructed and are operational and have adequate capacity and
size to serve the time-share and other intended uses of the Real
Property; and, to Borrower's knowledge, will continue to have
upon Completion of the Construction Work, adequate capacity and
size to serve the time-share and other intended uses of the Real
Property.
(e) Commencement of Work or Break in Priority. No work, equipment,
-----------------------------------------
materials or services of any kind that may give rise to any
mechanics or similar statutory lien (whether for work performed
prior to or after recordation of the Mortgage) which will have
priority over the lien of the Mortgage, including, without
limitation, the destruction or removal of existing improvements,
site work, cleaning, curbing, draining or fencing
-32-
<PAGE>
of the Real Property, has been or will be performed or commenced
on the Real Property prior to recordation of the Mortgage, except
for work, equipment, materials and services fully disclosed in
writing to Lender and Title Insurer prior to recordation of the
Mortgage.
6.4 Construction Work-Related Covenants. If the Loan includes a
-----------------------------------
Construction Component, Borrower will:
(a) once commenced, cause the progress of each Construction Work Phase
to occur in substantial compliance with the applicable
Construction Work Phase Progress Schedule, subject to Force
Majeure Events, all in accordance with the applicable Plans and
Specifications, the applicable Construction Work Contracts, the
applicable Legal Requirements, the Documents, sound construction
engineering and architectural principles and commonly accepted
safety standards, lien free and free from defective materials and
workmanship; and cause Completion of the Construction Work Phase
to occur on or before the applicable Required Completion Date
(Construction); provided, however, that Borrower shall have no
-------- -------
obligation to commence any particular Construction Work Phase;
(b) (i) pay when due all costs, expenses and claims pertaining to the
Construction Work; (ii) make available to Lender and Lender's
Inspector for inspection during the course of the Construction
Work in order to monitor and/or provide assurance that the
Construction Work is proceeding lien free, subject to Permitted
Encumbrances, in accordance with the Plans and Specifications, the
Construction Work Contracts, applicable Legal Requirements, the
Documents, sound construction, engineering and architectural
principles and commonly accepted safety standards: the
Construction Work Contracts; the Plans and Specifications; bills
of sale, conveyances and paid invoices pertaining to the
Construction Work; all waivers and releases of lien or claims on
the Real Property and/or the Construction Improvements in
connection with the Construction Work which Lender may determine
to be necessary or may otherwise reasonably request for its
protection; from persons acceptable to Lender, additional
engineering or architectural studies and reports as Lender or
Lender's Inspector may reasonably require in connection with the
Construction Work, provided, however, that Borrower will deliver
-------- -------
to Lender such items upon request if an Event of Default exists
and provided further that Borrower will deliver lien waivers and
-------- -------
other items to Lender to the extent required under EXHIBIT I; and
(iii) record all notices of commencement/completion and similar
notices permitted by applicable laws and regulations which have
the effect of shortening periods within which mechanics and
similar liens may be filed in connection with the Construction
Work;
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<PAGE>
(c) allow Lender, Lender's Inspector and/or its agents and employees
to inspect the Construction Work at all reasonable times to the
extent Lender has a right to require such inspections pursuant to
the last sentence of paragraph 8.1, upon reasonable prior notice,
with the reasonable costs of such inspections to be borne by
Borrower;
(d) enter into such Construction Work Contracts and
Architect/Engineer Agreements as Borrower shall determine are
necessary or desirable with respect to the Construction Work;
provided, however, that if (i) an Event of Default exists or (ii)
any such Architect/Engineer Agreement or Construction Work
Contract would result in any Uncovered Cost of the Construction
Work Phase, then Lender's consent shall be required with respect
to such Architect/Engineer Agreement or Construction Work
Contract, such consent not to be unreasonably withheld or delayed
when no Event of Default exists;
(e) not amend any of the Principal Construction Work-Related Items,
except for amendments which (i) are made when no Event of Default
exists and do not for any Construction Work Phase result in any
Uncovered Cost of the Construction Work Phase and (ii) do not
materially affect the design, structural integrity or quality of
the Construction Improvements;
(f) unless no Event of Default exists and the failure to do so will
not result in any Uncovered Cost of the Construction Work Phase,
perform all its obligations and preserve its rights under the
Principal Construction Work-Related Items and use commercially
reasonable efforts to obtain performance of the other parties to
the Principal Construction Work-Related Items;
(g) deliver to Lender promptly after substantial completion of each
Construction Work Phase, a survey certified to Lender by a
licensed engineer or surveyor acceptable to Lender and Title
Insurer, showing (A) the Construction Improvements and that the
location thereof is entirely within the property lines of the
Real Property and does not encroach upon, breach, or violate any
set-back line easement or similar restriction and (B) meeting
ALTA standards and other reasonable requirements of Lender and
Title Insurer;
(h) deliver to Lender: prior to each Construction Work-Related
Advance, at Lender's option, an endorsement ("date down
endorsement") issued by the Title Insurer insuring Lender against
any loss by reason of defects in, mechanic's or similar statutory
liens upon or unmarketability of the title to the Real Property,
as well as insuring that the Mortgage, at the time of each
Construction Work-Related Advance, constitutes a valid first and
exclusive
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<PAGE>
lien upon the Real Property, subject only to the Permitted
Encumbrances; promptly after the construction of the foundation
for any building forming part of the Construction Improvements,
an endorsement insuring that such foundation is located on the
Real Property within all set-back lines and does not encroach
upon any easements, rights-of-way (public or private) or upon any
adjoining landowner's property; and promptly after substantial
completion of a Construction Work Phase has occurred,
"comprehensive" and "location of improvements" endorsements (to
the extent available in the state where the Real Property is
located); and upon Completion of the Construction Work Phases,
"date down" endorsements;
(i) after obtaining knowledge or receiving notice thereof, correct or
cause to be corrected (i) any material defect in the Construction
Work, (ii) any material departure in the completion of the
Construction Work from the Plans and Specifications or the
Construction Work Contract(s) (unless expressly permitted in this
Agreement or consented to in writing by Lender), any applicable
Legal Requirements, the Documents, sound, construction,
engineering or architectural principles or commonly accepted
safety standards or (iii) any encroachment of any part of the
Construction Improvements on any building line, easement line or
restricted area, or any adjacent landowner's property;
(j) promptly deliver to Lender any and all written notices received
by Borrower that it is not complying with applicable Legal
Requirements pertaining to the Construction Work or that the
Construction Work is not being completed in accordance with the
Plans and Specifications, the Construction Work Contract(s),
sound construction, engineering and architectural principles and
commonly accepted safety standards;
(k) with respect to each Construction Work Phase for which Lender has
made an Advance, if at any time there exists or appears likely to
exist any Uncovered Cost of the Construction Work Phase, Borrower
will notify Lender within ten (10) Business Days (and in any
event prior to the next Advance) after obtaining knowledge
thereof; within the earlier of such ten (10) Business Day period
or ten (10) Business Days after Lender's demand that it do so,
except to the extent Lender has agreed in writing after the date
of this Agreement to increase the portion of the Construction
Component allocated to the Construction Work Phase in order to
cover the Uncovered Cost of the Construction Work Phase, Borrower
will either pay all costs of the Construction Work Phase to the
extent necessary to eliminate the Uncovered Cost of the
Construction Work Phase or will deliver to Lender a cash deposit
["Required Completion Assurance Deposit (Construction)"] equal to
the Uncovered Cost of the Construction Work Phase, provided,
--------
however, that the Required Completion Assurance Deposit
-------
(Construction)
-35-
<PAGE>
may consist of a letter of credit or other credit enhancement
instrument satisfactory to Lender in an amount not less than the
Uncovered Cost of the Construction Work Phase; in the event of
any dispute, the necessity for and amount of the Required
Completion Assurance Deposit (Construction) for such Construction
Work Phase shall be determined by Lender; any cost delivered to
Lender as the Required Completion Assurance Deposit
(Construction) shall be deposited in an interest bearing account
(Lender has not and, by this Agreement, does not represent that
any specific or minimum amount of interest will be earned from
such account) and shall be segregated from any of Lender's other
funds; and Lender will disburse the Required Completion Assurance
Deposit (Construction) for such Construction Work Phase and any
accrued interest to pay and/or reimburse Borrower for the costs
of the Construction Work Phase prior to any further disbursement
of the Construction Work-Related Advance for such purpose, but
subject to the terms and conditions of this Agreement pertaining
to the disbursement of Construction Work-Related Advances; and
Lender is hereby granted a security interest in all Required
Completion Assurance Deposits (Construction) from time to time
held by Lender;
(l) with respect to each Construction Work Phase for which Lender has
made an Advance, cause all materials supplied for or intended to
be utilized in the Completion of the Construction Work Phase, but
previously not affixed to or incorporated into the applicable
Construction Improvements, to be stored on the Real Property with
adequate safeguards, as reasonably required by Lender, to prevent
loss, theft, damage or commingling with other materials; and
(m) promptly after receipt by Borrower (but in no event later than
the Required Completion Date), deliver to Lender copies of all
certificates of acceptance and/or occupancy relating to the
Construction Work.
6.5 Renovation Work-Related Covenants. If the Loan includes a Renovation
---------------------------------
Component, Borrower: (a) will cause the progress of the Renovation
Work to occur in substantial compliance with the Renovation Work
Progress Schedule, subject to Force Majeure Events, all in accordance
with the Renovation Work Contract(s), applicable Legal Requirements,
the Documents, and otherwise in a good and workmanlike manner, lien
free and free from defective materials and workmanship; (b) will cause
Completion of the Renovation Work to occur on or before the Required
Completion Date (Renovation); (c) will enter into such Renovation Work
Contracts and Architect/Engineer Agreements as Borrower shall
determine are necessary or desirable with respect to the Renovation
Work, provided, however, that if (i) an Event of Default exists or
-------- -------
(ii) any such Architect/Engineer Agreement or Renovation Work Contract
would result in any Uncovered Cost of the Renovation Work Phase, then
Lender's consent shall be required with respect to
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<PAGE>
such Architect/Engineer Agreement or Renovation Work Contract, such
consent not to be unreasonably withheld or delayed when no Event of
Default exists; (d) unless no Event of Default exists and the
amendment will not result in any Uncovered Cost of the Renovation
Work, will not amend any Renovation Work Contract; (e) will make
available to Lender and Lender's Inspector during the course of the
Renovation Work, the Renovation Work Contracts; bills of sale,
conveyances and paid invoices pertaining to the Renovation Work; all
waivers and releases of lien or claims on the Real Property and/or the
Renovation Improvements in connection with the Renovation Work,
provided, however, that Borrower will deliver to Lender such items
-------- -------
upon request if an Event of Default exists and provided further, that
-------- -------
Borrower will deliver lien waivers and other items to Lender to the
extent required under EXHIBIT K; and (f) with respect to each
Renovation Work Phase, if at any time there exists or appears likely
to exist any Uncovered Cost of the Renovation Work Phase, Borrower
will notify Lender within ten (10) Business Days (and in any event
prior to the next Advance) after obtaining knowledge thereof; within
the earlier of such ten (10) Business Day period or ten (10) Business
Days after Lender's demand that it do so, except to the extent Lender
has agreed in writing after the date of this Agreement to increase the
portion of the Renovation Component in order to cover the Uncovered
Cost of the Renovation Work Phase, Borrower will either pay all costs
of the Renovation Work Phase to the extent necessary to eliminate the
Uncovered Cost of the Renovation Work Phase or will deliver to Lender
a cash deposit ["Required Completion Assurance Deposit (Renovation)"]
equal to the Uncovered Cost of the Renovation Work Phase, provided,
--------
however, that the Required Completion Assurance Deposit (Renovation)
-------
may consist of a letter of credit or other credit enhancement
instrument satisfactory to Lender in an amount not less than the
Uncovered Cost of the Renovation Work Phase; in the event of any
dispute, the necessity for and amount of the Required Completion
Assurance Deposit (Renovation) for such Renovation Work Phase shall be
determined by Lender; any cost delivered to Lender as the Required
Completion Assurance Deposit (Renovation) shall be deposited in an
interest bearing account (Lender has not and, by this Agreement, does
not represent that any specific or minimum amount of interest will be
earned from such account) and shall be segregated from any of Lender's
other funds; and Lender will disburse the Required Completion
Assurance Deposit (Renovation) and any accrued interest to pay and/or
reimburse Borrower for the costs of the Renovation Work Phase prior to
any further disbursement of the Renovation Work-Related Advance for
such purpose, but subject to the terms and conditions of this
Agreement pertaining to the disbursement of Renovation Work-Related
Advances; and Lender is hereby granted a security interest in all
Required Completion Assurance Deposits (Renovation) from time to time
held by Lender;
6.6 (a) Compliance with Laws. Borrower has complied, and will comply, in
--------------------
all material respects with all applicable Legal Requirements,
including, without limitation, Legal Requirements applicable to
the Completion of the
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<PAGE>
Construction Work, the operation of the Time-Share Project, and
the sale of Time-Share Interests.
(b) Sales Activities. Prior to the date of this Agreement, Borrower
----------------
has sold Time-Share Interests and offered Time-Share Interests
for sale only in the jurisdictions identified in the SCHEDULE as
the Jurisdictions Where Sales And/Or Offers To Sell Have
Occurred. Borrower will not sell any Time-Share Interest or offer
any Time-Share Interest created or to be created from the Real
Property for sale in any jurisdiction, unless: (i) Borrower has
delivered to Lender true and complete copies of all approvals
required to be obtained by Borrower in such jurisdiction prior to
engaging in its proposed conduct and all other evidence required
by Lender that Borrower has complied with all laws of such
jurisdiction governing its proposed conduct; and (ii) Borrower
has delivered to Lender the Time-Share Program Consumer Documents
and the Time-Share Program Governing Documents which Borrower
will be using in connection with the Real Property and the sale
or offering for sale of such Time-Share Interests and such
documents have been approved by Lender, which approval shall not
be unreasonably withheld, and which shall be given or denied by
Lender within thirty (30) days of the receipt of the Time-Share
Program Consumer Documents and the Time-Share Program Governing
Documents. Not later than the date identified in the SCHEDULE as
the Minimum Required Time-Share Approvals Application Date,
Borrower will submit to the state in which the Time-Share Project
is located, an application for the issuance by such state of the
Minimum Required Time-Share Approvals and complying with
applicable Legal Requirements and will diligently pursue approval
of such application and the issuance of the Minimum Required Time
Share Approvals. Not later than the date identified in the
SCHEDULE as the Minimum Required Time-Share Approvals Delivery
Date, Borrower will deliver to Lender the Minimum Required Time-
Share Approvals from the state where the Time-Share Project is
located, the Time-Share Program Governing Documents and Time-
Share Program Consumer Documents (which have, to the extent
required, been approved for use in the state where the Time-Share
Project is located) and will take all steps necessary to commence
the sale of Time-Share Interests created or to be created from
the Real Property in the state where the Time-Share Project is
located; and not later than the date identified in the SCHEDULE
as the Minimum Required Time-Share Approvals Delivery Date,
Borrower will maintain an active marketing program for the sale
of such Time-Share Interests in conformance with all applicable
Legal Requirements and consistent with the provisions of this
paragraph and the other terms and conditions of the Documents
pertaining to the sale of Time-Share Interests.
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<PAGE>
(c) Time-Share Interest Not a Security. Unless otherwise expressly
----------------------------------
approved in writing by Lender, Borrower has not sold or offered
for sale, and will not sell or offer for sale, any Time-Share
Interest as an investment. Unless otherwise expressly approved in
writing by Lender, neither the sale nor the offering for sale of
any Time-Share Interest will constitute the sale or the offering
of a security for sale under any applicable law.
(d) Zoning Compliance. Neither time-share use nor other intended use
-----------------
of the Real Property violates or constitutes a non-conforming use
or requires a variance under any Legal Requirement affecting the
use or occupancy of the Real Property.
6.7 (a) Fulfillment of Obligations to Purchasers. Borrower at all times
----------------------------------------
will fulfill and will cause its Affiliates, agents and
independent contractors at all times to fulfill all obligations
to Purchasers. Borrower will perform all of its obligations under
the Time-Share Program Consumer Documents and the Time-Share
Program Governing Documents.
(b) No Modification of Time-Share Documents. Except as required by
---------------------------------------
law, Borrower, without the prior written consent of Lender not to
be unreasonably withheld, will not cancel or materially modify,
or consent to or suffer to exist any cancellation or material
modification of, any of the Time-Share Program Consumer Documents
or the Time-Share Program Governing Documents.
(c) Title and Condition of Amenities. Except as otherwise permitted
--------------------------------
and disclosed by the Time-Share Program Governing Documents, from
and after the first closing for the sale of any Time-Share
Interest created or to be created from the Real Property: (i) the
Time-Share Association or the owners of Time-Share Interests in
common will at all times own all furnishings in the Units and
common areas, all common areas in the Time-Share Project and an
easement or right to use other amenities which have been promised
or represented as being available to Purchasers, free and clear
of liens and security interests except for the Permitted
Encumbrances; (ii) no part of the Time-Share Project is or will
be subject to partition by the owners of Time-Share Interests;
and (iii) prior to the closing of any sale of any Time-Share
Interest created or to be created from the Real Property, all
access roads and utilities and off-site improvements necessary to
the use of the Time-Share Project will be dedicated to and/or
accepted by the responsible governmental authority or utility
company or will be owned by an association of owners of property
in a larger planned development or developments of which the Time
Share Project is a part ("Planned Development Association"),
unless the access roads, utilities and off-site improvements
which are not so dedicated, accepted and owned are being
-39-
<PAGE>
constructed as part of the Construction Improvements, there
exists no Uncovered Cost of Construction Work and the non-
completion of such roads, utilities and improvements have been
disclosed to the Purchaser. Borrower will maintain or cause to be
maintained in good condition and repair all amenities and common
areas which have been promised or represented as being available
to Purchasers and all roads and off-site improvements which are
not the responsibility of the Time-Share Association or the
Planned Development Association to maintain and repair and have
not been dedicated to or accepted by the responsible governmental
authority or utility; and, to the extent owned by Borrower or an
Affiliate of Borrower, all portions of improvements in which
Units are located and are not part of the Time-Share Project.
Borrower will cause the Time-Share Association to maintain a
reasonable reserve to assure compliance with the terms of the
foregoing sentence.
(d) Maintenance of Larger Tract. Without limiting the generality of
---------------------------
the provisions of paragraph 6.7(c), to the extent either the Time
Share Project is part of a larger common ownership regime or
planned development or buildings in which Units are located are
not part of the Time-Share Project, Borrower will use
commercially reasonable efforts to prevent common expenses of
such common ownership regime, planned development and buildings
from being allocated to the Time-Share Project in a manner which
is not commercially reasonable; and will cause all such property
which is not part of the Time-Share Project to be professionally
managed and maintained in a manner consistent with management and
maintenance standards at least as high as those employed on July
9, 1998, at other resorts developed by Affiliates of VI.
6.8 (a) Additional Indebtedness. Without the prior written consent of
-----------------------
Lender not to be unreasonably withheld, Borrower will not incur
any indebtedness which is secured by the Collateral except for an
Approved Pre-Sales Receivables Financing. The term "Approved Pre-
Sales Receivables Financing" means a Pre-Sales Receivables
Facility in which Borrower, Lender and the lender under the Pre-
Sales Receivables Facility ("PSR Lender") have entered (at
Borrower's expense) into an agreement with provisions to the
following effect and other provisions mutually satisfactory to
the parties: (i) the PSR Lender may have a junior lien on that
portion of the Real Property ("Pre-Sale Real Property") from
which Time-Share Interests which are the subject of the pre-sales
will be created and a junior security interest on and assignment
of related Mortgage Property (as defined in the Mortgage),
provided that the priority of Lender's lien on security interest
in and assignment of the Collateral is expressly recognized; (ii)
Purchase Contracts shall be closed through an escrow established
with an escrow agent reasonably satisfactory to Lender and in
which subject to
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<PAGE>
applicable laws and regulations, the escrow agent holds the Purchase
Contracts pertaining to the Pre-Sale Real Property and deposits,
payments and documents related thereto (including, without limitation,
purchase money promissory notes and security documents) (collectively,
"Escrowed Sales Documents and Proceeds"); (iii) a Time-Share Interest
(together with the related Purchase Contract and any instruments,
chattel paper and general intangibles evidencing or representing
purchase money indebtedness owing to Borrower in connection with the
sale, the proceeds thereof and any other property required to be
released pursuant to the terms of the Documents) shall be released
from the Mortgage and the other Security Documents if the conditions
specified in paragraph 3.2 have been satisfied; and (iv) upon the
release of a Time-Share Interest pursuant to item (iii) above, Lender
shall receive from escrow agent the payments required pursuant to
paragraph 3.2, and the PSR Lender or Borrower, as applicable, shall
receive the balance of the Escrowed Sales Documents and Proceeds
pertaining to such Time-Share Interest. The term "Pre-Sales
Receivables Facility" means indebtedness advanced as a percentage of
and secured by Purchase Contracts prior to the time that the
Declaration for the building(s) in which the related Units are located
has been recorded.
(b) Restrictions on Liens or Transfers. Unless expressly permitted in
----------------------------------
this Agreement or in any of the Security Documents, Borrower, without
the prior written consent of Lender, will not: (i) sell, convey,
pledge, hypothecate, encumber or otherwise transfer any Collateral;
(ii) subject to any right under the Documents to contest such matters,
permit or suffer to exist any liens, security interests or other
encumbrances on any Collateral, except for the Permitted Encumbrances
and liens and security interests expressly granted to Lender; (iii)
permit or suffer the sale, lease, transfer or disposal of all or
substantially all of the assets of Borrower to another person; or (iv)
if Borrower is an organization, permit or suffer to exist any Change
in Control of Borrower or any person controlling Borrower (whether
directly or through one or more intermediaries); provided, however,
-------- -------
that so long as (x) Raymond L. Gellein, Jr., Jeffrey A. Adler or
another person reasonably acceptable to Lender is the chief executive
officer of VI, and (y) Borrower is a Vistana Entity (as defined in the
Master Credit Facilities Agreement), a Change in Control of Borrower
or any person controlling Borrower will not result in a violation of
the foregoing covenant. For purposes hereof, a "Change in Control"
shall have occurred if a person or entity not an Affiliate of VI
acquired through one or more series of transactions more than fifty
percent (50%) of any class of issued and outstanding capital stock of
Borrower or any person controlling Borrower and such person or entity
has the ability to elect a majority of the directors of Borrower or
any person controlling Borrower.
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<PAGE>
6.9 Insurance. Borrower will pay the cost of, will maintain and will
---------
deliver to Lender evidence of insurance policies required by, and
written by insurers and in amounts and on forms satisfactory to
Lender, as evidenced in the letter from Lender to Borrower identified
in the SCHEDULE as the Insurance Letter; or Borrower will cause the
same to be done.
6.10 (a) No Misrepresentations. The Documents and all certificates,
---------------------
financial statements and written materials furnished to Lender by
or on behalf of Borrower in connection with the Loan do not
contain any untrue statement of a material fact or omit to state
a fact which materially adversely affects or in the future may
materially adversely affect the Collateral or the financial
condition of Borrower.
(b) Reliance. Lender's examination, inspection, or receipt of
--------
information pertaining to the Collateral shall not in any way be
deemed to reduce the full scope and protection of the warranties,
representations and Obligations contained in this Document.
6.11 (a) Sales Reports. From and after the commencement of sales by
-------------
Borrower of Time-Share Interests created or to be created from
the Real Property, within thirty (30) days after the end of each
quarter, Borrower will cause to be furnished to Lender a sales
report for such quarter showing the number of sales of such Time-
Share Interests at any time encumbered by the Mortgage during
such quarter, and the aggregate dollar amount thereof, including
down payments.
(b) Financial Information. Borrower will furnish or cause to be
---------------------
furnished to Lender, within one hundred twenty (120) days after
the end of each fiscal year of Borrower, a copy of the current
financial statements of Borrower for such fiscal year. Borrower
will furnish to Lender within forty-five (45) days after the end
of each of its fiscal quarters a copy of its current financial
statements covering the period beginning the first day of that
fiscal year and ending on the last day of such fiscal quarter.
Such financial statements shall contain a balance sheet as of the
end of the relevant fiscal period and statements of income and of
cash flow for such fiscal period (together, in each case, with
the comparable figures for the corresponding period of the
previous fiscal year), all in reasonable detail. All financial
statements shall be prepared in accordance with generally
accepted accounting principles, consistently applied. All
financial statements required pursuant to this paragraph from a
person which is not a natural person shall be certified by the
chief financial officer or chief accounting officer of such
person and all other financial statements shall be certified by
the person who is the subject thereof. If any audited financial
statement is prepared for Borrower, Borrower will deliver to
Lender a copy of such financial statement to
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<PAGE>
Lender. Together with Borrower's financial statements, Borrower
will deliver to Lender a certificate signed Borrower's chief
executive officer or chief operating officer Lender stating that
there exists no Event of Default or Incipient Default or, if any
such Event of Default or Incipient Default exists, specifying the
nature and period of its existence and what action Borrower
proposes to take with respect to it.
(c) Time-Share Project and Sales Information. Borrower will deliver
----------------------------------------
price lists for Time-Share Interests created or to be created
from the Real Property to Lender from to time to time within ten
(10) Business Days after receipt of a written request from Lender
to do so. Borrower will deliver to Lender from time to time, as
available, and promptly upon amendment or effective date, sales
literature, registrations/consents to sell, and final subdivision
public reports/public offering statements/prospectuses. Borrower
will deliver to Lender any changes which Borrower proposes or any
other person having the power to do so proposes be made to the
Time-Share Program Consumer Documents and/or the Time-Share
Program Governing Documents last delivered to Lender, together
with a description and explanation of the changes; and other
items reasonably requested by Lender which relate to the Time-
Share Interests created or to be created from the Real Property.
(d) Time-Share Association Budgets. Borrower will deliver to Lender,
------------------------------
a pro-forma maintenance and operating budget for the Time-Share
Association's first twelve-month period of operation not later
than the date identified in the SCHEDULE as the Time-Share
Association Budget Delivery Date, and thereafter will use
commercially reasonable efforts to deliver to Lender within ten
(10) days after each is available annual maintenance and
operating budgets of the Time-Share Association, certified to be
adequate by the Time-Share Manager (or if there is not a Time-
Share Manager, by an authorized officer of the Time-Share
Association) and a statement of the annual assessment to be
levied upon the owners of Time-Share Interests; and will use
commercially reasonable efforts to cause to be made available to
Lender for inspection, auditing and copying, upon Lender's
request, the books and records of the Time-Share Association.
(e) Right to Inspect. Borrower will at its expense permit Lender and
----------------
its representatives at all reasonable times, upon reasonable
prior notice, to inspect the Time-Share Project, and to inspect,
audit and copy, as appropriate, the Time-Share Project, and
Borrower's records related thereto.
(f) Additional Information. Borrower will make available such further
----------------------
information as Lender may from time to time reasonably request.
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<PAGE>
6.12 Subordination of Indebtedness Owing to Affiliates. Borrower will
-------------------------------------------------
cause any and all indebtedness owing by it to its shareholders,
directors, officers, partners, members or managers, as the case may
be, to VI (if Borrower is not VI) or to the relatives or Affiliates of
Borrower or any of the foregoing to be subordinated in all aspects to
the Obligations pursuant to written agreements satisfactory to Lender;
provided, however, that such subordination shall not extend to
-------- -------
reasonable salaries and fees at normal and customary rates for
services actually rendered.
6.13 Payment of Taxes. VI has filed (or has requested extensions of the
----------------
time within which to file) returns for all federal, state, local and
other taxes which are required to be filed and taxes shown to be due
and payable on such filed returns have been paid or have been reserved
against as required by generally accepted accounting principles.
6.14 Fees, Costs and Expenses. Borrower will pay on demand any and all
------------------------
costs and expenses incurred by Lender (exclusive of Lender's
employee's expenses, but inclusive of travel expenses) in connection
with the initiation, documentation and closing of the Loan, the making
of Advances, the protection of the Collateral, or the enforcement of
the Obligations against Borrower, including, without limitation, all
attorneys' and other professionals' fees (including without limitation
normal charges for photocopy, telecopy and computer services, and
staff overtime), consumer credit reports, and revenue, documentary
stamp, documentary transaction and intangible taxes. Without limiting
the generality of the foregoing, if a bankruptcy proceeding is
commenced by or against Borrower or otherwise involving any
Collateral, Lender shall, to the extent not already provided for
herein, be entitled to recover, and Borrower shall be obligated to
pay, Lender's reasonable attorneys' fees incurred in connection with:
(i) any determination of the applicability of the bankruptcy laws to
the terms of this Agreement and the other Documents or to Lender's
rights thereunder; (ii) any attempt by Lender to enforce or preserve
its rights under the bankruptcy laws or to prevent Borrower or any
other person from seeking to deny Lender its rights thereunder; (iii)
any effort by Lender to protect, preserve or enforce its rights
against any Collateral or seeking authority to modify the automatic
stay of 11 U.S.C. Section 362 or otherwise seeking to engage in such
protection, preservation or enforcement; or (iv) any proceeding(s)
arising under the bankruptcy laws or arising in or related to a case
under bankruptcy laws.
6.15 Indemnification. Borrower will INDEMNIFY, PROTECT, HOLD HARMLESS, and
---------------
defend Lender, its successors, assigns and shareholders (including
corporate shareholders), and the directors, officers, employees,
agents and servants of the foregoing, for, from and against, except to
the extent arising from the indemnitee's gross negligence or willful
misconduct, any and all losses, costs, expenses (including, without
limitation, any attorneys' fees), demands, claims, suits, proceedings
(whether civil or criminal), orders, judgments, penalties, fines and
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other sanctions arising from or brought in connection with (a) any of
the Collateral, the terms of the Documents or the transactions related
thereto, or any act or omission of Borrower or its employees or
agents, whether actual or alleged, and (b) any and all brokers'
commissions or finders' fees or other costs of similar type by any
party, engaged by Borrower or any Affiliate of Borrower in connection
with the Loan. On written request by a person or other entity covered
by the above agreement of indemnity, Borrower will undertake, at its
own cost and expense, on behalf of such indemnitee, using counsel
satisfactory to the indemnitee, the defense of any legal action or
proceeding to which such person or entity shall be a party and for
which such indemnitee is entitled to be indemnified pursuant to this
paragraph. At Lender's option, Lender may at Borrower's expense
prosecute or defend any action involving the priority, validity or
enforceability of the Security Interests.
6.16 Perfection of Security Interests. Borrower will execute or cause to
--------------------------------
be executed all documents and do or cause to be done all acts
reasonably necessary for Lender to perfect or evidence and to continue
the perfection of the Security Interest of Lender in the Collateral or
otherwise to effect the intent and purposes of the Documents.
6.17 Survival and Additional Representations, Warranties and Covenants. The
-----------------------------------------------------------------
representations, warranties and covenants contained in this
Article VI are in addition to, and not in derogation of, the
representations and warranties contained elsewhere in the Documents
and shall be deemed to be made and reaffirmed prior to the making of
each Advance.
7. DEFAULT
-------
7.1 Events of Default. The occurrence of any of the following events or
-----------------
conditions shall constitute an Event of Default:
(a) failure of Lender to receive from Borrower within five (5)
Business Days of the date when due and payable (i) any amount
payable under the Note or (ii) any other payment due under the
Documents, except for the payment due at the Maturity Date for
which no grace period is allowed;
(b) any representation or warranty which is made by or on behalf of
Borrower and is contained in the Documents or in any certificate
furnished to Lender under the Documents by or on behalf of
Borrower proves to be, in any material adverse respect, false or
misleading as of the date deemed made; provided that if such
representation or warranty was not intentionally made falsely or
with the intent to mislead or was not made recklessly, such
occurrence shall not constitute an Event of Default unless the
actual condition might adversely affect any of the Collateral,
any part of the Time-Share Project, the business or financial
condition of Borrower or, if
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<PAGE>
VI is not Borrower, of VI, or the ability of Borrower to Perform
the Obligations;
(c) a default in the Performance of the Obligations set forth in
paragraph 6.8(b)(i), 6.8(b)(iii), 6.8(b)(iv), 6.9 or 6.12;
(d) a default in the Performance of the Obligations or a violation of
any term, covenant or provision of the Documents (other than a
default or violation referred to elsewhere in this paragraph 7.1)
which continues unremedied (i) for a period of five (5) Business
Days after notice of such default or violation to Borrower in the
case of a default under or violation of paragraph 6.8(b) (ii) or
any other default or violation which can be cured by the payment
of money alone or (ii) for a period of thirty (30) days after
notice to Borrower in the case of any other default or violation
plus only if such default or violation cannot be cured by
Borrower proceeding diligently and Borrower has been diligent in
attempting to effect cure, such additional period not to exceed
thirty (30) Business Days, as may be required by Borrower
proceeding diligently to effect cure;
(e) a payment default exists beyond any applicable cure period under
an Other Loan and, if VI is not the borrower under such Other
Loan, VI has failed to correct the default within any applicable
period allowed under the guaranty given in connection with such
Other Loan after notice thereof is given to VI in accordance with
such guaranty; or any default or defaults by Borrower under any
agreement or agreements with a third party (other than Lender)
evidencing, guaranteeing, or securing borrowed money or a
receivables purchase financing ("Third Party Obligation") which
has resulted in the acceleration of repayment or repurchase
obligations in excess of Two Million Five Hundred Thousand
Dollars ($2,500,000) in the aggregate, although Borrower agrees
that, to the extent such acceleration would cause a violation
this paragraph, it will give to Lender a notice of each default
permitting acceleration of a Third Party Obligation within a
reasonable period of time after Borrower acquires actual
knowledge of the occurrence of such default;
(f) any final, non-appealable judgment or decree for money damages or
for a fine or penalty against Borrower except in connection with
one of the Other Loans or a Third Party Obligation which is not
paid and discharged or stayed within thirty (30) days thereafter,
and when aggregated with all other judgment(s) or decree(s) that
have remained unpaid and undischarged or stayed for such period,
is in excess of One Hundred Thousand Dollars ($100,000);
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<PAGE>
(g) subject to any provisions of the Security Documents permitting
the contest of such liens or security interests, any party
holding a lien or security interest in any Collateral commences
foreclosure or similar sale thereof;
(h) Borrower shall (i) generally not be paying its debts as they
become due, (ii) file, or consent by answer or otherwise to the
filing against it of a petition for relief or reorganization,
arrangement or liquidation or any other petition in bankruptcy or
insolvency under the laws of any jurisdiction, (iii) make an
assignment for the benefit of its creditors, (iv) consent to the
appointment of a custodian, receiver, trustee or other officer
with similar powers for itself or any substantial part of its
property, (v) be adjudicated insolvent, (vi) dissolve or commence
to wind-up its affairs or (vii) take any action for purposes of
the foregoing; or a petition for relief or reorganization,
arrangement or liquidation or any other petition in bankruptcy or
insolvency or the appointment of a custodian under the laws of
any jurisdiction is filed against it or a custodian is appointed
for Borrower, the Collateral or any material part of its
properties and such proceeding is not dismissed and appointment
vacated within ninety (90) days thereafter;
(i) a material adverse change in the Collateral, the Time-Share
Project or in the business or financial condition of Borrower,
which change is not enumerated in this paragraph 7.1, as the
result of which Lender in good faith deems the prospect of
Performance of the Obligations impaired or the Collateral
imperiled;
(j) any of the events enumerated in paragraphs 7.1(b), (f), (g), (h)
or (i) occurs with respect to any surety (including, without
limitation, VI, if Borrower is not VI) for the Performance of the
Obligations;
(k) an "Event of Default", as defined elsewhere in any of the
Documents;
(l) an order or decree has been entered by any court of competent
jurisdiction enjoining the intended use of the Real Property for
time-share purposes and judgment is not vacated within ninety
(90) days after Borrower has obtained knowledge or notice
thereof;
(m) if the Loan includes a Construction Component, at any time prior
to Completion of the Construction Work, Borrower (i) abandons the
Construction Work or (ii) delays construction or suffers
construction to be delayed for any period of time, for any reason
whatsoever not covered by item (i) above so that Completion of
the Construction Work cannot be accomplished in the ordinary
course of construction, in the reasonable
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<PAGE>
judgment of Lender, on or before the Required Completion Date
(Construction);
(n) if the Loan includes a Renovation Component, at any time prior to
Completion of the Renovation Work, Borrower (i) abandons the
Renovation Work or (ii) delays renovation or suffers renovation
to be delayed for any period of time, for any reason whatsoever
not covered by item (i) above so that Completion of the
Renovation Work cannot be accomplished in the ordinary course of
construction, in the reasonable judgment of Lender, on or before
the Required Completion Date (Renovation);
(o) failure of Lender to receive from Borrower, within twenty (20)
days of the date Borrower knows or should have known of such
change, notice of any material change in any representations or
warranties in the Documents or otherwise made in connection with
the Loan; or
(p) a default in the Performance of the obligations of VI under the
Credit Facilities Agreement or a violation of any term, covenant
or provision of the Credit Facilities Agreement (other than a
default or violation referred to elsewhere in this paragraph 7.1)
which continues unremedied (i) for a period of five (5) Business
Days after notice of such default or violation to VI in the case
of a default or violation which can be cured by the payment of
money alone or (ii) for a period of thirty (30) days after notice
to VI in the case of any other default or violation plus only if
such default or violation cannot be cured by VI proceeding
diligently and VI has been diligent in attempting to effect cure,
such additional period not to exceed thirty (30) Business Days,
as may be required by VI proceeding diligently to effect cure;
however, no non-payment default under any guaranty given by VI in
connection with any Other Loan shall constitute an Event of
Default with respect to the Loan.
7.2 Remedies. At any time after an Event of Default has occurred and
--------
while it is continuing, Lender may but without obligation, in addition
to the rights and powers granted elsewhere in the Documents and not in
limitation thereof, do any one or more of the following:
(a) cease to make further Advances;
(b) declare the Note, together with any applicable prepayment
premiums, and all other sums owing by Borrower to Lender in
connection with the Documents, immediately due and payable
without notice, presentment, demand or protest, which are hereby
waived by Borrower;
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<PAGE>
(c) if the Loan includes a Construction Component or a Renovation
Component, apply the Required Completion Assurance Deposits then
held by Lender to the satisfaction of the Obligations in such
order and manner as Lender may determine;
(d) if the Loan includes a Construction Component for any
Construction Work Phase, but only for which Lender has made an
Advance: (i) continue and/or cause Completion of the
Construction Work Phase; (ii) take exclusive possession of the
Property or any part thereof; (iii) expend such funds as Lender
may deem appropriate, including the Required Completion Assurance
Deposit(s) (Construction) (if any), any other funds of Borrower
held by Lender and any sums which may remain unadvanced
hereunder, to continue and/or cause Completion of the
Construction Work; (iv) demand and receive performances due under
the Principal Construction Work-Related Items; (v) make such
changes to the scope of the Construction Work and to the
Principal Construction Work-Related Items as may be necessary or
desirable in Lender's judgment; (vi) file claims, institute
enforcement actions and otherwise prosecute and defend all
actions or proceedings relating to the Construction Work and/or
the Principal Construction Work-Related Items as Lender may
determine to be necessary or desirable in Lender's judgment;
(vii) pay, settle or compromise all existing bills and claims
which Lender deems to be necessary or desirable for the
continuance or Completion of the Construction Work related
thereto, after notice to Borrower; (viii) execute in Borrower's
name all applications, certificates, notices and other
instruments and give all instructions and communications which
may be required or permitted by the Principal Construction Work-
Related Items as determined by Lender; (ix) cancel or surrender
any of the Principal Construction Work-Related Items and enter
into new contracts for the Completion of the Construction Work
and any changes to the scope of the Construction Work; (x) do any
and every act with respect to the Completion of the Construction
Work and the Principal Construction Work-Related Items which
Borrower may do in its behalf; (xi) employ such contractors,
subcontractors, suppliers, agents, attorneys, architects,
accountants, appraisers, security guards and inspectors as Lender
may in its judgment deem necessary or desirable to accomplish any
of the above purposes; and (xii) receive, collect, open and read
all mail of Borrower for the purpose of obtaining all items
pertaining to the Construction Work and the Principal
Construction Work-Related Items (provided, as to the remedies
listed in subparts vii-xii, above, such remedies are limited if
and to the extent that any other Document imposes a procedural or
other limitation on the implementation of such remedy); and
(e) if the Loan includes a Renovation Component, but only for any
Renovation Work Phase for which Lender has made an Advance: (i)
continue and/or
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<PAGE>
cause Completion of the Renovation Work; (ii) take exclusive
possession of the Property or any part thereof; (iii) expend such
funds as Lender may deem appropriate, including the Required
Completion Assurance Deposit(s) (Renovation) (if any), any other
funds of Borrower held by Lender and any sums which may remain
unadvanced hereunder, to continue and/or cause Completion of the
Renovation Work; (iv) demand and receive performances due under
the Contracts, Licenses, Permits and other Intangibles pertaining
to the Renovation Work; (v) make such changes to the scope of the
Renovation Work and to the Contracts, Licenses, Permits and other
Intangibles pertaining to the Renovation Work as may be necessary
or desirable in Lender's judgment; (vi) file claims, institute
enforcement actions and otherwise prosecute and defend all
actions or proceedings relating to the Renovation Work and the
Contracts, Licenses, Permits and other Intangibles pertaining to
the Renovation Work as Lender may determine to be necessary or
desirable in Lender's judgment; (vii) pay, settle or compromise
all existing bills and claims which Lender may deem to be
necessary or desirable for the continuance or Completion of the
Renovation Work related thereto, after notice to Borrower; (viii)
execute in Borrower's name all applications, certificates,
notices and other instruments and give all instructions and
communications which may be required or permitted by the
Contracts, Licenses, Permits, and other Intangibles pertaining to
the Renovation Work as determined by Lender; (ix) cancel or
surrender any of the Principal Renovation Work-Related Items and
the other Contracts, Licenses, Permits and other Intangibles
pertaining to the Renovation Work and enter into new contracts
for the Completion of the Renovation Work and any changes to the
scope of the Renovation Work; (x) do any and every act with
respect to the Completion of the Renovation Work and the
Contracts, Licenses, Permits and other Intangibles pertaining to
the Renovation Work which Borrower may do in its behalf; (xi)
employ such contractors, subcontractors, suppliers, agents,
attorneys, architects, accountants, appraisers, security guards
and inspectors as Lender may in its judgment deem necessary or
desirable to accomplish any of the above purposes; and (xii)
receive, collect, open and read all mail of Borrower for the
purpose of obtaining all items pertaining to the Renovation Work
and the Contracts, Licenses, Permits and other Intangibles
pertaining to the Renovation Work (provided, as to the remedies
listed in subparts vii-xii, above, such remedies are limited if
and to the extent that any other Document imposes a procedural or
other limitation on the implementation of such remedy); and
(f) proceed to protect and enforce its rights and remedies under the
Documents and to foreclose or otherwise realize upon the
Collateral, or to exercise any other rights and remedies
available to it at law, in equity or by statute.
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<PAGE>
7.3 Uniform Commercial Remedies; Sale; Assembly of Collateral.
---------------------------------------------------------
(a) UCC Remedies; Sale of Collateral. Lender shall have all of the
--------------------------------
rights and remedies of a secured party under the Uniform
Commercial Code of the State of Arizona and all other rights and
remedies accorded at equity or law. Any notice of sale or other
disposition of the Collateral given not less than ten (10)
Business Days prior to such proposed action in connection with
the exercise of Lender's rights and remedies shall constitute
reasonable and fair notice of such action. Lender may postpone or
adjourn any such sale from time to time by announcement at the
time and place of sale stated on the notice of sale or by
announcement of any adjourned sale, without being required to
give a further notice of sale. Any such sale may be for cash or,
unless prohibited by applicable law, upon such credit or
installment as Lender may determine. Borrower shall be credited
with the net proceeds of such sale only when such proceeds are
actually received by Lender in good current funds. Despite the
consummation of any such sale, Borrower shall remain liable for
any deficiency on the Obligations which remains outstanding
following such sale. All net proceeds recovered pursuant to a
sale shall be applied in accordance with the provisions of
paragraph 7.4.
(b) Lender's Right to Execute Conveyances. Lender may, in the name
-------------------------------------
of Borrower or in its own name, make and execute all conveyances,
assignments and transfers of the Collateral sold in connection
with the exercise of Lender's rights and remedies.
(c) Obligation to Assemble Collateral. Upon request of Lender when
---------------------------------
an Event of Default exists, Borrower shall assemble the Personal
Property, Collateral not already in Lender's possession and make
it available to Lender at a time and place within county where
the Real Property is located as designated by Lender.
7.4 Application of Proceeds. Except as may be otherwise required by
-----------------------
applicable law or by the terms of another Security Document, the
proceeds of any sale of all or any part of the Collateral made in
connection with the exercise of Lender's rights and remedies shall be
applied in the following order of priorities: first, to the payment of
all costs and expenses of such sale, including without limitation,
reimbursement to Lender and its agents for attorneys' fees, and all
other expenses, liabilities and advances incurred or made by Lender,
its agents and attorneys, in connection with such sale, and any other
unreimbursed expenses for which Lender may be reimbursed pursuant to
the Documents; second, to the payment of all late charges required by
the Documents to be paid by Borrower, in such order and manner as
Lender shall in its discretion determine; third, to the payment of the
other Obligations, in such order and manner as Lender shall determine,
with no amounts applied to payment of principal until all interest has
been paid; and third,
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<PAGE>
to the payment to Borrower, its successors or assigns, or to whosoever
may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may direct, of any surplus then remaining from
such proceeds.
7.5 Lender's Right to Perform. Lender may, at its option, and without any
-------------------------
obligation to do so, pay, perform and discharge any and all
obligations (including, without limitation, the Obligations under
paragraph 6.9) agreed to be paid or performed in the Documents by
Borrower or any surety for the Performance of the Obligations if (a)
such person fails to do so and (b) (i) an Event of Default exists or
(ii) in the opinion of Lender, such action must be taken because an
emergency exists or to preserve any of the Collateral or its value.
For such purposes Lender may use the proceeds of the Collateral. All
amounts expended by Lender in so doing or in exercising its remedies
under the Documents following an Event of Default shall become part of
the Obligations, shall be immediately due and payable by Borrower to
Lender upon demand, and shall bear interest at the Default Rate from
the dates of such expenditures until paid.
7.6 Non-Exclusive Remedies. No remedy in any Document conferred on or
----------------------
reserved to Lender is intended to be exclusive of any other remedy or
remedies, but each and every such remedy shall be cumulative and shall
be in addition to every other remedy given under any Document or now
or hereafter existing at law or in equity. No delay or omission to
exercise any right or power shall be construed to be a waiver of or
acquiescence to any default or a waiver of any right or power; and
every such right and power may be exercised from time to time and as
often as may be deemed expedient.
7.7 Waiver of Marshaling. Borrower, for itself and for all who may claim
--------------------
through or under it, hereby expressly waives and releases all right to
have the Collateral, or any part of the Collateral, marshaled on any
foreclosure, sale or other enforcement of Lender's rights and
remedies.
7.8 Attorney-in-Fact. For the purpose of exercising its rights and
----------------
remedies under paragraphs 7.2(c), 7.2 (d), 7.3(b) and 7.5, Lender may
do so in Borrower's name or its name and is hereby appointed as
Borrower's attorney-in-fact to take any and all actions in Borrower's
name and/or on Borrower's behalf as Lender may deem necessary or
appropriate in its discretion in the accomplishment of such purposes.
8. LENDER'S INSPECTOR; DISCLAIMER OF LENDER'S DUTIES REGARDING WORK
----------------------------------------------------------------
8.1 Retention of Lender's Inspector. If the Loan includes a Construction
-------------------------------
Component, Lender may retain an architectural/engineering firm
("Lender's Inspector") to do the following: (a) until Completion of
the Construction Work and the making of the last Construction Work-
Related Advance (including the disbursement of the
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Basic Retainage and Additional Retainage), review the Principal
Construction Work-Related Items, and the budget proposed to be the
Construction Budget and any changes to such items; (b) inspect the
Real Property prior to commencement of the Construction Work for
purposes of determining the condition of the Real Property and any
existing improvements; (c) until Completion of the Construction Work
and the making of the last Construction Work-Related Advance
(including the disbursement of the Basic Retainage and Additional
Retainage), make monthly inspections of the Real Property and
Construction Work and Borrower's records pertaining to the same
[whether or not Loan proceeds are to be used to pay or reimburse
Borrower for the costs of such Construction Work] and provide to
Lender reports of such inspections so that Lender may monitor whether
Borrower is in compliance with the terms and conditions of this
Agreement; and (d) provide evidence satisfactory to Lender prior to
the funding of the first Work-Related Advance regarding the matters
which are the subject of Borrower's representations and warranties in
paragraph 6.3(c). Furthermore, Lender may require an inspection of the
Construction Work by Lender's Inspector (a) at least once each month
during the course of completion of the Construction Work; (b) upon
Completion; and (c) until Completion of the Construction Work and the
making of the last Construction Work-Related Advances (including the
disbursement of the Basic Retainage and Additional Retainage), at such
other time as Lender may, in its judgment, deem necessary due to
actual or suspected non-compliance with the Plans and Specifications,
Construction Work Contract(s), applicable Legal Requirements, the
Documents, sound architectural, engineering or construction principles
or commonly accepted safety standards, or Borrower's failure to
satisfy the requirements of the Documents. Lender will use
commercially reasonable efforts to minimize the costs of Lender's
Inspector.
8.2 No Duty of Lender to Supervise, Etc. Lender shall have no duty to
------------------------------------
supervise or to review and inspect the Principal Construction Work-
Related Items, the other Contracts, Licenses, Permits and other
Intangibles, any budget proposed to be the Construction Budget, any
budget proposed to be the Renovation Budget, any books and records
pertaining thereto or any changes to such items or the construction/
making of the Construction Work or the Renovation Work. Any inspection
made by Lender shall be for the sole purpose of determining whether
the Obligations are being Performed and preserving Lender's rights
under these Documents. If Lender, or Lender's Inspector acting on
behalf of Lender, should review or inspect the Principal Construction
Work-Related Items, the other Contracts, Licenses, Permits and other
Intangibles, the Construction Budget, the Renovation Budget, any books
and records pertaining thereto or any changes to such items or the
construction/making of the Construction Work or the Renovation Work,
Lender and Lender's Inspector shall have no liability or obligation to
Borrower or any third person arising out of such inspection; and
neither Borrower nor any third person shall be entitled to rely upon
any such inspection or review. Inspection not followed by notice of an
Event of Default shall not constitute (a) waiver of any
-53-
<PAGE>
Event of Default then existing; (b) an acknowledgment or
representation by Lender or Lender's Inspector that there has been or
will be compliance with the Principal Construction Work-Related Items,
the other Contracts, Licenses, Permits and other Intangibles, the
Construction Budget, or the Renovation Budget, applicable Legal
Requirements, the Documents, sound construction, engineering or
architectural principles or commonly accepted safety standards, or
that the construction is lien free or free from defective materials or
workmanship; or (c) a waiver of Lender's right thereafter to insist
that Completion of the Construction Work or Construction of the
Renovation Work occur in accordance with (as applicable) the Principal
Construction Work-Related Items, the other Contracts, Licenses,
Permits and other Intangibles, the Construction Budget, applicable
Legal Requirements, the Documents, sound construction, engineering or
architectural principles or commonly safety standards and free from
defective materials and workmanship. Lender and Lender's Inspector owe
no duty of care to Borrower or any third person to protect against, or
inform Borrower or any third person of, the existence of negligence,
faulty, inadequate or defective design or construction of the
Construction Work or Renovation Work.
9. CONSTRUCTION AND GENERAL TERMS
------------------------------
9.1 Payment Location. All monies payable under the Documents shall be
----------------
paid to Lender at its address furnished pursuant to paragraph 9.5 of
this Agreement in lawful monies of the United States of America,
unless otherwise designated in the Documents or by Lender by notice.
9.2 Entire Agreement. The Documents exclusively and completely state the
----------------
rights and obligations of Lender and Borrower with respect to the
Loan. No modification, variation, termination, discharge, abandonment,
or waiver of any of the provisions or conditions of the Documents
shall be valid unless in writing and signed by duly authorized
representatives of the party sought to be bound by such action. The
Documents supersede any and all prior representations, warranties
and/or inducements, written or oral, heretofore made by Lender
concerning this transaction, including any commitment for financing.
Without limiting the generality of the foregoing, the Documents shall
control over the Credit Facility Agreement to the extent of any
apparent conflict.
9.3 Powers Coupled with an Interest. The powers and agency hereby granted
-------------------------------
by Borrower are coupled with an interest and are irrevocable until the
Obligations have been paid in full and Lender has no further
obligation to make Advances and are granted as cumulative to Lender's
other remedies for collection and enforcement of the Obligations.
-54-
<PAGE>
9.4 Counterparts. Any Document may be executed in counterpart, and any
------------
number of copies of such Document which have been executed by all
parties shall constitute one original.
9.5 Notices. Except as may be expressly otherwise provided in any of the
-------
Documents, all notices, requests or demands required or permitted to
be given under any Document shall be in writing, and shall be deemed
effective (a) upon hand delivery, if hand delivered; (b) one (1)
Business Day (as defined below) after such are deposited for delivery
via Federal Express or other nationally recognized overnight courier
service; or (c) three (3) Business Days after such are deposited in
the United States mails, certified or registered mail, all with
delivery charges and/or postage prepaid, and addressed as shown below,
or to such other address as the party being notified may have
designated in a notice given to the other party. Written notice may be
given by telecopy to the telecopier number as the party being notified
may have designated in a notice given to the other party, which notice
shall be effective on the day of receipt if received prior to the
expiration of the recipient's normal business hours on the day of
receipt or otherwise on the next Business Day; provided that such
notice shall not be deemed effective unless not later than the next
Business Day, a copy of such notice is hand delivered or deposited for
delivery via courier or in the United States mails in accordance with
the requirements set forth above.
If to Lender: FINOVA Capital Corporation
7272 East Indian School Road
Suite 410
Scottsdale, Arizona 85251
Attn: Vice President - Resort Finance
Telecopy No.: (602) 874-6444
with a copy to: FINOVA Capital Corporation
7272 East Indian School Road
Suite 410
Scottsdale, Arizona 85251
Attn: Vice President - Associate General Counsel
Telecopy No.: (602) 874-6445
If to Borrower: [Name of Borrower]
--------------------------------
8801 Vistana Centre Drive
Orlando, Florida 32821
Attn: Chief Financial Officer
Telecopy No.: (407) 239-3222
With copy to: Susan Werth, Esq.
Vistana, Inc.
-55-
<PAGE>
701 Brickell Avenue, Suite 2100
Miami, Florida 33131
Telecopy No.: (305) 374-7159
9.6 Successors and Assigns. All the covenants of Borrower and all the
----------------------
rights and remedies of the Lender contained in the Documents shall
bind Borrower, and, subject to the restrictions on merger,
consolidation and assignment contained in the Documents, its
successors and assigns, and shall inure to the benefit of Lender, its
successors and assigns, whether so expressed or not. Borrower may not
assign its rights in the Documents in whole or in part. Except as may
be expressly provided in a Document, no person or other entity shall
be deemed a third party beneficiary of any provision of the Documents.
9.7 Severability. If any provision of any Document is held to be invalid,
------------
illegal or unenforceable under present or future laws, the legality,
validity and enforceability of the remaining provisions of the
Documents shall not in any way be affected or impaired thereby. In
lieu of each such illegal, invalid or unenforceable provision, there
shall be added to the Document affected, a provision that is legal,
valid and enforceable and as similar in terms to such illegal, invalid
and unenforceable provision as may be possible.
9.8 Time of Essence. Time is of the essence in the Performance of the
---------------
Obligations.
9.9 Miscellaneous. All headings are inserted for convenience only and
-------------
shall not affect any construction or interpretation of the Documents.
Unless otherwise indicated, all references in a Document to clauses
and other subdivisions refer to the corresponding paragraphs, clauses
and other subdivisions of the Document; the words "herein," "hereof,"
"hereto," hereunder" and words of similar import refer to the Document
as a whole and not to any particular paragraph, clause or other
subdivision; and reference to a numbered or lettered subdivision of an
Article or paragraph shall include relevant matter within the Article
or paragraph which is applicable to but not within such numbered or
lettered subdivision. All Schedules and Exhibits referred to in this
Agreement are incorporated in this Agreement by reference.
9.10 (A) CHOICE OF LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED THEREIN,
-------------
THE DOCUMENTS AND THE RIGHTS, DUTIES AND OBLIGATIONS OF THE PARTIES
THERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF ARIZONA AND TO THE EXTENT THEY PREEMPT
THE LAWS OF SUCH STATE, THE LAWS OF THE UNITED STATES.
-56-
<PAGE>
(B) CHOICE OF JURISDICTION; WAIVER OF VENUE. EACH OF LENDER AND
---------------------------------------
BORROWER: (A) HEREBY IRREVOCABLY SUBMITS ITSELF TO THE PROCESS,
JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF ARIZONA, MARICOPA
COUNTY, AND TO THE PROCESS, JURISDICTION, AND VENUE OF THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA, FOR THE PURPOSES OF
SUIT, ACTION OR OTHER PROCEEDINGS ARISING OUT OF OR RELATING TO ANY
DOCUMENT OR THE SUBJECT MATTER HEREOF, OR, IF LENDER INITIATES SUCH
ACTION, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION AND THE
CHOICE OF SUCH VENUE SHALL IN ALL INSTANCES BE AT LENDER'S ELECTION;
AND (B) WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, HEREBY
WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, DEFENSE OR OTHERWISE
IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY CLAIM THAT SUCH PERSON IS
NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED COURTS,
THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH OF LENDER AND BORROWER HEREBY WAIVES THE RIGHT TO
COLLATERALLY ATTACK ANY JUDGMENT OR ACTION IN ANY OTHER FORUM.
(C) WAIVER OF JURY TRIAL. LENDER AND BORROWER ACKNOWLEDGE AND AGREE
--------------------
THAT ANY CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE DOCUMENTS WOULD
BE BASED UPON DIFFICULT AND COMPLEX ISSUES; AND THEREFORE, THE PARTIES
AGREE THAT ANY LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE
TRIED BY A JUDGE SITTING WITHOUT A JURY, AND BORROWER HEREBY KNOWINGLY
AND VOLUNTARILY WAIVES TRIAL BY JURY IN ANY SUCH PROCEEDING.
(D) INDUCEMENT TO LENDER. ALL OF THE PROVISIONS SET FORTH IN THIS
--------------------
PARAGRAPH ARE A MATERIAL INDUCEMENT FOR LENDER'S MAKING THE LOAN TO
BORROWER.
(________ BORROWER'S INITIALS)
9.11 Compliance With Applicable Usury Law. It is the intent of the parties
------------------------------------
hereto to comply with the Applicable Usury Law. Accordingly,
notwithstanding any provisions to the contrary in the Documents, in no
event shall this Agreement or the Documents require the payment or
permit the collection of interest in excess of the maximum contract
rate permitted by the Applicable Usury Law.
-57-
<PAGE>
9.12 NO RELATIONSHIP WITH PURCHASERS. LENDER DOES NOT HEREBY ASSUME AND
-------------------------------
SHALL HAVE NO RESPONSIBILITY, OBLIGATION OR LIABILITY TO PURCHASERS,
LENDER'S RELATIONSHIP BEING THAT ONLY OF A CREDITOR WHO HAS TAKEN, AS
SECURITY FOR INDEBTEDNESS OWED TO IT, A COLLATERAL ASSIGNMENT FROM
BORROWER OF THE INSTRUMENTS. EXCEPT AS REQUIRED BY LAW AND FOR FILINGS
MADE WITH THE SECURITIES & EXCHANGE COMMISSION OR ANY STOCK EXCHANGE
ON WHICH BORROWER'S STOCK IS TRADED, BORROWER WILL NOT, AT ANY TIME,
USE THE NAME OF OR MAKE REFERENCE TO LENDER WITH RESPECT TO THE TIME-
SHARE PROJECT, THE SALE OF TIME-SHARE INTERESTS OR OTHERWISE, WITHOUT
THE EXPRESS WRITTEN CONSENT OF LENDER.
9.13 NO JOINT VENTURE. THE RELATIONSHIP OF BORROWER AND LENDER IS THAT OF
----------------
DEBTOR AND CREDITOR, AND IT IS NOT THE INTENTION OF EITHER OF SUCH
PARTIES BY THIS OR ANY OTHER INSTRUMENT BEING EXECUTED IN CONNECTION
WITH THE LOANS TO ESTABLISH A PARTNERSHIP, AND THE PARTIES HERETO
SHALL NOT UNDER ANY CIRCUMSTANCES BE CONSTRUED TO BE PARTNERS OR JOINT
VENTURERS.
9.14 Standards Applied to Lender's Actions. Unless otherwise specifically
-------------------------------------
stipulated elsewhere in the Documents, if a matter is left in the
Documents to the decision, requirement, request, determination,
judgment, opinion, approval, consent, waiver, satisfaction,
acceptance, agreement, option or discretion of Lender, its employees,
Lender's counsel or any agent for or contractor of Lender, then such
action shall be deemed to be exercisable by Lender or such other
person in its sole and absolute discretion and according to standards
established in its sole and absolute discretion. Without limiting the
generality of the foregoing, "option" and "discretion" shall be
implied by use of the words "if" or "may."
9.15 Meaning of Subordination. Any subordinations required to be given
------------------------
under the Documents by third parties to Lender shall include the
subordination of and the deferral of the right to receive payments on
the subordinated obligations except to the extent expressly permitted
in this Agreement; the remittances to Lender of all prohibited
payments received by the third party; the subordination of all liens,
security interests, assignments and other encumbrances and claims held
by the third party on or against any of Borrower's property to
Lender's interest (whenever acquired) in such property; and an
agreement on the part of the third party not to exercise any remedies
against Borrower so long as all obligations under the Documents have
not been fully satisfied.
9.16 Scope of Reimbursable Attorney's Fees. As used in the Documents, the
-------------------------------------
term "attorneys' fees" includes the fees of attorneys licensed to
practice law in any
-58-
<PAGE>
jurisdiction, the fees of law clerks, paralegals, investigators and
others not admitted to the bar but performing services under the
supervision of a licensed attorney, and the expenses incurred by them
in the performance of their services. As used in the Documents,
attorneys' fees incurred by Lender in the enforcement of any remedy or
covenant include, without limitation, attorneys' fees incurred in any
foreclosure of Borrower's Security Documents, in protecting or
sustaining the lien or priority of the collateral, or in any
proceeding arising from or connected with any such matter, including
any bankruptcy, receivership, injunction or other similar proceeding,
or any appeal from or petition for review of any such matter, and with
or without litigation.
9.17 Publicity. Lender routinely advertises the transactions to which it is
---------
a party in newspapers, industry periodicals, and other miscellaneous
print and electronic literature. Without the prior written consent of
VI, not to be unreasonably withheld, Lender will not use Borrower's
name, logo, insignia, descriptive art work, trade name, trademark or
other similar material, whether or not protected by copyright (or
otherwise), in any such advertisement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their respective name, personally or by their duly authorized
representatives as of the date above written.
LENDER FINOVA CAPITAL CORPORATION, a
Delaware corporation
By:______________________________________
Type/Print Name:_________________________
Title:___________________________________
BORROWER __________________________________, a(n)
__________________________________
By:______________________________________
Type/Print Name:_________________________
Title:___________________________________
-59-
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
Schedule
Exhibit A Note
Exhibit B Permitted Encumbrances
Exhibit C Real Property
Exhibit D Standard Procedures Pertaining to Developmental Matters
Requests
Exhibit E Opinion Requirements
Exhibit F Additional Due Diligence Items for Each Loan with an
Acquisition Component
Exhibit G Additional Conditions for any Subsequent Advances of
Acquisition Component
Exhibit G-1 Borrower's Affidavit for Acquisition Component Advance
Exhibit H Additional Due Diligence Items for Each Loan with a
Construction Component
Exhibit I Construction Work-Related Advance Request Administrative
Procedures
Exhibit I-1 Borrower's Affidavit for Construction Work-Related
Advance
Exhibit J Additional Due Diligence Items for Each Loan with a
Renovation Component
Exhibit K Renovation Work-Related Advance Request Administrative
Procedures
Exhibit K-1 Borrower's Affidavit for Renovation Work-Related Advance
<PAGE>
SCHEDULE OF ADDITIONAL TERMS
----------------------------
S.1 This SCHEDULE has been incorporated by reference into and form a part of
that Loan Agreement dated as of ___________, ______, between FINOVA Capital
Corporation and __________________.
S.2 To the extent of any inconsistency between this SCHEDULE and the other
provisions of the Loan Agreement, the provisions of this SCHEDULE shall
control.
S.3 The provisions of the Loan Agreement are supplemented as follows (paragraph
references are references to paragraphs of the Loan Agreement) which are
intended to be supplemented by the following provisions :
<TABLE>
<S> <C>
(a) Intro., (P)1.5.1 Loan Components: ----------------------------------------------------------------.
(b) (P)1.26 Construction Improvements: ------------------------------------------------------.
(c) (P)1.30 Construction Work Phases: -------------------------------------------------------.
(d) (P)1.57 Maximum Acquisition Component Amount: ----------------------- Dollars ($________).
(e) (P)1.58 Maximum Construction Component Amount: ---------------------- Dollars ($________).
(f) (P)1.60 Maximum Interest Reserve Amount: ---------------------------- Dollars ($________).
(g) (P)1.61 Maximum Loan Amount: ---------------------------------------- Dollars ($________).
(h) (P)1.62 Maximum Per Unit Cost: -------------------------------------- Dollars ($________).
(i) (P)1.63 Maximum Renovation Component Amount: ------------------------ Dollars ($________).
(j) (P)1.64 Minimum Initial Equity Contribution: ------------------------ Dollars ($________).
(k) (P)1.71 Partial Release Fee: ---------------------------------------- Dollars ($________).
(l) (P)1.85 Renovation Improvements: --------------------------------------------------------.
(m) (P)1.89 Renovation Work Phase: ----------------------------------------------------------.
(n) (P)1.96 Required Completion Period (Construction): --------------------------------------.
(o) (P)1.97 Required Completion Period (Renovation): ---------------------------------------.
(p) (P)1.109 Time-Share Declaration: ---------------------------------------------------------.
(q) (P)1.116 Time-Share Project: -------------------------------------------------------------.
(r) (P)2.1(a) Acquisition Advance(s): ---------------------------------------------------------.
(s) (P)4.1(a) Additional Loan Documents: ------------------------------------------------------.
(t) (P)4.1(b) Additional Due Diligence Items: -------------------------------------------------.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(u) (P)(P)4.1(b), 6.1(a) State of Organization: ---------------------------------------------------------.
(v) (P)(P)4.1(b), 6.6(b) Minimum Required Time-Share Approvals Delivery Date with respect to any
Construction Work Phase or Renovation Work Phase, not later than: -------------.
(x) (P)4.9 Current Wire Transfer Fee: ------------------------------ Dollars ($__________).
(y) (P)5.3(c) Prepayment Premium: ------------------------------------------------------------.
(z) (P)6.1(a) Type of Business Organization: ------------------------------------------------.
(aa) (P)6.1(c) Borrower's Principal Place of Business and Chief Executive Office: -------------.
(bb) (P)6.6(b) Jurisdictions Where Sales And/Or Offers To Sell Have Occurred: -----------------.
(cc) (P)6.6(b) Minimum Required Time-Share Approvals Application Date with respect to any
Construction Work Phase or Renovation Work Phase, not later than: --------------.
(dd) (P)6.9 Insurance Letter: --------------------------------------------------------------.
(ee) (P)6.11(d) Time-Share Association Budget Delivery Date: ----------------------------------.
</TABLE>
S.4 The representations, warranties and covenants of Borrower and the other
terms and conditions set forth in the Loan Agreement are modified as
follows:
(a)
(b)
S.5 In addition to the other representations, warranties and covenants of
Borrower set forth in the Loan Agreement, Borrower represents, warrants and
covenants as follows:
(a)
(b)
<PAGE>
EXHIBIT A
---------
NOTE
<PAGE>
EXHIBIT B
---------
PERMITTED ENCUMBRANCES
<PAGE>
EXHIBIT C
---------
REAL PROPERTY
<PAGE>
EXHIBIT D
PROCEDURES PERTAINING TO
DEVELOPMENTAL MATTERS REQUESTS
A. If Borrower desires Lender to give its consent to or to take any other
action concerning a matter affecting the zoning, platting, development or sale
of or title to the Real Property, then Borrower will endeavor to deliver to
Lender a written request ("Developmental Matters Request") at least ten (10)
Business Days prior to the date such Borrower desires Lender to take such
action.
B. The Developmental Matters Request shall contain in reasonable detail the
following: (1) a description of the action which Borrower desires Lender to
take; (2) the date by which Borrower desires that Lender take the action and any
special factors affecting Borrower's desire that Lender take the requested
action by such date (such as the desire to present an amended plat to a
governmental entity on a scheduled hearing date and the length of time before
another hearing date can be scheduled); (3) the reason that Borrower desires the
action to be taken by Lender, a description as to how the matter which is the
subject of the request for Lender's action alters the plan required to be given
by the Borrower to Lender pursuant to paragraph 4.1(b) of this Agreement
regarding the use, development or sale of the Real Property; and (4) a
description of any amendments or waivers required with respect to the Documents.
At the same time, it delivers the Developmental Matters Request to Lender,
Borrower will also endeavor to deliver to Lender at least two (2) copies of all
items as would be reasonably required by a reasonable and prudent lender in
order to evaluate the request. Borrower will in any event promptly deliver to
Lender any information which Lender may reasonably request concerning the
Developmental Matters Request.
C. To the extent Lender's consent is requested to a plat, a plat amendment
or covenants, conditions and restrictions affecting the Real Property, such
consent shall specifically state, in addition to such other matters as Lender
may require, that nothing contained in the consent shall otherwise affect,
alter, or modify in any manner whatsoever the terms of the Mortgage, that except
as otherwise required by law and subject to the provisions of the Time-Share
Declaration the lien of the Mortgage shall be prior to the lien for all
assessments, and that execution of the consent by Lender is not intended to and
shall not diminish the obligations of Borrower under the Mortgage, excuse the
Borrower from any liability for failure to perform any such obligation, or
impair any of Lender's rights against Borrower under the Mortgage.
D. Notwithstanding the provisions of paragraph 9.5, a Developmental Matters
Request and all items delivered to Lender in connection therewith shall be
addressed to :
FINOVA CAPITAL CORPORATION
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attn: Lydia Moody-Minert
Telecopy No.: (602) 874-6445
E. The provisions of paragraph 3.3 of the Agreement shall be applicable to
each Developmental Matters Request.
F. The procedures set forth in this Exhibit shall not apply to a request
for a Partial Release of a Time-Share Interest or to obtain Advances, the
procedures for which are set forth elsewhere in this Agreement.
<PAGE>
EXHIBIT E
OPINION MATTERS OF THE BORROWER'S AND
GUARANTOR'S COUNSEL OPINIONS
Lender will require legal opinions from the Borrower's and Guarantor's
counsel [which, for purposes of the opinions required pursuant to items (7)-(10)
of the following sentence must be counsel licensed to practice in the
jurisdiction where the Real Property is located] as to such matters as Lender
reasonably deems appropriate. Without limiting the generality of the preceding
sentence, opinions will be required as to (1) due organization, good standing
and structure of the Borrower, Guarantor and (if any) other sureties for the
Performance of the Obligations who are not natural persons; (2) due
authorization, execution and delivery of the Documents executed by the Borrower,
Guarantor and (if any) other sureties for the Performance of the Obligations who
are not natural persons in connection with the Loan; (3) enforceability of such
Documents (including choice of law provisions); (4) the absence of conflict
between such Documents and Legal Requirements; (5) non-materiality of pending
and threatened litigation; (6) compliance by the Borrower with applicable laws;
(7) enforceability of the Agreement and other Documents executed in connection
with Loan (including choice of law provisions); (8) compliance of the Loan with
usury laws; (9) zoning of such Real Property; (10) compliance of the project
governing documents and project consumer documents with applicable laws; and
(11) proper perfection of the required liens and security interests.
<PAGE>
EXHIBIT F
ADDITIONAL DUE DILIGENCE ITEMS FOR EACH
LOAN WITH AN ACQUISITION COMPONENT AND OTHER CONDITIONS PERTAINING TO
ACQUISITION ADVANCES
1. a tentative budget for the construction and/or renovation work which
Borrower intends to be done with respect to the Real Property; and
2. if required by Lender in writing, a report prepared by an engineer engaged
by Lender with respect to the physical condition of any improvements
existing on the Real Property.
<PAGE>
EXHIBIT G
ADDITIONAL CONDITIONS FOR SUBSEQUENT ADVANCES
OF ACQUISITION COMPONENT
With each Acquisition Advance request, Borrower must complete, execute and
deliver to Lender:
1. Borrower's Affidavit for Advance (Exhibit G-1 hereof)
<PAGE>
EXHIBIT G-1
-----------
BORROWER'S AFFIDAVIT FOR ACQUISITION ADVANCE
Borrower: ______________________
Date: ________________
Loan No.: __________________
Amount: _______________________________
In connection with and in order to induce FINOVA Capital Corporation
("Lender") to make an Acquisition Advance in the amount requested above,
Borrower hereby represents, warrants and stipulates as follows:
1. The sum of (a) amount of the requested Acquisition Advance and (b) the
amount of any Acquisition Advances previously made does not exceed the
Acquisition Cost.
2. No material adverse change has occurred since __________________, ___, the
date of the latest financial statements given by or on behalf of such
person to Lender, in the financial condition or the business and operations
of Borrower.
3. All representations and warranties contained in the Agreement are true and
correct in all material respects as of the date hereof.
4. Neither an Event of Default nor an Incipient Default exists.
5. Borrower has performed and complied with all other agreements or conditions
required by the Agreement to be performed or complied with prior to or at
the date of the requested Advance.
6. Capitalized terms not otherwise defined herein shall have the meaning given
to them in the Agreement.
7. Borrower hereby requests that the requested Advance be disbursed through
the following method (check one): _____ wire transfer or ____ check. If
Borrower has requested disbursement via wire transfer, Borrower requests
that wire transfer be made in accordance with the following instructions:
Bank Name:_____________________________________
Bank Address:__________________________________
Bank ABA No.:__________________________________
Account Name:__________________________________
Account No.:___________________________________
Special Instructions:__________________________
_______________________________________________
_______________________________________________
<PAGE>
Very truly yours,
____________________________________, a(n)
____________________________________
By:____________________________________________
Type/Print Name:_______________________________
Title:_________________________________________
State of _______ )
) ss:
County of _________ )
Subscribed and sworn to before me on
this _____ day of _____________, _____.
______________________________________
Notary Public
My commission expires:
______________________
(Notary Seal)
<PAGE>
EXHIBIT H
ADDITIONAL DUE DILIGENCE ITEMS FOR EACH LOAN
WITH A CONSTRUCTION COMPONENT
1. all grading permits, foundation permits, building permits, environmental
permits, and other permits, licenses, approvals and certificates for the
construction of the Construction Improvements, excluding, however, items
which cannot be issued until after construction has been completed or
otherwise reached a required stage;
2. a soils and geotechnical test report with respect to the suitability of the
soils on the Real Property to construct the Construction Improvements;
3. unless a building permit has been issued for the Construction Improvements,
a flood and drainage study with respect to the Real Property and the
Construction Improvements;
4. the Architect/Engineer Agreement for each Architect/Engineer;
5. Plans and Specifications for the Construction Improvements complete in all
respects (subject only to Lender's approval prior to the initial Advance);
6. the Construction Budget complete in all respects (subject only to Lender's
approval prior to the initial Advance);
7. a detailed draw schedule for the Construction Component;
8. the Construction Work Progress Schedule (subject only to Lender's approval
prior to the initial Advance);
9. a list of all Construction Work Contractors with whom Borrower has
contracted and all subcontractors and materialmen responsible for major
portions of the such Construction Work, all of whom must be satisfactory to
Lender;
10. if Borrower is not acting as its own general contractor and a VI Entity is
not the general contractor, copies of the general construction contract and
copies of subcontracts for materials portions of the Construction Work; the
consent of the Construction Work Contractors under Material Construction
Work Contracts to the assignment of their respective contracts to Lender;
provided, however, the express consent of a Contractor to an assignment by
-------- -------
Borrower of a Construction Contract with such Contractor will not be
required so long as the required agreement between the Borrower and such
Contractor contains provisions acceptable to Lender reflecting the
Contractor's (i) consent to such assignment and (ii) agreement with respect
to performance under its contract after a default by the Borrower; all
information as Lender may reasonably require regarding all Construction
Work Contractors under Material Construction Work Contracts, and, if
required by Lender, the subcontractors and materialmen responsible for
major portions of such Construction Work (which, among other things, may
consist of financial statements for the last two years, federal employer
tax identification numbers, a Dun & Bradstreet report, credit references
and a Better Business Bureau report);
11. if Borrower is not acting as its own general contractor and a VI Entity is
not the general contractor, if required by Lender and available under the
laws of the state where the Real Property is located, a payment bond which
complies with all Legal Requirements of the state where the Real Property
is located, is issued by a surety satisfactory to Lender and is adequate to
cause all persons providing labor, materials, equipment
<PAGE>
or services with respect to the Construction Work to look solely to such
bond, rather than the Real Property and other Collateral, in the event of
non-payment;
12. if Borrower is not acting as its own general contractor and a VI Entity is
not the general contractor, if required by Lender and available under the
laws of the state where the Real Property is located, a performance bond or
bonds which complies/comply with all Legal Requirements of the state where
the Real Property is located, is/are issued by a surety satisfactory to
Lender, covering Construction Work Contracts for at least the major
portions of the related Construction Work and naming Lender as a co-
obligee;
13. the report of Lender's Inspector with respect to any completed work and the
Construction Budget, Plans and Specifications, the Construction Work
Contracts, the Construction Work Progress Schedule, and other construction-
related items to the extent provided in paragraph 8.1.
<PAGE>
EXHIBIT I
---------
LENDER'S
CONSTRUCTION WORK-RELATED ADVANCE REQUEST
ADMINISTRATIVE PROCEDURES
A. With each Construction Work-Related Advance Request, Borrower must
complete, execute and deliver to Lender:
1. Borrower's Affidavit for Advance (Exhibit I-1 hereof);
2. lien waivers for Material Construction Work Contracts on such form as is
required by law or is otherwise reasonably satisfactory to Lender for
previous application payments no later than sixty (60) days after the
Construction Work-Related Advance to which they relate; and
3. any surveys required pursuant to paragraph 6.4(g) of the Agreement.
B. The following events must take place prior to each Construction Work-
Related Advance:
1. At Lender's option, Lender will request Title Insurer to review public
records, advise Lender of same, and forward to Lender endorsement(s) as
required pursuant to paragraph 6.4(h) of the Agreement.
2. Lender must have received the report of Lender's Inspector for the
inspection made by Lender's Inspector during the prior month.
3. Lender will review the Construction Work-Related Advance Request, the
Title Insurer's input and most recent report of Lender's Inspector. The
Construction Work-Related Advance Request must be appropriate, complete
and in proper order. The order of the Construction Work-Related Advance
Request package will determine the processing time needed.
<PAGE>
EXHIBIT I-1
-----------
BORROWER'S AFFIDAVIT FOR CONSTRUCTION WORK-RELATED ADVANCE
Borrower: ______________________
Date: ________________
Construction Work: __________________________________________________
Request No.: __________________
Loan No.: __________________
Period: _________________ to ____________________
Amount: _______________________________
In connection with and in order to induce FINOVA Capital Corporation
("Lender") to make a Construction Work-Related Advance in the amount requested
above, Borrower hereby represents, warrants and stipulates as follows:
1. The work listed in this Construction Work-Related Advance Request Package
("Request") has been completed in accordance with the Loan Agreement dated
_______________, _____ between the undersigned and Lender (with any
amendments, "Agreement"); all obligations for work submitted and received
on previous Borrower's Construction Work-Related Advance Request have now
been paid in full (except for retainage); the funds requested at this time
shall be applied only to the obligations for work set forth in this
Request; and all Insurance Policies (including without limitation,
Builder's Risk and General Liability Coverage policies) as required by the
Agreement are in full force and effect.
2. The following is a description of the completed Construction Work (by Work
Phase) for which Borrower is requesting a Construction Work-Related Advance
in this application: ______________________________________________________
___________________________________________________________________________
__________________________________________________________________________.
3. No material adverse change has occurred in the Construction Improvements
or, since __________________, _____, the date of the latest financial
statements given by or on behalf of such person to Lender, in the financial
condition or the business and operations of Borrower.
4. All representations and warranties contained in the Agreement are true and
correct in all material respects as of the date hereof.
5. Neither an Event of Default nor an Incipient Default exists.
6. Borrower has performed and complied with all other agreements or conditions
required by the Agreement to be performed or complied with prior to or at
the date of the requested Construction Work-Related Advance.
7. Capitalized terms not otherwise defined herein shall have the meaning given
to them in the Agreement.
<PAGE>
8. Borrower hereby requests that the requested Advance be disbursed through
the following method (check one): _____ wire transfer or ____ check. If
Borrower has requested disbursement via wire transfer, Borrower requests
that wire transfer be made in accordance with the following instructions:
Bank Name:____________________________________________
Bank Address:_________________________________________
Bank ABA No.:_________________________________________
Account Name:_________________________________________
Account No.:__________________________________________
Special Instructions:_________________________________
______________________________________________________
______________________________________________________
Very truly yours,
____________________________________, a(n)
____________________________________
By:____________________________________
Type/Print Name:_______________________
Title:_________________________________
State of _________ )
) ss:
County of _________ )
Subscribed and sworn to before me on
this _____ day of _____________, _____.
__________________________________
Notary Public
My commission expires:
______________________
(Notary Seal)
<PAGE>
EXHIBIT J
ADDITIONAL DUE DILIGENCE ITEMS FOR EACH
LOAN WITH A RENOVATION COMPONENT
1. the Renovation Budget complete in all respects (subject only to Lender's
approval prior to the initial Renovation Work-Related Advance);
2. a detailed draw schedule for the Renovation Component;
3. the Renovation Work Progress Schedule (subject only to Lender's approval
prior to the initial Renovation Work-Related Advance); and
4. if not previously received by Lender, a report prepared by an engineer
engaged by Lender with respect to the physical condition of any
improvements existing on the Real Property.
<PAGE>
EXHIBIT K
LENDER'S RENOVATION WORK-RELATED ADVANCE
REQUEST ADMINISTRATIVE PROCEDURES
A. With each Renovation Work-Related Advance Request, Borrower must complete
and deliver to Lender:
1. Borrower's Affidavit for Renovation Work-Related Advance Request
(Exhibit K-1 hereof); and
2. lien waivers in connection with all Material Renovation Work Contracts
on such form as is required by law or is otherwise reasonably
satisfactory to Lender for previous application payments no later than
sixty (60) days after the Renovation Work-Related Advance to which they
relate is made; and
3. such other items as Lender requests which are reasonably necessary to
evaluate the requests of the Work-Related Advance and the satisfaction
of Conditions Precedent thereto.
B. The following events must take place prior to each Renovation Work-Related
Advance:
4. At Lender's option, Lender will request Title Insurer to review public
records, advise Lender of same, and forward to Lender endorsement(s) as
required pursuant to paragraph 6.4(h) of the Agreement.
5. Lender must have received the report of Lender's Inspector with respect
to the inspection made by Lender's Inspector during the prior month.
6. Lender will review the Renovation Work-Related Advance Request, the
Title Insurer's input and most recent report of Lender's Inspector. The
Renovation Work-Related Advance Request must be appropriate, complete
and in proper order. The order of the Renovation Work-Related Advance
Request package will determine the processing time needed.
<PAGE>
EXHIBIT K-1
-----------
BORROWER'S AFFIDAVIT FOR RENOVATION WORK-RELATED ADVANCE
Borrower: ______________________
Date: ________________
Construction Work: __________________________________________________
Request No.: __________________
Loan No.: __________________
Period: _________________ to ____________________
Amount: _______________________________
In connection with and in order to induce FINOVA Capital Corporation
("Lender") to make a Renovation Work-Related Advance in the amount requested
above, Borrower hereby represents, warrants and stipulates as follows:
1. The work listed in this Renovation Work-Related Advance Request Package
("Request") has been completed in accordance with the Loan Agreement dated
_______________, _____ between the undersigned and Lender (with any
amendments, "Agreement"); all obligations for work submitted and received
on previous Borrower's Renovation Work-Related Advance Request have now
been paid in full (except for retainage); the funds requested at this time
shall be applied only to the obligations for work set forth in this
Request; and all Insurance Policies (including without limitation,
Builder's Risk and General Liability Coverage policies) as required by the
Agreement are in full force and effect.
2. The following is a description of the completed Renovation Work (by Work
Phase) for which Borrower is requesting a Renovation Work-Related Advance
in this application:_______________________________________________________
___________________________________________________________________________
__________________________________________________________________________.
3. No material adverse change has occurred in the Renovation Improvements or,
since __________________, _____, the date of the latest financial
statements given by or on behalf of such person to Lender, in the financial
condition or the business and operations of Borrower.
4. All representations and warranties contained in the Agreement are true and
correct in all material respects as of the date hereof.
5. Neither an Event of Default nor an Incipient Default exists.
6. Borrower has performed and complied with all other agreements or conditions
required by the Agreement to be performed or complied with prior to or at
the date of the requested Renovation Work-Related Advance.
7. Capitalized terms not otherwise defined herein shall have the meaning given
to them in the Agreement.
8. Borrower hereby requests that the requested Advance be disbursed through
the following method (check one): _____ wire transfer or __________ check.
If Borrower has requested disbursement via wire transfer, Borrower requests
that wire transfer be made in accordance with the following instructions:
<PAGE>
Bank Name:_______________________________________
Bank Address:____________________________________
Bank ABA No.:____________________________________
Account Name:____________________________________
Account No.:_____________________________________
Special Instructions:____________________________
_________________________________________________
_________________________________________________
Very truly yours,
____________________________________, a(n)
____________________________________
By:________________________________________
Type/Print Name:___________________________
Title:_____________________________________
State of ___________ )
) ss:
County of _________ )
Subscribed and sworn to before me on
this _____ day of _____________, _____.
__________________________________
Notary Public
My commission expires:
______________________
(Notary Seal)
<PAGE>
EXHIBIT 2
FORM OF PROMISSORY NOTE
-2-
<PAGE>
PROMISSORY NOTE
$___________ _________, _____
FOR VALUE RECEIVED, the undersigned _________________________________, a(n)
____________________ ("Borrower"), promises to pay to FINOVA CAPITAL
CORPORATION, a Delaware corporation, or order, at its office at 7272 East Indian
School Road, Scottsdale, Arizona 85251, or at such other place as the holder of
this Note ("Holder") may from time to time designate in writing, in lawful money
of the United States of America, the principal sum of
________________________________________ DOLLARS ($___________), or so much
thereof as has been disbursed and not repaid, together with interest on the
unpaid principal balance from time to time outstanding, as more fully provided
below. All payments in respect of this Note shall be made in immediately
available funds.
SECTION 1. DEFINITIONS
1.1 When used in this Note, the following terms shall have the meanings
set forth below:
"Agreement" shall mean that Loan Agreement dated as of even date
herewith and executed by Borrower and Lender (which has been executed
pursuant to that Revolving Credit Facility Agreement dated as of July 9,
1998, between Vistana, Inc. and Lender), as it may be from time to time
further renewed, amended, supplemented, replaced or restated.
"Applicable Usury Law" shall have the meaning given to it in Section
3.9.
"Business Day" shall mean any day other than a Saturday, a Sunday, a
national holiday or a day on which banks in Phoenix, Arizona, are required
to be closed.
"Dollars" shall mean U.S. Dollars.
"Lender" shall mean FINOVA Capital Corporation and its successors and
assigns.
"Loan" shall mean the loan made to Borrower under the Agreement and
evidenced by this Note.
"Maturity Date" shall mean July 9, 2006.
<PAGE>
SECTION 2. INTEREST AND PAYMENT TERMS OF NOTE
-2-
<PAGE>
2.1 Interest on the principal amount outstanding ("Basic Interest") shall
accrue daily on the basis of the actual number of days in the computation period
using a three hundred sixty (360) day year.
2.2 Basic Interest shall be payable monthly, in arrears, on the last
Business Day of each month, commencing on the last Business Day of the calendar
month in which the initial advance of the Loan is made and continuing on the
last Business Day of each month thereafter to and including the Maturity Date.
2.3 Borrower will make to Holder principal payments in the amounts and at
the times required by paragraph 5.2 of the Agreement.
2.4 Unless payment of the amounts due hereunder have been accelerated or
unless a payment is mandated pursuant to paragraph 5.2 of the Agreement, all
sums of principal then outstanding, all accrued and unpaid interest and all
other sums due under this Note shall be due and payable on the Maturity Date.
2.5 Except as otherwise provided herein, interest ("Basic Interest") shall
accrue on the unpaid principal balance of this Note from time to time
outstanding at a variable interest rate per annum ("Basic Interest Rate") equal
to (i) the LIBOR Rate plus (ii) two and eighty-five hundredths percent (2.85%)
("LIBOR Based Rate"), which rate shall be adjusted on each LIBOR Interest Rate
Change Date (as hereinafter defined). The term "LIBOR Rate" means the rate of
interest determined by Holder, based on Bloomberg Service reports, to be the
rate at which deposits in United States dollars are offered by major banks in
London, England, to other major banks in the London interbank market at 11:00
a.m. (London, England, local time) on the date two (2) London business days
preceding the initial advance of the Loan or the LIBOR Interest Rate Change
Date, as the case may be, in the London interbank market equal to one (1) month
[or if a one (1) month period is not quoted or the period between the Interest
Rate Change Date and the Maturity Date is less than one (1) month, then the
period quoted or the period which is next greater than one (1) month or the
remaining term to maturity, as the case may be]. The term "LIBOR Interest Rate
Change Date" means the first Business Day of each month following the initial
advance of the Loan. If prior to the commencement of any interest period,
Holder determines by reason of circumstances affecting the London interbank
market, adequate and reasonable means do not exist for ascertaining the LIBOR
Rate in the manner provided in the definition of such term, the LIBOR Rate shall
be determined from such source as Holder shall reasonably determine.
2.6 Any payment due hereunder, whether of principal or interest, shall, if
not made when due, earn Basic Interest thereafter at a rate per annum ("Default
Rate") equal to (a) the greater of two percent (2%) above the rate otherwise
payable hereunder or (b) the maximum contract rate permitted under the
Applicable Usury Law, whichever of (a) or (b) is lesser. At the option of
Holder, Basic Interest shall accrue at the Default Rate on the unpaid principal
balance of this Note while an Event of Default exists.
-3-
<PAGE>
2.7 If any installment of principal and/or interest required to be made in
connection with the indebtedness evidenced hereby is not actually received by
Holder from Borrower by the date it is due and, except in the case of the final
installment for which no grace period is allowed, such failure continues for
five (5) Business Days after notice of such failure to Borrower or an Event of
Default occurs, Holder may at its option, without notice or demand, declare this
Note immediately due and payable, whereupon this Note shall become immediately
due and payable and Borrower will pay to Holder the entire unpaid principal
balance hereof, all accrued and unpaid interest thereon, and all other sums
owing in connection with the Loan.
2.8 Except as expressly provided in this Note or in the Agreement,
prepayment of this Note will not be permitted in whole or in part without
premium.
2.9 This Note is secured by, among other things, that [CONSTRUCTION]
[MORTGAGE] [DEED OF TRUST] and Financing Statement (With Security Agreement and
Assignment of Leases, Rents, Sales Documents, Sales Proceeds and Developer's
Rights) dated as of ___________________, ______, encumbering real property in
__________ County, _________, and related personal property, as such security
document may from time to time be renewed, amended, restated or replaced.
2.10 Payment received in respect of this Note shall be applied in
accordance with the provisions of the Agreement.
SECTION 3. MISCELLANEOUS
3.1 The contracted for rate of interest of the Loan, without limitation,
shall consist of the following: (i) the Basic Interest Rate, calculated and
applied to the principal balance of this Note in accordance with the provisions
hereof; (ii) the Default Rate, calculated and applied to the principal balance
of this Note in accordance with the provisions hereof; (iii) the Credit Facility
Fee (as defined in the Agreement) attributable to the Loan; and (iv) all
Additional Sums (as hereinafter defined), if any. Borrower agrees to pay an
effective contracted for rate of interest which is the sum of the above-
referenced elements but in no event to exceed the maximum contract rate
permitted under the Applicable Usury Law. All fees, charges, goods, things in
action or any other sums or things of value [other than amounts described in
(i), (ii) and (iii) of the preceding sentence], to be paid by or on behalf of
Borrower or received by Holder pursuant to this Note, the Agreement, the other
Documents (as defined in the Agreement) or any other documents or instruments in
any way pertaining to this lending transaction, or otherwise with respect to
this lending transaction, that under any applicable law may be deemed to be
interest with respect to this lending transaction, for the purpose of any
applicable law that may limit the maximum amount of interest to be charged with
respect to this lending transaction ("Additional Sums"), shall be payable by
Borrower as, and shall be deemed to be, additional interest; and for such
purposes only, the agreed upon and "contracted for rate of interest" of this
lending transaction shall be deemed to be increased by the rate of interest
resulting from the Additional Sums.
-4-
<PAGE>
3.2 If Holder undertakes to collect this Note, Borrower will pay to Holder
in addition to any indebtedness due and unpaid, all costs and expenses of
collection, including, without limitation, attorneys' fees, whether or not legal
proceedings shall be instituted.
3.3 Borrower and every person or entity at any time liable for the payment
of the indebtedness evidenced by this Note waives: presentment for payment,
protest and demand; notice of protest, demand, dishonor and nonpayment of this
Note; and each and every other notice of any kind respecting this Note except as
provided in this Note or in any of the other Documents. Borrower and every such
person or entity further consents that at any time and from time to time, Holder
may renew or extend the time of payment of any sums to be paid under this Note
without limit as to the number or aggregate period of such renewals or
extensions, at the request of any other person or entity liable for them. Any
such renewals or extensions may be made without notice to any person or entity
liable for the payment of the indebtedness evidenced by this Note.
3.4 This Note is given and accepted as evidence of indebtedness only and
not in payment or satisfaction of any indebtedness or obligation.
3.5 Time is of the essence with respect to all of Borrower's obligations
and agreements under this Note.
3.6 This Note and all the provisions, conditions, promises and covenants
contained herein shall be binding in accordance with its terms upon Borrower,
its successors, transferees, and assigns; and shall inure to the benefit of
Holder, its successors and assigns. No modification, variation, termination,
discharge or abandonment of this Note and no waiver of any of the provisions or
conditions of this Note shall be valid unless in writing and signed by duly
authorized representatives of Borrower and Holder or their successors,
transferees or assigns, as the case may be; and a waiver on one occasion shall
not be construed as continuing or as a bar to or waiver of such right or remedy
on any other occasion. All remedies conferred upon Holder by this Note or any
other document securing repayment of this Note or otherwise related to this Note
shall be cumulative and none is exclusive, and such remedies may be exercised
concurrently or consecutively at Holder's option. Nothing in this Note shall be
deemed a consent to any assignment, merger or consolidation, restricted or
prohibited by the terms of any of the other Documents.
3.7 If any one or more of the provisions contained in this Note shall be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby; provided that where the provisions of any invalidating law
may be waived, they are waived by Borrower to the fullest extent possible.
3.8 THIS NOTE HAS BEEN DELIVERED AND WILL BE SERVICED AND RETAINED IN
PHOENIX, ARIZONA. THIS NOTE AND THE RIGHTS, DUTIES AND OBLIGATIONS OF THE
BORROWER AND HOLDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF
-5-
<PAGE>
ARIZONA WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES AND TO THE EXTENT THEY
PREEMPT THE LAWS OF SUCH STATE, THE LAWS OF THE UNITED STATES.
EACH OF BORROWER AND (BY ACCEPTANCE HEREOF) HOLDER: (A) HEREBY IRREVOCABLY
SUBMITS ITSELF TO THE PROCESS, JURISDICTION AND VENUE OF THE COURTS OF THE STATE
OF ARIZONA, MARICOPA COUNTY, AND TO THE PROCESS, JURISDICTION, AND VENUE OF THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA, FOR THE PURPOSES OF
SUIT, ACTION OR OTHER PROCEEDINGS ARISING OUT OF OR RELATING TO THIS NOTE OR THE
SUBJECT MATTER HEREOF, AND, IF HOLDER INITIATES SUCH ACTION, ANY COURT IN WHICH
HOLDER SHALL INITIATE SUCH ACTION, AND THE CHOICE OF SUCH VENUE SHALL IN ALL
INSTANCES BE AT HOLDER'S ELECTION; AND (B) WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING, HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, DEFENSE
OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY CLAIM THAT SUCH PERSON
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT
SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE
VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH OF BORROWER AND (BY
ACCEPTANCE HEREOF) HOLDER HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY
JUDGMENT OR ACTION IN ANY OTHER FORUM.
BORROWER AND (BY ACCEPTANCE HEREOF) HOLDER ACKNOWLEDGE AND AGREE THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS NOTE WOULD BE BASED UPON DIFFICULT AND
COMPLEX ISSUES; AND THEREFORE, THE PARTIES AGREE THAT ANY LAWSUIT ARISING OUT OF
ANY SUCH CONTROVERSY SHALL BE TRIED BY A JUDGE SITTING WITHOUT A JURY, AND
KNOWINGLY AND VOLUNTARILY WAIVES TRIAL BY JURY IN ANY SUCH PROCEEDING.
ALL OF THE PROVISIONS SET FORTH ABOVE ARE MATERIAL INDUCEMENTS FOR LENDER'S
MAKING THE LOAN TO BORROWER.
_____ BORROWER'S INITIALS
3.9 It is the intent of the parties to comply with the usury law
("Applicable Usury Law") applicable pursuant to the terms of the preceding
paragraph or such other usury law which is applicable if the law chosen by
parties is not. Accordingly, it is agreed that notwithstanding any provisions
to the contrary in this Note or in any of the other Documents, in no event shall
this Note or such other Documents require the payment or permit the collection
of interest in excess of the maximum contract rate permitted by the Applicable
Usury Law. If (a) any such excess of interest otherwise would be contracted
for, charged or received from Borrower or otherwise in connection with the Loan,
or (b) the maturity of the indebtedness evidenced by this Note is
-6-
<PAGE>
accelerated in whole or in part, or (c) all or part of the principal or interest
of this Note shall be prepaid, so that under any of such circumstances the
amount of interest contracted for, charged or received in connection with the
Loan, would exceed the maximum contract rate permitted by the Applicable Usury
Law, then in any such event (1) the provisions of this paragraph shall govern
and control, (2) neither Borrower nor any other person or entity now or
hereafter liable for the payment hereof will be obligated to pay the amount of
such interest to the extent that it is in excess of the maximum contract rate
permitted by the Applicable Usury Law, (3) any such excess which may have been
collected shall be either applied as a credit against the then unpaid principal
amount of this Note or refunded to Borrower, at the Holder's option, and (4) the
effective rate of interest will be automatically reduced to the maximum amount
of interest permitted by the Applicable Usury Law. It is further agreed, without
limiting the generality of the foregoing, that to the extent permitted by the
Applicable Usury Law: (x) all calculations of the rate of interest which are
made for the purpose of determining whether such rate would exceed the maximum
contract rate permitted by the Applicable Usury Law shall be made by amortizing,
prorating, allocating and spreading during the period of the full stated term of
the Loan, all interest at any time contracted for, charged or received from
Borrower or otherwise in connection with the Loan; and (y) in the event that the
effective rate of interest on the Loan should at any time exceed the maximum
contract rate allowed under the Applicable Usury Law, such excess interest that
would otherwise have been collected to such date of calculation had there been
no ceiling imposed by the Applicable Usury Law shall be paid to Holder from time
to time, if and when the effective interest rate on the Loan otherwise falls
below the maximum amount permitted by the Applicable Usury Law, to the extent
that interest paid to the date of calculation does not exceed the maximum
contract rate permitted by the Applicable Usury Law, until the entire amount of
interest which would have otherwise been collected to such date of calculation
had there been no ceiling imposed by the Applicable Usury Law has been paid in
full. Borrower further agrees that should the maximum contract rate permitted by
the Applicable Usury Law be increased at any time hereafter because of a change
in the law, then to the extent not prohibited by the Applicable Usury Law, such
increases shall apply to all indebtedness evidenced by this Note regardless of
when incurred; but, again to the extent not prohibited by Applicable Usury Law,
should the maximum contract rate permitted by the Applicable Usury Law be
decreased because of a change in the law, such decreases shall not apply to the
indebtedness evidenced by this Note regardless of when incurred.
3.10 Any notice, demand, document or other writing required or permitted to
be given by Borrower or Holder under this Note shall be given and deemed
received as provided in the Agreement.
-7-
<PAGE>
3.11 Borrower warrants and represents that the Loan is for business or
investment purposes.
BORROWER _________________________________,
a(n) _________________________
By: _______________________________________
Type/Print Name: __________________________
Title:_____________________________________
Maker's Federal EIN: ____________
-8-
<PAGE>
STATE OF __________________ )
) ss.
County Of ________________ )
This instrument was acknowledged before me this _____ day of ____, ____, by
_________________________, the _______________________ of
_______________________, on behalf of ___________________________. He/She is
known to me or produced __________________ as identification.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ______, ____.
_____________________________________________
Notary Public in and for the State and County
aforesaid
My commission expires:
_________________________
-9-
<PAGE>
EXHIBIT 3
FORM OF MORTGAGE
-3-
<PAGE>
ATTENTION COUNTY RECORDER:
Prepared by:
Ronald M. Stoll
Streich, Lang
Renaissance One
Two North Central Avenue
Phoenix, Arizona 85004-2391 For use by Recorder's Office
- --------------------------------------------------------------------------------
[THIS MORTGAGE SECURES A NOTE IN THE STATED PRINCIPAL AMOUNT OF $_________
TOGETHER WITH OTHER INDEBTEDNESS OWED BY BORROWER TO LENDER UP TO A TOTAL
MAXIMUM PRINCIPAL AMOUNT SECURED HEREBY (EXCLUSIVE OF FUTURE ADVANCES) OF
$_________. ACCORDINGLY, DOCUMENTARY STAMP AND INTANGIBLES TAXES ARE BEING PAID
BASED ON $_________.]
[CONSTRUCTION] MORTGAGE
(With Security Agreement and Assignment of Leases, Rents, Sales
Documents, Sales Proceeds and Developer's Rights)
THIS [CONSTRUCTION] MORTGAGE (With Security Agreement and Assignment of
Leases, Rents, Sales Documents and Sales Proceeds) is granted by
_________________________________________, a(n) _______________ ("Borrower"),
whose address is c/o __________________________, 8801 Vistana Centre Drive,
Orlando, Florida 32821, to FINOVA CAPITAL CORPORATION, a Delaware corporation
("Lender"), whose address is 7272 East Indian School Road, Suite 410, Phoenix,
Arizona 85251, dated as of ______________, __________.
W I T N E S S E T H:
- - - - - - - - - -
ARTICLE 1 - GRANT
-----------------
To secure the full and timely payment and performance of the Obligations
(hereinafter defined), Borrower, for good and valuable consideration, has
MORTGAGED, GRANTED, BARGAINED, SOLD, CONVEYED, ASSIGNED AND TRANSFERRED, and by
these presents does MORTGAGE, GRANT, BARGAIN, SELL, CONVEY, ASSIGN AND TRANSFER
TO
1
<PAGE>
Lender, the Mortgaged Property (hereinafter defined), and any greater estate
which Borrower may hereafter acquire therein, subject, however, to the Permitted
Encumbrances.
ARTICLE 2 - DEFINITIONS
-----------------------
Unless the context clearly otherwise requires, the capitalized terms used
in this Mortgage shall have the meaning given to them in this Article 2 or
elsewhere in this Mortgage:
2.1 Affiliate: with respect to any person or entity, another person or
---------
entity that directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with such person or
entity.
2.2 Approved Time-Share Declaration: the meaning given to it in Paragraph
-------------------------------
11.5.
2.3 Approved Use: rental, time-share and resort condominium use (as
------------
"resort condominium use" is defined in paragraph 8.3) and the development of the
Property for such use; and uses ancillary to rental, time-share and resort
condominium use.
2.4 Business Day: any day other than a Saturday, a Sunday or a day on
------------
which banks in Phoenix, Arizona are required to close.
2.5 Default Rate: the meaning given to it in the Loan Agreement.
------------
2.6 Developer's Rights: all rights and privileges of Borrower under
------------------
Property Governing Documents.
2.7 Documents: the Loan Agreement, the Note, this Mortgage, and all other
---------
documents now or hereafter evidencing, securing or pertaining to the Loan, as
they may be from time to time renewed, amended, restated or replaced.
2.8 Event of Default: the meaning given to it in Article 6.
----------------
2.9 Fixtures: all materials, supplies, equipment, apparatus and other
--------
goods now or hereafter attached to, or installed in (temporarily or permanently)
the Improvements or the Real Property.
2.10 Impositions: all real estate and personal property taxes, charges,
-----------
assessments, excises and levies (including non-governmental assessments and
levies such as maintenance charges, association dues, assessments, and subsidy
payments under private covenants, conditions and restrictions) and any interest,
costs or penalties with respect thereto, general and special, ordinary and
extraordinary, foreseen and unforeseen, of any kind and nature whatsoever which
at any time prior to or after the execution hereof may be assessed, levied or
imposed upon any
2
<PAGE>
portion of the Property or the ownership, use, occupancy or enjoyment of any
portion of the Property.
2.11 Impounds: the deposits held by Lender pursuant to Paragraph 4.10.
--------
2.12 Improvements: all improvements of any kind now or hereafter affixed
------------
to or erected, constructed or developed on the Real Property and which are a
part of the Real Property or in which any interest is part of the Real Property.
2.13 Indebtedness: (a) the Loan; (b) all sums now or hereafter due to
------------
Lender under the terms of this Mortgage or any other Document with respect to
the Loan; and (c) all modifications, extensions, renewals, replacements,
increases or reinstatements of the above-described indebtedness.
2.14 Incipient Default: an event which after notice and/or lapse of time
-----------------
would constitute an Event of Default.
2.15 Leases: all leases, subleases, licenses, concessions or other
------
agreements (whether written or oral, or now or hereafter in effect) which grant
a possessory interest in and to, or the right to use, any portion of the
Property, as they may be from time to time renewed, amended, restated or
replaced.
2.16 Legal Requirements: (a) all present and future judicial decisions,
------------------
statutes, regulations, permits or certificates of any governmental authority in
any way applicable to Borrower or the Property; (b) all covenants, conditions
and restrictions now or hereafter contained in any instrument that is applicable
to the Property or, as permitted by the terms of any Document or with Lender's
prior written consent, hereafter becomes applicable to the Property; (c) all
organizational documents forming, or granting and/or limiting the powers of,
Borrower; and (d) all contracts or agreements (written or oral) by which
Borrower or any portion of the Property is bound or, as permitted by the terms
of any Document or with Lender's prior written consent, by which Borrower or any
portion of the Property becomes bound.
2.17 Loan: a non-revolving loan in a principal amount not to exceed
----
________________________________ Dollars ($__________)
2.18 Loan Agreement: that Loan Agreement dated as of even date herewith,
--------------
between Lender, as lender, and Borrower, as borrower, and providing for the
Loan, as it may be from time to time renewed, amended, restated or replaced.
3
<PAGE>
2.19 Mortgage: this Mortgage (With Security Agreement and Assignment of
--------
Leases, Rents, Sales Documents, Sales Proceeds and Developer's Rights), as it
may be from time to time renewed, spread, amended, restated or replaced.
2.20 Mortgaged Property: the Real Property, Personal Property, Leases,
------------------
Rents, Water and Utility Rights and Proceeds, together with all additions,
accessions, replacements or betterments thereto.
2.21 Lender: the person or entity named above as being the person or
------
entity for whose benefit Lender is acting and any other lawful owner, holder,
pledgee or assignee of the Indebtedness.
2.22 Note: the Promissory Note in the stated principal amount of
----
_____________________________ Dollars ($_______________), dated as of even date
herewith, executed by Borrower pursuant to the Loan Agreement (and similarly
defined in the Loan Agreement) and made payable to Lender to evidence the
advances of the Loan, as it may be from time to time renewed, amended, restated
or replaced.
2.23 Obligations: the Indebtedness and all other obligations, covenants
-----------
and conditions that Borrower or any other person or entity is now or hereafter
obligated to perform to Lender under the Documents related to the Loan.
2.24 Permitted Encumbrances: the matters set forth in EXHIBIT B.
----------------------
2.25 Personal Property: all fixtures and tangible and intangible personal
-----------------
property in which Borrower now or hereafter has an interest and which either (a)
is now or hereafter located on the Real Property or (b) is necessary for or
arises from or pertains to the ownership, development, construction,
improvement, repair, use, operation, sale or lease of any of the Real Property
or any business of Borrower conducted thereon or with respect thereto [subject
to the terms of any Approved Time-Share Declaration (as defined in Paragraph
11.5) to which this Mortgage becomes subordinate], including, without
limitation, the following:
(a) furniture, furnishings, equipment, inventory and other
goods and other items of tangible personal property, including,
without limitation: all building and other materials; vehicles;
machinery; engines; boilers, furnaces, oil burners, coolers,
refrigeration plants, water and sewer treatment equipment,
incinerators, appliances and equipment for generating, regulating
or distributing air, water, heat, electricity, light and fuel,
for ventilating, cooling or sanitary purposes, for the exclusion
of vermin or insects, or for the removal of dust, refuse or
garbage; sprinkling and irrigation systems; alarm systems;
reservation systems; telephone, communication, computer,
surveillance and other electronic systems; audio-visual
4
<PAGE>
equipment; wall safes; cabinets, shelving, lockers, partitions,
doors, vaults, elevators, awnings, window shades, venetian
blinds, drapes, drapery rods, brackets, screens, floor tile,
linoleum, carpets, art work, appliances, built-in furniture and
bars, sofas, beds, lamps, tables, chairs and linens; walk-in
refrigerator boxes, deep freeze cabinets, steam tables,
dishwashers, bake ovens, set-up tables, kitchen ranges and any
and all other heavy kitchen equipment; and cleaning equipment;
and
(b) (i) deposits made by third parties (including tenants' security
deposits and escrow deposits under contracts of sale, to the extent
permitted by applicable Legal Requirements); (ii) bank accounts, impound
accounts for the payment of taxes and insurance and deposits held by Lender
with respect to the Property; (iii) causes of action (including, without
limitation, causes of action and claims of Borrower relating to any
casualty to or taking of the Real Property or the Personal Property or any
rights, appurtenant hereto), documents, insurance policies, loan
commitments, accounts, chattel paper, contract rights, general intangibles
and instruments, including Sales Documents, which arise from or relate to
the Property, or any transaction with respect thereto or any business of
Borrower conducted thereon or with respect thereto; (iv) tax refunds with
respect to any Impositions and all other refundable or reimbursable fees,
deposits or other funds or evidences of credit or indebtedness pertaining
to any portion of the Property or any business of Borrower conducted
thereon or with respect thereto and now or hereafter deposited with any
governmental authority or other person or entity, including, without
limitation, tap fees, utility deposits, deposits on construction and
materials contracts, commitment fees and development costs; (v) books and
records, computer software, plans and specifications, shop drawings, bonds,
construction contracts, architect/engineer agreements, utility (including,
without limitation cable television) contracts, option rights, management
agreements, marketing agreements, franchise agreements, equipment leases,
maintenance contracts, service contracts, warranties and Water and Utility
Rights which relate to the ownership, development, construction,
improvement, repair, use, operation, sale or lease of the Property or any
business of Borrower conducted thereon or with respect thereto, but
expressly excluding exchange affiliation agreements; (vi) trade names,
trademarks, service marks, customer lists and copyrights used in connection
with the Property or any business of Borrower conducted thereon or with
respect thereto, except the name "Vistana" in any form; (vii) rights and
privileges of Borrower under any declaration of covenants, conditions and
restrictions and/or other documents governing the Real Property; and (viii)
permits (including, without limitation, building and environmental
permits), licenses, franchises, certificates and other rights and
privileges obtained in connection with ownership, development,
construction, improvement, repair, use, operation, sale or lease of the
Property or any business of Borrower conducted thereon or with respect
thereto.
5
<PAGE>
2.26 Proceeds: all cash and non-cash proceeds (including, without
--------
limitation, accounts, chattel paper, contract rights, documents, instruments,
general intangibles, and equipment, inventory and other goods) from the
Property, conversion of the Property, including hazard and title insurance
proceeds and awards and compensation for any taking (voluntary or involuntary),
including the change of grade of streets, curb cuts and other rights of access.
2.27 Property Governing Documents: development agreements, declarations,
----------------------------
restrictive covenants or other documents benefitting or burdening the Property.
2.28 Real Property: the land described in EXHIBIT A, together with the
-------------
Improvements, the Fixtures and all rights, titles, hereditaments, strips, gores
and other interests now or hereafter appurtenant thereto, including, without
limitation, all rights in streets, roads, public places, easements and rights of
way (existing or proposed, and public or private), which are adjacent to or used
in connection with such land.
2.29 Rents: all rents, revenues, royalties, bonuses, delay rentals,
-----
issues, income, proceeds, profits, security and other types of deposits, and
other benefits now or hereafter paid or payable for using, leasing, licensing,
possessing, operating, residing in, mining, or otherwise enjoying any portion of
the Property or arising exclusively from the operation of any business of
Borrower conducted on or with respect to the Property, including, without
limitation, income from the rental or license of the use of rooms for lodging,
meeting or banquet purposes.
2.30 Sales Documents: all contracts for the sale of any portion of the
---------------
Property (including, without limitation, contracts for the sale of Time-Share
Interests), instruments, chattel paper and general intangibles evidencing or
representing purchase money indebtedness owing to Borrower in connection with
such contracts and related sales (except sales as to which the related portion
of the Property has been released from the lien of this Mortgage when no Event
of Default exists), and all escrow agreements and deposits (to the extent
permitted by applicable Legal Requirements) and security related to such
contracts, instruments, chattel paper and general intangibles and sales, whether
now or hereafter existing; provided, however, nothing herein shall be deemed to
-------- -------
require Lender to release Sales Documents and Sales Proceeds from the lien,
assignment and security interest granted hereby when an Event of Default exists.
2.31 Sales Proceeds: all proceeds now or hereafter paid or payable to
--------------
Borrower as the result of the sale of any portion of the Property except in
connection with sales as to which the related portion of the Property has been
released from the lien of this Mortgage, including, without limitation, all
proceeds paid or payable under the Sales Documents; provided, however, nothing
herein shall be deemed to require Lender to release Sales Documents and Sales
Proceeds from the lien, assignment and security interest granted hereby when an
Event of Default exists.
2.32 Time-Share Interest: the property interest described in Exhibit C.
-------------------
6
<PAGE>
2.33 Time-Share Program: the meaning given to it in Paragraph 11.5.
------------------
2.34 Water and Utility Rights: (a) all water stock and other water rights
------------------------
now or hereafter associated with the Property, including, without limitation,
all rights to water located on, or adjacent to, the Real Property, and (b) all
rights to receive or install utility services, including, sewer, water,
electricity, gas, telephone and cable television.
ARTICLE 3 - WARRANTIES AND REPRESENTATIONS
------------------------------------------
Borrower hereby warrants and represents the matters contained in this
Article 3 to be true.
3.1 Title to Mortgaged Property and Lien of this Instrument. Subject
-------------------------------------------------------
only to the Permitted Encumbrances, Borrower is seized of, and hereby WARRANTS
AND WILL FOREVER DEFEND unto Lender against the claims of all other persons,
good and marketable title to a fee simple estate in the Real Property other than
any portion thereof described as an "easement" or "easement parcel" and good
title to the remainder of the Property. There are no liens, security interests
or other rights or encumbrances existing or claimed to exist against the
Property, except for the Permitted Encumbrances. This Mortgage creates a valid
and subsisting mortgage lien on that portion of the Property consisting of real
property and a valid and subsisting security interest in and to that portion of
the Property covered by the Uniform Commercial Code adopted by the state in
which the Property is located.
3.2 Zoning and Subdivision. The Property and the use thereof for the
----------------------
Approved Use does not and will not violate any Legal Requirement. The Property
is zoned to permit the use thereof for the Approved Use. The Property is capable
of being conveyed in its entirety without reference to any other parcel and
without need to comply at the time of any such conveyance with any subdivision
law or to obtain the approval of any governmental authority. Except as may be
otherwise expressly disclosed in and/or permitted pursuant to the terms of the
Loan Agreement: (a) all streets, easements and utilities necessary for the full
utilization of the Property for the Approved Use have been completed and paid
for in full; (b) all such streets have been dedicated to public use or are the
subject of rights-of-way agreements and accepted by the appropriate governmental
authority and/or are subject to private access easements; and (c) all such
utilities are available to the Property in adequate size and with adequate
capacity.
3.3 Approvals and Reports. Except as may be otherwise expressly disclosed
---------------------
in and/or permitted pursuant to the terms of the Loan Agreement: (a) Borrower
has hereby obtained or caused to be obtained all necessary consents, licenses,
permits, franchises, approvals and certificates and has made or caused to be
made all registrations or declarations with governmental authorities that are
required in connection with the Property and the Approved Use thereof; (b) the
same are in full force and effect; and (c) true and complete copies of such
consents, licenses, permits, franchises, approvals, certificates, registrations
and declarations have been delivered to Lender.
7
<PAGE>
3.4 Condition of Property. Upon completion of the construction of the
---------------------
Improvements contemplated by the Loan Agreement, all Improvements will be in
good condition and repair.
3.5 Taxes and Assessments; Condemnation. Borrower does not know of any
-----------------------------------
basis for any additional assessment in respect of any taxes or assessments on
the Real Property, except that which may result from increased valuation
resulting from the construction of any additional Improvements or Fixtures on
the Real Property or from the subdivision of the Property into Time-Share
Interests pursuant to Paragraph 4.3. No condemnation or similar proceedings are
pending or, to the knowledge of Borrower, threatened with respect to any portion
of the Real Property.
3.6 Disclaimer of Homestead. No part of the Property constitutes any part
-----------------------
of the homestead of Borrower. To the extent not prohibited by applicable law,
Borrower disclaims, releases and waives any right of homestead in the Property.
ARTICLE 4 - COVENANTS
---------------------
Borrower hereby unconditionally covenants with Lender as follows:
4.1 Payment and Performance. Borrower will fully and timely pay and
-----------------------
perform all the Obligations.
4.2 Compliance with Legal Requirements. Except as permitted in Paragraph
----------------------------------
10.6, Borrower will fully and timely comply with all applicable Legal
Requirements.
4.3 Approved Use; Easements, Plats, Restrictive Covenants and Zoning.
-----------------------------------------------------------------
Borrower will use the Real Property solely for the Approved Use and will not
engage in or suffer to exist any conduct on the Real Property that would
constitute a public or private nuisance or adversely affect the insurance
required hereby. Except as expressly provided in the Loan Agreement or this
Mortgage regarding the creation of the Time-Share Interests and easements
necessary therefor, without the prior written consent of Lender, Borrower will
not (a) grant any easement over any portion of the Real Property; (b) subdivide
the Real Property or its interest in the Real Property, execute or record any
subdivision or parcel map or plat covering any portion of the Real Property; (c)
initiate, join in or consent to the imposition or amendment of any private
restrictive covenant or other public or private restriction as to the use of any
portion of the Real Property or any zoning reclassification of any portion of
the Real Property; or (d) seek any variance under (or deviation from) any
existing zoning laws or ordinances applicable to the Real Property.
4.4 Repair, Waste, Alterations, Etc. Borrower (a) will keep the Real
-------------------------------
Property and tangible Personal Property in good condition and repair and
restore, replace and repair any damaged, worn out or obsolete portions of such
property so as to maintain the Real Property and tangible Personal Property in
at least as good a condition as it is on the date of this Mortgage and, with
respect to any future Improvements, Fixtures or tangible Personal Property, in
at least as
8
<PAGE>
good a condition as they are at the time of their completion; and (b) will not
commit or permit any waste, deterioration or impairment of the Real Property and
tangible Personal Property. Without the prior written consent of Lender,
Borrower will not make any alterations to or remove any portion of the
Improvements, Fixtures or tangible Personal Property except (x) to comply with
the terms of the preceding sentence, (y) to satisfy Legal Requirements or (z)
when necessary on an emergency basis to preserve and protect the Real Property
and tangible Personal Property. Borrower will perform and complete all work done
to the Real Property and the tangible Personal Property in a prompt and good and
workmanlike manner and in accordance with the requirements (if any) of the other
Documents.
4.5 Maintenance of Existence and Rights. Borrower will preserve and keep
-----------------------------------
in full force and effect and renew all easements, grants, privileges, licenses,
governmental approvals and franchises and other rights reasonably necessary for
the Approved Use of the Property and the performance of the Obligations and pay
all charges associated therewith when due.
4.6 Lien Status. If a claim of title, possession, lien, security interest
-----------
or other encumbrance (excluding any statutory preliminary notice of a
mechanic's, materialman's or similar lien claim), which is not a Permitted
Encumbrance or has not been consented to by Lender in writing, arises or is
asserted against the Property, then Borrower will notify Lender of the claim
and, except as permitted in Paragraph 10.6, promptly pay such claim in full or
take such other action to cause such claim to be released. At any time after the
assertion of such a claim, if Lender has not received proof that the claim has
been satisfied or is being contested as permitted in Paragraph 10.6, then Lender
may take whatever action it determines to be necessary for the defense of its
lien and security interest in the Property, including, without limitation, the
employment of counsel, the prosecution and defense of litigation and the
payment, compromise or discharge of such claim. Upon demand therefor, Borrower
will reimburse Lender for the costs incurred in connection with such action,
together with interest thereon at the Default Rate from the date of occurrence
until the date reimbursed by Borrower. In taking any such action, Lender shall
not be bound to inquire into the validity of any apparent or threatened claim of
title, possession, lien, security interest or other encumbrance.
4.7 Payment of Utilities and Impositions. Except as permitted in
------------------------------------
Paragraph 10.6, Borrower will pay when due all charges for utility services to
the Real Property and will pay and discharge Impositions against the Property
prior to the date such Impositions become delinquent. However, Borrower may pay
Impositions in installments, whether or not interest shall accrue on the unpaid
balance of such amounts, if payment in installments is permitted by law. If
Borrower fails to furnish Lender with proof that the Impositions have been paid
in full or in timely installments or that Borrower is contesting such
Impositions as permitted in Paragraph 10.6, then Lender may pay such Impositions
and all penalties, interest and legal costs associated therewith; and Borrower
will pay to Lender, upon demand, all such amounts plus interest thereon at the
Default Rate from the date payment of such Impositions is made by Lender until
the date reimbursed by Borrower. If Lender elects to pay any Imposition as set
forth above, Lender may
9
<PAGE>
do so in reliance on any bill, statement or assessment procured from the
appropriate governmental authority or other issuer without inquiring into its
accuracy or validity. Borrower will furnish Lender with proof of payment of all
Impositions within thirty (30) days after they would become delinquent.
4.8 Insurance. Borrower will pay the cost of, or cause such costs to be
---------
paid, and will maintain and deliver, or cause to be maintained and delivered to
Lender evidence of insurance policies required by Lender pursuant to the terms
of the Loan Agreement. All insurance policies maintained by Borrower relating to
the Property and the proceeds thereof are hereby assigned to Lender. Except to
the extent prohibited by applicable Legal Requirements, and except in the case
of any minor loss [one which does not materially affect the continuing use of
the Improvements for the Approved Use and which in no event involves a loss of
more than Fifty Thousand Dollars ($50,000)], in case of loss, Lender shall be
entitled to receive all insurance proceeds from policies required to be
maintained hereunder. Lender may apply such proceeds to the payment of the
Indebtedness in such order and manner as it may elect or, at its option, apply
such proceeds to restoration and repair of the Property upon such conditions as
Lender may reasonably impose. Application of insurance proceeds by Lender,
regardless of the manner or order, shall not waive full and timely performance
of any Obligation, cure or waive any default by Borrower in the full and timely
performance of the Obligations, or invalidate or affect any act done hereunder
because of any such default; provided, however, that if the insurance proceeds
have been received by Lender, Borrower will be obligated to repair or restore
the Property only to the extent of the proceeds made available by Lender for the
same. Lender shall not be obligated to see to the proper application of any
insurance proceeds paid over to Borrower. Borrower will promptly notify Lender
of substantial loss or damage to the Property and make proof of loss if loss or
damage occurs that is covered by insurance. Borrower hereby appoints Lender as
its attorney-in-fact to do any of the following at Lender's option: make proof
of loss, adjust or compromise in the name of Borrower any loss covered by an
insurance policy on the Property and collect and give receipt for the proceeds
from such policies. If Lender acquires title to the Property or the Property is
sold pursuant to Article 7, then Lender or the purchaser at foreclosure, as the
case may be, shall become the owner of the insurance policies required pursuant
to this Paragraph, the unearned premiums on the policies and insurance proceeds
relating to prior damage to the Property.
4.9 Condemnation. All judgments, decrees and awards for injury or damage
------------
to the Property and all awards pursuant to proceedings for condemnation thereof
are hereby assigned in their entirety to Lender, which may apply the proceeds
thereof in the manner (with the same effect and subject to the same limitations)
in which it is entitled in this Mortgage to apply insurance proceeds. Lender is
hereby authorized, in the name of Borrower to execute and deliver valid
acquittances for, and to appeal from, any such award, judgment or decree.
Immediately upon obtaining knowledge of the institution or the threatened
institution of any proceedings for the condemnation of any portion of the
Property, Borrower will notify Lender. Borrower will then, if requested by
Lender, file or defend its claims thereunder and prosecute such claims with due
10
<PAGE>
diligence to their final disposition and will cause any awards or settlements to
be paid over to Lender for application as set forth above. Lender shall be
entitled to participate in and to control such proceedings and to be represented
in such proceedings by counsel of its own choice, and Borrower will deliver, or
cause to be delivered, to Lender such instruments as Lender may request to
permit such participation.
4.10 Taxes, Insurance and Other Impositions. At all times required by
--------------------------------------
Lender after an Event of Default has occurred, Borrower will make monthly
deposits to Lender as a reserve for the payment of all Impositions and the cost
of all insurance policies required to be maintained by Borrower under this
Mortgage. Such installments shall be equal to the estimated Impositions and
premium(s) for such insurance next due (as reasonably estimated by Lender giving
due consideration to the previous year's Impositions and premiums), less all
amounts already paid therefor, and divided by the number of months that are to
elapse before one (1) month prior to the date when such Impositions or
premium(s) will become delinquent. If legal title to the Property is transferred
without being released by Lender from this Mortgage, Lender shall be entitled,
at its option, to treat the new holder of legal title as the owner of the
Impounds, and any transferee shall be deemed to have assumed Lender's
obligations hereunder with respect to the assigned Impounds. The Impounds may be
held by Lender in non-interest bearing accounts (unless interest is required by
applicable law, in which case Lender shall pay Borrower the minimum amount of
interest required by such law to be paid) and (unless otherwise required by law)
commingled with Lender's other funds. Upon assignment of any portion of the
Indebtedness and the lien of this Mortgage, Lender shall have the right to pay
any portion of the Impounds then in its possession to the assignee, whereupon
Lender shall become completely released from all liability with respect to the
assigned Impounds. Upon release of this Mortgage or at such earlier time as
Lender may elect, the Impounds may be paid over to Borrower or the then owner of
the Property, as Lender shall elect; and no other party shall have any right or
claim to the assigned Impounds. If the Impounds are in an amount sufficient for
that purpose, the Impounds shall be used (or, at Lender's option, given to
Borrower to use) to pay the Impositions and insurance premiums then due; but
otherwise, Lender shall have the option of crediting the full amount of the
Impounds against the Indebtedness.
4.11 Taxes on Note or this Instrument. If at any time a change in the law
--------------------------------
results in any tax or tax increase upon any Document or upon any rights, titles,
liens or security interests created by the Documents, Borrower will immediately
pay all such taxes and thereafter will continue to pay such taxes as they become
due. If it is unlawful for Borrower to pay such taxes, Borrower shall not be
required to pay such taxes, but Lender may demand payment of the Obligations in
full and Borrower will pay the Obligations in full within sixty (60) days after
such demand.
4.12 Further Assurances. Borrower will execute, acknowledge, deliver and
------------------
record such further instruments and do such further acts as Lender determines to
be necessary, desirable or proper to carry out the purposes of the Documents and
to subject to the liens and security interests
11
<PAGE>
created by the Documents any property intended to be covered by them or any
other property which is essential to the Approved Use of the Property.
ARTICLE 5 - TRANSFERS
---------------------
5.1 Restrictions on Transfer, Encumbrance, Merger and Consolidation.
---------------------------------------------------------------
Except as expressly permitted pursuant to the terms of the Loan Agreement and
for transfers made with the prior written consent of Lender, Lender, at its
option, may at any time declare the Indebtedness immediately due and payable if
any of the following events occur: (a) Borrower shall sell, convey, lease (other
than for "resort condominium uses"), mortgage, pledge, encumber or otherwise
transfer any portion of the Property or interest therein; (b) Borrower shall
further assign or hypothecate any Rents, Sales Proceeds or other proceeds from
any portion of the Property; (c) Borrower shall permit or suffer to exist any
change in the legal or beneficial ownership of it or the power to control it; or
(d) Borrower shall approve any managing agent for any portion of the Property or
enter into any management agreement for any portion of the Property, other than
(i) the appointment of, or a management agreement with, an Affiliate of Borrower
or another entity approved by Lender and (ii) for the appointment of a managing
agent for the Association (as defined in Paragraph 11.5) in accordance with the
Approved Time-Share Declaration (as defined in Paragraph 11.5). Any such act
shall be expressly subject to this Mortgage and the prior lien created by this
Mortgage, and written consent of Lender to any one such act shall not be
construed to be a waiver of this provision with respect to any subsequent act.
5.2 Compliance. Borrower will not take any action which would entitle
----------
Lender to accelerate the Indebtedness pursuant to this Article.
ARTICLE 6 - EVENTS OF DEFAULT
-----------------------------
6.1 Events of Default. The occurrence of any of the following events
-----------------
shall, at Lender's election, be an "Event of Default":
(a) failure of Lender to receive from Borrower within five
(5) Business Days of the date when due and payable (i) any amount
payable under the Note or (ii) any other payment due under the
Documents, except for the payments due at the maturity date of
the Note for which no grace period is allowed;
(b) any representation or warranty of a person other than
Lender or its agent contained in the Documents or in any
certificate furnished to Lender under the Documents by or on
behalf of Borrower proves to be, in any material respect, false
or misleading as of the date deemed made; provided that if such
representation or warranty was not intentionally made falsely or
with the intent to mislead or was not made recklessly, such
occurrence shall not constitute an Event of Default unless the
actual condition might adversely affect performance of the
Obligations, the
12
<PAGE>
Property, the business or financial condition of Borrower or any
guarantor of the Obligations ("Guarantor"), or the ability of
Borrower or any Guarantor to perform the Obligations;
(c) a default in the performance of the Obligations or a
violation of any term, covenant or provision of the Documents
(other than a default or violation referred to elsewhere in this
paragraph 6.1) which continues unremedied (i) for a period of
five (5) Business Days after notice of such default or violation
to Borrower in the case of a default under or violation of
Paragraph 4.6 arising from a lien to which Borrower has not
consented or (ii) in the case of any other default or violation,
for a period of thirty (30) days after notice to Borrower of such
default or violation plus only if such default or violation
cannot be cured by Borrower proceeding diligently and Borrower
has been diligent in attempting to effect cure, such additional
period not to exceed thirty (30) days as may be required by
Borrower proceeding diligently to effect cure;
(d) an "Event of Default," as defined elsewhere in any of
the Documents;
(e) Borrower abandons any portion of the Property if such
portion is material to the operation of the Real Property and
Improvements for the Approved Use;
(f) unless Borrower is proceeding in accordance with the
provisions of Paragraph 10.6, the holder of any lien or security
interest on any part of the Property (without implying Lender's
consent to the creation or existence of any such lien or security
interest) institutes foreclosure, receivership or other
proceedings for the enforcement of its remedies under any
instrument creating such lien or security interest;
(g) any failure to maintain insurance as required pursuant
to Paragraph 4.8; or
(h) any act or event which permits the acceleration of the
Indebtedness pursuant to Paragraph 5.1.
ARTICLE 7 - REMEDIES AND FORECLOSURE
------------------------------------
7.1 Remedies. If an Event of Default occurs, Lender may, at Lender's
--------
election and by or through Lender or otherwise, exercise any or all of the
following rights, remedies and recourses without notice:
13
<PAGE>
(a) Acceleration. Lender may declare the entire accrued but
------------
unpaid portion of the Indebtedness or any portion thereof to be
immediately due and payable, without notice, grace, presentment,
protest, demand for payment or any other action whatsoever (each
of which hereby is expressly waived by Borrower), whereupon the
same shall become immediately due and payable.
(b) Entry Upon and Operation of the Mortgaged Property. To
--------------------------------------------------
the extent allowed by applicable law, Lender may enter upon and
into the Property and take exclusive possession thereof and of
all books, records and accounts relating thereto. If Borrower
remains in possession of any portion of the Property while an
Event of Default exists, Lender may (without implying any
requirement therefor) invoke any and all legal remedies to
dispossess Borrower. Lender may hold, sell, lease, manage,
operate, subdivide, or otherwise use or permit the use of the
Property, either by itself or by other persons, firms or
entities, in such manner, for such time and upon such other terms
as Lender, in its judgment, determines to be appropriate under
the circumstances (making such repairs, alterations, additions
and improvements thereto and taking any and all other actions
with reference thereto, from time to time, as Lender determines
to be appropriate and consistent with applicable Legal
Requirements). Lender may apply all amounts collected from such
activities in the same manner as Rents and Sales Proceeds may be
applied by it according to the terms of this Mortgage. In the
exercise of the foregoing rights and powers, Lender shall not be
liable to Borrower for any loss or damage thereby sustained
unless due solely to the gross negligence or willful misconduct
of Lender.
(c) Receiver. Lender may make application to a court of
--------
competent jurisdiction, as a matter of strict right and without
notice to Borrower or regard to the adequacy of the security for
the payment and performance of the Obligations, for appointment
of a receiver of the Property; and Borrower does hereby
irrevocably consent to such appointment upon ex parte
application. Any such receiver shall have all the usual powers of
receivers in similar cases; and, without limiting the generality
of the foregoing and to the extent not prohibited by law, shall
have all the powers of Lender set forth in the preceding
subparagraph (b), including the full power to sell, rent,
maintain, manage, subdivide, and otherwise operate the Property
upon such terms as may be approved by the court. All sums
received therefrom may be applied in the same manner as Lender is
entitled to apply Rents and Sales Proceeds in accordance with the
terms hereof. The expenses, including receiver's fees, attorneys'
fees and court costs, incurred pursuant to the powers herein
contained shall be secured by this Mortgage. Lender shall be
liable to account only for such rents, issues and profits as are
actually received by Lender, whether received pursuant to this
subparagraph or subparagraph 7.1(b) above. Notwithstanding the
appointment of any receiver or other custodian, Lender
14
<PAGE>
shall be entitled as secured party hereunder to the possession
and control of any cash, deposits, or instruments at the time
held by, or payable or deliverable under the terms of this
Mortgage to, Lender.
(d) Foreclosure. Upon the occurrence of an Event of
-----------
Default, then, and in every such case, Lender shall have the
right to foreclose the lien hereof in accordance with applicable
Florida law and to exercise any other remedies of Lender provided
in any one or more of the Documents, or which Lender may have at
law, at equity or otherwise. In any suit to foreclose the lien
hereof, there shall be allowed and included as additional
Obligations in the decree of sale, all expenditures and expenses
which may be paid or incurred by or on behalf of Lender in
connection with such suit, including, without limitation, all
attorneys' fees, receivers' fee, environmental consultants' fees,
appraisers fees, outlays for documentary and expert evidence,
stenographer's charges, publication costs, costs (which may be
estimated as to items to be expended after entry of the decree)
of procuring all such abstracts of title, title searches and
examination, title insurance policies, and similar data and
assurance with respect to title as Lender may deem reasonably
necessary either to prosecute such suit or to evidence to bidders
at sales which may be had pursuant to such decree the true
conditions of the title to or the value of the Property, and any
other expenses and expenditures which may be paid or incurred by
or on behalf of Lender. All expenses of the nature mentioned in
this Paragraph, and such other expenses and fees as may be
incurred in the protection of the Property and rents and income
therefrom and the maintenance of the lien of this Mortgage,
including, without limitation, attorneys' fees shall be part of
the Obligations and shall be immediately due and payable by
Borrower with interest thereon at the Default Rate from the date
of expenditure until paid.
(e) Right of Set Off. Lender may set off and apply any and
----------------
all deposits held and other indebtedness owing by Lender to or
for the credit or account of Borrower, against any and all
Obligations, even though such obligations of Lender may be
unmatured.
(f) Other. Lender may exercise any and all other rights,
-----
remedies and recourses granted under the Documents or now or
hereafter existing at law or in equity, including, without
limitation, the Uniform Commercial Code.
7.2 Foreclosure. In addition to Lender's other rights, Borrower agrees
-----------
that Lender shall have the following rights in connection with foreclosure of
the lien and security interest of this Mortgage to the extent not otherwise
prohibited by applicable law:
(a) Partial Sales and Sales in Separate Lots; Foreclosure
-----------------------------------------------------
for Installments. At any foreclosure sale, all or a portion of
----------------
the Property may be sold
15
<PAGE>
or the Property being sold may be sold together or in separate
lots or parcels in such order and manner as Lender may determine
to be in Lender's best interests. Lender may also require the
foreclosure of the lien and security interest of this Mortgage to
satisfy any unpaid installment or portion of the Indebtedness
without declaring the entire Indebtedness due and payable, and
such foreclosure shall not in any manner affect the remaining
Obligations as to which this Mortgage shall remain in full force
and effect. However, Borrower shall have no right to require that
the foreclosure of this Mortgage or the sale of the Property be
made in any particular manner. If the proceeds of such sale(s) of
less than the whole of the Property are not sufficient to pay the
entire Indebtedness and the expenses thereof, this Mortgage shall
remain in full force and effect as to the unsold portion of the
Property. Any number of foreclosure sales may be had until the
whole of the Property is sold.
(b) Lender May Bid. Any person or entity (including Lender)
--------------
may bid and become the purchaser of all or any part of the
Property at any foreclosure sale. The Indebtedness, or any
portion thereof, may be credited on the purchase price in lieu of
any cash payments.
(c) Personal Property. The Personal Property may be sold
-----------------
separately from that portion of the Property consisting of real
property and may be sold in the same or separate proceedings;
and, at Lender's option, all Property may be sold in one unit as
a going business.
7.3 Application of Proceeds. The proceeds of sales of the Property and
-----------------------
any Rents and Sales Proceeds and other amounts generated by the holding,
leasing, sale, operation or other use of the Property shall be applied, to the
extent not prohibited by law, by Lender and any receiver (if one is appointed)
as follows:
(a) first, together with interest thereon at the Default
Rate, to the payment of any costs and expenses incurred by
Lender, or any receiver (if one is appointed) from the
foreclosure of the Property and the protecting, taking of
possession, holding, using, leasing, repairing, improving and
selling of the Property, including, without limitation, (i)
receiver's fees, (ii) court costs, (iii) attorneys' or
accountants' fees (to the extent not prohibited by law), (iv)
costs of advertisement, (v) Impositions, (vi) title search costs
and title insurance premiums, (vii) costs of environmental
investigations, (viii) any other expenses of the type mentioned
in Paragraph 7.1(d), and (ix) without in any way implying
Lender's prior consent to the creation of such rights, titles or
interests, costs incurred to remove or cure any liens, security
interests or other rights, titles or interests superior to the
lien and security interest of this Mortgage;
16
<PAGE>
(b) second, to the payment of all late charges, costs,
fees, expenses and prepayment premiums required by the Documents
to be paid by Borrower, then to accrued and unpaid interest due
on the Notes in such order and manner as Lender may determine;
and then to the unpaid principal balance of the Notes in such
order and manner as Lender may determine;
(c) third, to the payment of the other Indebtedness in such
order and manner as Lender may determine; and
(d) last, the excess, if any, to the person or persons
legally entitled thereto. If any dispute arises with respect to
the person or entity entitled to the excess proceeds, Lender may,
at its option, tender the excess proceeds into the registry or
custody of any court of competent jurisdiction, together with
such legal pleadings as it determines to be appropriate and
thereupon be discharged from any liability hereunder.
Notwithstanding anything herein to the contrary, neither Lender nor any receiver
(if one is appointed) shall have any obligation to incur any cost or expense in
connection with the holding, using, leasing, repairing, improving or selling of
the Property or to remove or cure any lien, security interest, or other right,
title or interest superior to the lien and security interest of this. Mortgage.
7.4 Tenancy at Will. If, at the time of foreclosure sale, Borrower or any
---------------
other person occupies any portion of the Property so sold, such occupant shall
immediately become the tenant at will of the purchaser at such sale, at a
reasonable rental per day established by such purchaser and based upon the value
of the portion of the Property so occupied. Such rental shall be due and
payable daily to the purchaser.
7.5 Lender's Right to Perform. Without limiting Lender's rights under any
-------------------------
other Paragraph, if Borrower fails or refuses to pay or perform any Obligation
and either (i) an Event of Default exists, (ii) Lender deems such action
necessary to protect the Collateral or its value, or (iii) such failure
constitutes a failure to maintain in force the insurance required under
Paragraph 4.8, then at any time thereafter, and without notice to or demand upon
Borrower and without waiving or releasing any other right, remedy or recourse
Lender may have, Lender may (but shall not be obligated to) pay or perform such
Obligation for the account of and at the expense of Borrower. For such purpose,
to the extent allowed by law, Lender shall have the right to enter upon the Real
Property and into the Improvements and to take all action thereon and with
respect thereto as it determines to be necessary or appropriate. Upon demand
therefor, Borrower will reimburse Lender for all sums paid by Lender pursuant to
this Paragraph, together with interest thereon at the Default Rate from the date
paid until reimbursed to Lender.
17
<PAGE>
7.6 Discontinuance of Proceedings. Lender shall have the unqualified
-----------------------------
right to invoke any right, remedy or recourse permitted under the Documents and
thereafter to elect to discontinue or abandon it for any reason. In such an
event, Borrower and Lender shall be restored to their former positions with
respect to the Obligations, the Documents, the Property and otherwise, and all
of the rights, remedies and recourses of Lender shall continue as if never
invoked.
7.7 Remedies Cumulative, Concurrent and Nonexclusive. All rights,
------------------------------------------------
remedies and recourses of Lender (a) may, in the discretion of Lender, be
pursued separately, successively or concurrently and (b) may be exercised as
often as occasion therefor shall arise. To the extent not prohibited by
applicable law, (x) Lender may sue and recover judgment on all or less than all
of the Indebtedness, either before, during or after foreclosure of the lien and
security interest of this Mortgage or any of the other Documents; (y) the right
of Lender to recover such judgment shall not be affected by the exercise of any
other right, remedy or recourse of Lender; and (z) after a sale of the Property
or other security for the payment and performance of the Obligations and the
application of the proceeds of sale as provided in any of the Documents, Lender
shall be entitled to enforce payment of the unpaid Obligations and to recover
judgment for the unpaid Obligations, together with interest on the deficiency at
the Default Rate from the date of sale to the date that payment is actually
received by Lender. Without limiting the generality of the foregoing, obtaining
of a judgment or decree on any portion of the Indebtedness, whether in the State
of Arizona, the state in which the Real Property is located, or elsewhere, shall
not in any manner affect the lien of this Security Document upon the Property,
and any judgment or decree so obtained shall be secured hereby to the same
extent such Indebtedness is now secured. Lender may resort to any security for
the payment and performance of the Obligations in such order and manner as
Lender may elect without affecting the lien and security interest of this
Mortgage. No exercise of any right, remedy or recourse of Lender shall have the
effect of curing any default of Borrower.
7.8 No Release Implied. Neither Borrower nor any other person or entity
------------------
primarily or secondarily liable for any of the Obligations shall be relieved of
any such Obligation by reason of any of the following, even if done without
consideration or notice to such person or entity: (a) the failure of Lender to
comply with any request of Borrower or any other person to foreclose the lien of
this Mortgage or to enforce any provision of the Documents; (b) any agreement or
stipulation between Borrower or any subsequent owner of the Property and Lender
extending, renewing, rearranging or in any other way modifying the terms of the
Indebtedness or the Documents (in which event Borrower and all such other
persons shall continue to be liable to pay and perform the Obligations according
to the terms of such agreement unless expressly released and discharged in
writing by ) Lender); (c) the release of any person or entity from liability to
perform any Obligations or the release or subordination or taking of any
security (including any portion of the Property) for the performance of the
Obligations; or (d) any other act or occurrence, save and except the complete
release of this Mortgage. Furthermore, no such act or occurrence shall, except
as expressly provided in writing signed by Lender at the time, in any way
affect, impair, subordinate or release the liens or security interests, created
by the Documents.
18
<PAGE>
7.9 Waiver of Redemption; Notice and Marshalling of Assets. To the
------------------------------------------------------
fullest extent permitted by law, Borrower hereby irrevocably and unconditionally
waives and releases (a) all benefit that might accrue to Borrower by virtue of
any present or future law or judicial decision exempting the Property from
attachment, levy or sale on execution or providing for any appraisement,
valuation, stay of execution, exemption from civil process, right of redemption
(equitable or legal) or extension of time for payment; (b) all right to receive
notices of an election by Lender to exercise, or its actual exercise of, any
right, remedy or recourse provided for under the Documents; (c) all right to a
marshalling of assets or sale in inverse order of alienation or rights
pertaining to the administration of the estates of decedents; and (d) all other
rights and matters which would defeat the right of Lender to sell the Property
for the collection of the Indebtedness (without any prior or different resort
for collection).
ARTICLE 8 - ASSIGNMENT OF LEASES, RENTS,
----------------------------------------
SALES DOCUMENTS, SALES PROCEEDS AND DEVELOPER'S RIGHTS
------------------------------------------------------
8.1 Assignment. For other good and valuable consideration, including the
----------
Indebtedness evidenced by the Note, the receipt and sufficiency of which are
hereby acknowledged, Borrower has GRANTED, BARGAINED, SOLD, CONVEYED, ASSIGNED
AND TRANSFERRED, and by these presents does GRANT, BARGAIN, SELL, CONVEY, ASSIGN
AND TRANSFER absolutely unto Lender, its successors and assigns all of
Borrower's rights, title and interest in, to, under and with respect to the
Leases, Rents, Sales Documents, Sales Proceeds and Developer's Rights subject
only to the Permitted Encumbrances. Borrower hereby warrants and will forever
defend unto Lender the title to the Leases, Rents, Sales Documents, Sales
Proceeds and Developer's Rights arising from any disposition of its interests in
the Property against every person whomsoever lawfully claiming or to claim the
same or any part thereof, subject to the Permitted Encumbrances. Borrower hereby
authorizes and directs any lessee or purchaser of the Property to deliver any
such payment to, and otherwise to attorn all other obligations under the Leases
and Sales Documents directly to, Lender. Borrower will perform all its
obligations under the Leases, Sales Documents and Property Governing Documents.
Borrower authorizes and appoints Lender as its attorney-in-fact to perform the
obligations of such Borrower in connection with the Leases, Sales Documents and
Property Governing Documents and/or to preserve its rights thereunder. All sums
expended by Lender in so doing shall be payable by Borrower upon demand and
accrue interest at the Default Rate from the date incurred until paid; and shall
be secured hereby and by all other security for the payment and performance of
the Obligations. No lessee or purchaser shall be required to inquire into the
authority of Lender to collect any Rent or Sales Proceeds, and any such person's
obligation to Borrower shall be absolutely discharged to the extent of its
payment to Lender. Notwithstanding anything in this Mortgage to the contrary,
but subject to the provisions of the other Documents, Lender hereby grants to
Borrower a license ("License"): (a) to exercise all Developer's Rights; (b) to
collect and receive all Rents and otherwise to exercise all rights and benefits
of the Leases; and (c) to collect and receive all Sales Proceeds to the extent
arising from the sale of Time-Share Interests expressly permitted pursuant to
the terms of the Loan Agreement. Upon the occurrence of an Event of Default, the
License
19
<PAGE>
shall be immediately revoked and Lender may collect the Rents and all Sales
Proceeds; provided, however, that such License shall continue as to Developer's
Rights until Lender records the acceptance of appointment described in Paragraph
8.2. All Rents and Sales Proceeds collected by Lender shall be applied to the
following: (a) the payment of all taxes and lien assessments levied and due and
payable against the Property, where provision for paying them is not otherwise
made to the satisfaction of Lender; (b) to the payment of the Obligations due
and owing to Lender; (c) to the payment of current operating costs and expenses
(including, without limitation, repairs, maintenance and necessary acquisition
of property and expenditures for capital improvements) arising in connection
with the Property; and (d) to the extent Borrower has any interest therein, to
such Borrower or its designee. All Rents and Sales Proceeds collected by Lender
may be applied to the items listed in the preceding sentence in any order and
manner that Lender determines to be advisable without regard to any order of
priority. Without limiting the generality of any other provision of this
Mortgage: (a) Lender may take any and all actions it determines to be necessary
or appropriate to preserve all of Borrower's rights with respect to the Leases
and Sales Documents and the Developer's Rights; and (b) if an Event of Default
exists, Lender may, with respect to the Leases and the Sales Documents, (i)
institute enforcement actions against obligors thereunder, (ii) enter into
modification agreements and make extension agreements with respect to payments
and other performances, (iii) release persons liable for performance, (iv)
settle and compromise disputes with respect to payments and performances claimed
due, all without notice to, or without being called to account therefor by
Borrower and without relieving Borrower from Performance of the Obligations, and
(v) receive, collect, open and read all mail of Borrower for the purpose of
obtaining all items pertaining to the Leases and Sales Documents.
8.2 Developer's Rights. Notwithstanding anything in this Article 8 to the
------------------
contrary, Borrower hereby appoints and designates Lender as the successor to
Borrower's interest in the Developer's Rights; provided, however, that such
appointment shall not take effect until Lender accepts such appointment in a
writing which is recorded in the public records of the county in which the Real
Property is located.
8.3 Resort Condominium and Other Revenues. The Real Property may be
-------------------------------------
operated as a resort condominium (any such use shall be considered to be "resort
condominium use"), Borrower hereby stipulates and agrees that the Real Property
consists, in part, of a finite number, or inventory, of rooms and related
amenities available for sale, license and/or lease for resort condominium use,
and that all room rate revenues generated from the sale, license or lease of
room "nights" (exclusive of food, beverage and other service-related revenues)
("Realty Proceeds") constitute rent or proceeds of the Real Property under
Section 552(b) of the United States Bankruptcy Code ("Code"). If at any time
prior to full repayment of the Indebtedness, Borrower becomes the subject of any
bankruptcy proceedings under the Code (whether voluntary or involuntary),
Borrower intends for Lender to have a continuing, valid, first priority security
interest in all post-petition Realty Proceeds pursuant to Section 552(b) of the
Code. In connection therewith, Borrower acknowledges and agrees that the sale,
license and/or lease of each room "night" occurring after the commencement of
any such bankruptcy proceeding shall constitute
20
<PAGE>
payment for the use and occupancy of the Property, and/or a conversion of the
Lender's pre-petition real property security and/or a conversion of Lender's
pre-petition inventory security into cash or accounts, and in all cases
constitutes proceeds of Lender's pre-petition secured collateral, and
constitutes the "cash collateral" of Lender as that term is defined in Section
363(a) of the Code. Borrower further acknowledges and agrees that, in order for
Lender's security interest in the Real Property to be adequately protected upon
the filing of any bankruptcy proceeding by or against Borrower, (i) all Realty
Proceeds must and will be immediately segregated upon receipt, and (ii) cash
payment must and will be made to Lender in an amount equal to all post-petition
Realty Proceeds less such amounts as may be agreed to by Lender as necessary for
the continued operation of the Real Property for resort condominium or similar
purposes. In the event such post-petition Realty Proceeds are not timely paid to
Lender, Lender shall be entitled to, and that Borrower will not oppose any
request for, immediate relief from the stay pursuant to Section 362 of the Code
or other Code provisions, whereupon Lender shall be entitled to pursue the full
extent of its remedies hereunder.
8.4 Relationship. Except as expressly set forth in Paragraph 11.5,
------------
nothing in this Mortgage shall be construed to obligate Lender to discharge or
perform the duties of Borrower under the Leases, Sales Documents, Property
Governing Documents or any other instrument or of a landlord to a tenant or of a
seller to a purchaser or to impose any liability as a result of the exercise of
the right to collect Rents or Sales Proceeds under a Lease or Sales Document or
the exercise of any of Developer's Rights; and Lender shall not be responsible
or liable in any manner with respect to the Property or the use, occupancy or
enjoyment of all or any part thereof.
8.5 Termination of Assignment. The assignment set forth in this Article 8
-------------------------
will terminate at such time as this Mortgage is entitled to be released pursuant
to Paragraph 10.7.
8.6 SECTION 697.07. THE PARTIES ACKNOWLEDGE AND CONFIRM THE APPLICATION
--------------
OF SECTION 697.07 OF THE FLORIDA STATUTES ENTITLED "ASSIGNMENT OF RENTS," AS
AMENDED, TO THIS TRANSACTION AND THIS MORTGAGE AND AGREE THAT SUCH SECTION
697.07 SHALL GOVERN THE RIGHTS OF LENDER AND LIABILITIES OF BORROWER, AND THE
PARTIES FURTHER AGREE TO BE BOUND THEREBY.
ARTICLE 9 - SECURITY AGREEMENT
------------------------------
9.1 Security Interest. This Mortgage (a) shall be construed as a mortgage
-----------------
on real property and (b) shall also constitute and serve as a "security
agreement" within the meaning of the applicable Uniform Commercial Code with
respect to all portions of the Property for which the granting of security
interests therein is governed by such Uniform Commercial Code. To this end,
Borrower has GRANTED, and by these presents does GRANT, unto Lender, a security
interest in and to all their rights, title and interest in, to and under the
Property subject to the Uniform Commercial Code (including, without limitation,
the Personal Property, all income from the rental or license of the use of rooms
for lodging, meeting or banquet purposes and/or from any other business of
Borrower conducted with respect to the Property, Sales Documents and Sales
21
<PAGE>
Proceeds), subject only to the Permitted Encumbrances, to secure the full and
timely payment and performance of the Obligations.
9.2 Fixture Filing. Some items of the Property are goods that are, or are
--------------
intended to become, fixtures related to the Real Property. It is intended that,
as to those goods, this instrument shall be effective as a financing statement
and fixture filing from the date of its filing for record in the real estate
records of the county in which the Real Property is located. Information
concerning the security interest created hereby may be obtained from Lender, as
the secured party, at the address of Lender stated above. The mailing address
of Borrower as debtor shall be the address stated above for Borrower. The
principal place of business or chief executive office of Borrower is 8801
Vistana Centre Drive, Orlando, Florida 32821.
9.3 Notice of Changes. Borrower will give advance notice in writing to
-----------------
Lender of any proposed change in Borrower's name, identity, structure, principal
place of business or chief executive office, or change in location of the
Property and shall execute and deliver to Lender, prior to or concurrently with
the occurrence of any such change, all additional financing statements that are
necessary or Lender may require to establish and maintain the validity and
priority of Lender's security interest with respect to any of the Property.
9.4 Uniform Commercial Code Remedies. If Lender disposes of any of the
--------------------------------
Property pursuant to the Uniform Commercial Code, twenty (20) Business Days
written notice by to Lender to Borrower shall be deemed to be reasonable
notice.
ARTICLE 10 - MISCELLANEOUS
--------------------------
10.1 Notices. Except as may be expressly otherwise provided in this
-------
Mortgage, all notices, requests or demands required or permitted to be given
under this Mortgage shall be in writing, and shall be deemed effective (a) upon
hand delivery, if hand delivered; (b) one (1) Business Day (as defined below)
after such are deposited for delivery via Federal Express or other nationally
recognized overnight courier service; or (c) three (3) Business Days after such
are deposited in the United States mails, certified or registered mail, all with
delivery charges and/or postage prepaid, and addressed as shown below, or to
such other address as the party being notified may have designated in a notice
given to the other party. Written notice may be given by telecopy to the
telecopier number as the party being notified may have designated in a notice
given to the other party, which notice shall be effective on the day of receipt
if received prior to the expiration of the recipient's normal business hours on
the day of receipt or otherwise on the next Business Day; provided that such
notice shall not be deemed effective unless not later than the next Business
Day, a copy of such notice is hand -delivered or deposited for delivery via
courier or in the United States mails in accordance with the requirements set
forth above. The addresses and telecopy numbers for Lender and Borrower are:
22
<PAGE>
If to Lender: FINOVA Capital Corporation
7272 East Indian School Road
Suite 410
Scottsdale, Arizona 85251
Attn: Vice President - Resort Finance
Telecopy No.: (602) 874-6444
with a copy to: FINOVA Capital Corporation
7272 East Indian School Road
Suite 410
Scottsdale, Arizona 85251
Attn: Vice President - Group Counsel
Telecopy No.: (602) 874-6445
If to Borrower: ___________________________
8801 Vistana Center Drive
Orlando, Florida 32821
Attn: Chief Financial Officer
Telecopy No.: (407) 289-3222
with a copy to: Susan Werth, Esq.
Vistana, Inc.
701 Brickell Avenue, Suite 2100
Miami, Florida 33131
Telecopy No.: (305) 374-7159
Notwithstanding anything in this Mortgage to the contrary, notice of foreclosure
of this Mortgage and sale of the Property may be given in any manner which meets
the requirements of the applicable laws of the state where the Real Property is
located with respect to foreclosure of real and personal property in effect at
the time of such sale; and such alternative notices shall constitute sufficient
notice under this Mortgage.
10.2 CHOICE OF LAW; JURISDICTION; VENUE; AND WAIVER OF JURY TRIAL.
------------------------------------------------------------
(A) THIS MORTGAGE AND THE RIGHTS, DUTIES AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF ARIZONA AND TO THE EXTENT THEY PREEMPT THE
LAWS OF SUCH STATE, THE LAWS OF THE UNITED STATES, PROVIDED, HOWEVER, THAT
THE CREATION, PERFECTION AND
23
<PAGE>
FORECLOSURE THE LIEN, SECURITY INTEREST, ASSIGNMENT AND OTHER CHARGES
CREATED BY THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS)
OF THE STATE WHERE THE REAL PROPERTY IS LOCATED.
(B) EACH OF BORROWER AND (BY ITS ACCEPTANCE HEREOF) LENDER: (I)
HEREBY IRREVOCABLY SUBMITS ITSELF TO THE PROCESS, JURISDICTION AND VENUE OF
THE COURTS OF THE STATE OF ARIZONA, MARICOPA COUNTY, AND TO THE PROCESS,
JURISDICTION, AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF ARIZONA, FOR THE PURPOSES OF SUIT, ACTION OR OTHER PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS MORTGAGE OR THE SUBJECT MATTER HEREOF,
AND, IF LENDER INITIATES SUCH ACTION, ANY IN WHICH LENDER SHALL INITIATE
SUCH ACTION, AND THE CHOICE OF SUCH VENUE SHALL IN ALL INSTANCES BE AT
LENDER'S ELECTION; AND (II) WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, DEFENSE
OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY CLAIM THAT BORROWER
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED COURTS,
THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR
THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH OF
BORROWER AND (BY ITS ACCEPTANCE HEREOF) LENDER HEREBY WAIVES THE RIGHT TO
COLLATERALLY ATTACK ANY JUDGMENT OR ACTION IN ANY OTHER FORUM.
(C) LENDER (BY ACCEPTING THIS MORTGAGE) AND BORROWER ACKNOWLEDGE AND
AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE DOCUMENTS WOULD
BE BASED UPON DIFFICULT AND COMPLEX ISSUES AND THEREFORE, THE PARTIES AGREE
THAT ANY LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED BY A
JUDGE SITTING WITHOUT A JURY, AND BORROWER HEREBY KNOWINGLY AND VOLUNTARILY
WAIVES TRIAL BY JURY IN ANY SUCH PROCEEDING.
24
<PAGE>
(D) ALL OF THE PROVISIONS SET FORTH IN THIS PARAGRAPH ARE A MATERIAL
INDUCEMENT FOR LENDER'S MAKING THE LOAN TO BORROWER.
(______ BORROWER INITIALS)
10.3 Interpretation. The Article, Paragraph and Subparagraph headings
--------------
hereof are inserted for convenience of reference only and shall not alter,
define or be used in construing the text of such Articles, Paragraphs or
Subparagraphs. All Schedules and Exhibits referred to herein are herein
incorporated by this reference. Whenever used, the singular number shall
include the plural and the plural the singular, and the use of any gender shall
be applicable to all genders. If more than one person or entity collectively
comprise Borrower, the term "Borrower" shall include each such person or entity
in their individual capacities and jointly and each such person shall be jointly
and severally liable for the performance of the Obligations under this Mortgage.
Each Borrower who executes this instrument and each subsequent owner of the
Property, or any part thereof (other than Lender or any purchaser at
foreclosure), agrees that it will perform and be bound by each term of this
Mortgage as if such person were the named Borrower. The provisions of this
Mortgage shall not be construed to limit the obligations of Borrower, or the
rights of Lender, under the other Documents. Time is of the essence for each
provision herein.
10.4 Subordination. The rights of any person or entity to be subrogated
-------------
to the lien and security interest and assignment granted hereby hereof by virtue
of the payment or satisfaction of any portion of the Indebtedness shall be
subordinated and remain inferior to the rights of Lender under this Mortgage
until all the Indebtedness has been paid in full. Any such person or entity
shall be regarded as a junior lienholder at any foreclosure proceeding and shall
not be entitled to notice thereof (unless otherwise required by law) and, until
Lender is fully paid, shall not be entitled to participate in any proceeds
therefrom.
10.5 Subrogation. To the extent funds are at any time following the date
-----------
hereof advanced by Lender under any of the Documents for the purpose of paying
any indebtedness now or hereafter secured by any liens or security interests or
assignments on the Property other than the liens, security interests and
assignments created by this Mortgage, Lender shall be subrogated to any and all
rights, liens, security interests and equities owned or claimed by the holder of
such other liens, security interests and assignments.
10.6 Permitted Contests. After prior written notice to Lender, Borrower
------------------
at its expense may contest, by appropriate legal or other proceedings conducted
in good faith and with due diligence, the amount or validity of any Imposition,
Legal Requirement or any monetary lien, so long as: (a) in the case of an unpaid
Imposition or lien, such proceedings shall suspend the collection thereof from
Borrower and foreclosure of such lien upon the Property and any Rents, Sales
Proceeds or other Proceeds therefrom and shall not interfere with the payment of
any such Rents, Sales Proceeds or other Proceeds to Lender; (b) none of the
Property is, in the judgment of Lender, in any imminent danger of being sold,
forfeited or lost; (c) in the case of a Legal
25
<PAGE>
Requirement, neither Borrower nor Lender is in any danger of any civil or
criminal liability for failure to comply therewith; and (d) Borrower has
furnished such security, if any, as may be required in the proceedings or as
Lender reasonably requests up to one hundred fifty percent (150%) of the amount
in controversy.
10.7 Defeasance. This Mortgage shall be released when all the Obligations
----------
are paid and performed in full or at such time as the Mortgage is required to be
released pursuant to Paragraph 11.6; and Lender will execute at that time such
defeasements of release and satisfaction as are necessary for that purpose.
10.8 Power of Attorney. While an Event of Default exists, Lender shall
-----------------
have the right, but not the obligation: (a) to demand and receive payment and
performance and to enforce and/or preserve any and all of Borrower's rights with
respect to the Leases, the Sales Documents and the personal property covered
hereby; (b) to exercise any right and to perform any obligation of Borrower
under or in connection with the Leases, the Sales Documents and any other
instrument covered hereby, at Borrower's expense; (c) with respect to rights to
payment and performance assigned hereunder, to make extension agreements,
release persons liable thereon or securities for payment or other performance,
and settle and compromise disputes in connection with those rights; (d) to
modify, cancel, or accept the surrender of the terms of any Lease or Sales
Document; (e) to take any action Lender may deem necessary or desirable to
perfect the liens, assignments and the security interest made and granted to
Lender under this Mortgage; and (f) to perform all these acts in the name of
Borrower or in the name of Lender. For all of the foregoing purposes, Borrower
irrevocably appoints Lender, until performance of its Obligations in full, as
its attorney-in-fact.
10.9 Standard Applied to Lender's Discretion. Unless otherwise
---------------------------------------
specifically stipulated elsewhere in this Mortgage, if a matter is left in this
Mortgage to the decision, determination, judgment, opinion, approval, consent,
satisfaction, acceptance, agreement, request, requirement, option, election or
discretion of Lender, its employees, Lender's counsel or any agent for or
contractor of Lender, such action shall be deemed to be exercisable by Lender or
such other person in its sole and absolute discretion and according to standards
established in its sole and absolute discretion. Without limiting the
generality of the foregoing, "option" and "discretion" shall be implied by use
of the words "if" or "may.".
10.10 Scope of Reimbursable Attorney's Fees. As used in this Mortgage, the
-------------------------------------
term "attorneys' fees" includes the fees of attorneys licensed to practice law
in any jurisdiction, the fees of law clerks, paralegals, investigators and
others not admitted to the bar but performing services under the supervision of
a licensed attorney, and the expenses incurred by them in the performance of
their services. As used in this Mortgage, attorneys' fees incurred by Lender in
the enforcement of any remedy or covenant include, without limitation,
attorneys' fees incurred in any foreclosure of this Mortgage, in protecting or
sustaining the lien or priority of the security, or in any proceeding arising
from or connected with any such matter, including any bankruptcy,
26
<PAGE>
receivership, injunction or other similar proceeding, or any appeal from or
petition for review of any such matter, and with or without litigation.
ARTICLE 11 - ADDITIONAL PROVISIONS
----------------------------------
11.1 Future Advances. This Mortgage secures such future or additional
---------------
advances (in addition to the Indebtedness described in Paragraph 2.13) as may be
made by Lender or the holder hereof, at its exclusive option, to Borrower or its
successors or assigns in title, for any purpose and are stated to be secured by
this Mortgage in any document evidencing or providing for such indebtedness,
provided that all such advances are made within twenty (20) years from the date
of this Mortgage or within such lesser period of time as may be provided by law
as a prerequisite for the sufficiency of actual notice or record notice of such
optional future or additional advances as against the rights of creditors or
subsequent purchasers for valuable consideration to the same extent as if such
future or additional advances were made on the date of the execution of this
Mortgage. The total amount of Indebtedness secured by this Mortgage may be
increased or decreased from time to time, but the total unpaid balance so
secured at any one time shall not exceed the maximum principal amount of
$60,000,000 plus interest thereon and any disbursements made under the Mortgage
for the payment of impositions, taxes, assessments, levies, insurance, or
otherwise, with interest on such disbursements. Subject to the foregoing
provisions of this Paragraph, it is the intent of the parties that this Mortgage
shall secure the payment of the Indebtedness described in Paragraph 2.13 and any
additional advances made from time to time pursuant to any additional notes or
otherwise, all of such future advances being equally secured hereby, having the
same priority as the original Indebtedness, and being subject to all of the
terms, provisions and conditions of this Mortgage.
11.2 Variable Interest Rate. Interest may accrue on advances evidenced by
----------------------
the Note at a variable interest rate, which is adjusted monthly.
11.3 Sales Contracts; Statutory Cancellation Rights. Notwithstanding
----------------------------------------------
anything herein to the contrary, all Sales Proceeds from the sale of Time-Share
Interests consisting of payments made by owners of such Time-Share Interests for
insurance, taxes or other assessments shall be applied only for such purposes to
the extent required by the Sales Documents or applicable Legal Requirements. By
acceptance of this Mortgage, Lender acknowledges that contracts for the sale of
Time-Share Interests may be subject to certain statutory cancellation rights.
Borrower will take all actions to cause such cancellation rights to expire at
the earliest possible time but this shall not prevent Borrower from amending the
Sales Documents in a commercially reasonable manner.
11.4 Future Property Governing Documents. The use of the Real Property
-----------------------------------
and surrounding Real Properties for time-share purposes may from time to time
require the execution, filing and/or recording of plats, replats, maps,
declarations of condominium, declarations of covenants and/or restrictions,
easements, reciprocal use and access agreements, registration
27
<PAGE>
documents with regulatory agencies, amendments to any of the foregoing, and
other similar documents and agreements with respect to the Property
(collectively, the "Future Property Governing Documents"). Without the prior
written consent of Lender, Borrower will not execute, file and/or record any
Future Property Governing Document. However, Lender will use reasonable efforts
to review all such Future Property Governing Documents on a timely basis and
agrees (a) not to unreasonably withhold or delay granting its consent to such
Future Property Governing Documents or its joinder in or to any such Future
Property Governing Documents (to the extent required by any Legal Requirement)
and (b) to provide on a timely basis such certificates, affidavits or other
verifying statements relating to the foregoing, this Mortgage or the use of the
Property as may be required by or in connection with such Future Property
Governing Documents to which it has given its consent. All expenses of Lender in
reviewing Future Property Governing Documents, including, without limitation,
reasonable attorneys' fees, shall be paid by Borrower to Lender promptly upon
demand, together with interest on the unpaid balance at the Default Rate from
the date of demand until paid by Lender. Without limiting the generality of any
other provision contained herein, Lender may, in addition to other conditions,
require that Borrower deliver to it a specific assignment (which shall terminate
when this Mortgage is entitled to be released pursuant to Paragraph 10.7) of
Borrower's rights, title and interest under a Future Property Governing Document
as a condition to its consent thereto, which assignment shall contain such terms
as a prudent institutional investor would require.
11.5 Time-Share Program. If Borrower records a Future Property Governing
------------------
Document to which Lender has given its prior written consent and which
establishes a program ("Time-Share Program") by which purchasers of Time-Share
Interests may own such Time-Share Interests, enjoy such Time-Share Interests on
a recurring basis not less often than seven (7) days every year or every other
year, and share the expenses associated with the management of such program
("Approved Time-Share Declaration"), then notwithstanding anything in this
Mortgage to the contrary, from and after recordation of the Approved Time-Share
Declaration and the release of the first Time-Share Interest in accordance with
the express provisions of the Loan Agreement:
(a) in the event of conflict with respect to the use and application
of insurance and condemnation proceeds, the terms and conditions of the
Approved Time-Share Declaration shall prevail over the terms of this
Mortgage;
(b) if an association of owners of Time-Share Interests ("Time-Share
Association") is formed and is obligated to Borrower under the Approved
Time-Share Declaration to perform duties which, if performed, will satisfy
any of the Obligations of Borrower under this Mortgage, Borrower will use
its best efforts to cause the Association to perform such duties,
including, without limitation, exercising all of Borrower's rights in the
Time-Share Association and under the Approved Time-Share Declaration to
enforce the performance of such duties by the Time-Share Association;
provided, however, that Borrower shall not be released of any of the
Obligations by virtue of any Approved Time-Share Declaration; and
28
<PAGE>
(c) Lender shall not be entitled to exercise any rights it has under
this Mortgage or any rights it may hereafter acquire in the Property to
diminish or disturb the quiet and peaceful enjoyment by a Purchaser of its
purchased Time-Share Interest which has been or under the express terms of
the Loan Agreement is entitled to be released from this Mortgage, so long
as the Purchaser is not in default of its obligations under any Sales
Document or under the Approved Time-Share Declaration or any other document
governing the Time-Share Program.
11.6 Partial Release of Time-Share Interest. Time-Share Interests shall be
--------------------------------------
entitled to be released from this Mortgage only in accordance with the express
terms of the Loan Agreement. The partial release of a Time-Share Interest from
this Mortgage when no Event of Default exists shall ipso facto cause the partial
---- -----
release from this Mortgage of Lender's interest in the tangible Personal
Property, Leases, Rents, Sales Documents and Sales Proceeds appurtenant to such
Time-Share Interest and of Lender's interest in Sales Documents and Sales
Proceeds arising solely from the sale of such Time-Share Interest.
11.7 Other Provisions Pertaining to Property Governing Documents. (a)
-----------------------------------------------------------
Unless required to do so by the terms thereof or by applicable Legal
Requirements, Borrower will not, without the prior written consent of Lender,
modify, waive, terminate or alter in any material way any of the terms of the
Property Governing Documents with respect to the Developer's Rights or surrender
any of the same and without limiting the generality of the foregoing, will not
consent to any modification which would result in the loss of any material
benefit or the incurrence of any material detriment to Borrower or Lender under
the Property Governing Documents; (b) Borrower will take all acts reasonably
necessary to prevent the forfeiture, rescission or termination of any of the
Property Governing Documents or any of the Developer's Rights, the loss of any
material benefit to Borrower or Lender under any of the Property Governing
Documents, or the incurrence of any material detriment to Borrower or Lender
under any of the Property Governing Documents, and will require, demand, and
enforce, by all available, lawful and reasonable means, the prompt and faithful
payment, performance, observance and satisfaction of all of the material
provisions, covenants, conditions, and agreements in the Property Governing
Documents to be performed and/or complied with for the benefit of Borrower under
the Property Governing Documents with respect to the Developer's Rights; and (c)
Borrower will exercise all of its rights under Property Governing Documents so
that at all times, unless Borrower's compliance will conflict with applicable
Legal Requirements or the exercise by others of the rights held by them under
the Property Governing Documents:
(i) Borrower shall be in compliance with all terms and conditions of
the Documents, including, without limitation, provisions with respect to
the maintenance and use of insurance and condemnation proceeds and
maintenance, repair and restoration of the Property; and no Event of
Default or Incipient Default (as defined in the Loan Agreement) will be
created;
29
<PAGE>
(ii) the exercise of the rights and remedies of Lender under the
Documents shall not be limited by any decision made pursuant to the
Property Governing Documents to take or not to take any action with respect
to the Property;
(iii) except as Lender might otherwise reasonably require pursuant to
the terms of the Documents following damage to all or substantially all of
the Property, neither the Property Governing Documents, nor the Time-Share
Program is terminated as to any part of the Property, no property is
withdrawn from the Time-Share Program, and the use of recreational
facilities on the Property by owner of the Time-Share Program interest; and
(iv) the Time-Share Program will be, and the Property is,
professionally managed.
[11.8 CONSTRUCTION MORTGAGE. THIS SECURITY DOCUMENT IS A "CONSTRUCTION
---------------------
MORTGAGE" AS THAT TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE. ONLY A PORTION
OF THE LOAN WILL BE AVAILABLE FOR PAYMENT OF CONSTRUCTION COSTS, AS PROVIDED IN
THE LOAN AGREEMENT.]
EXECUTED as of the date first written above.
[SEPARATE SIGNATURE PAGE FOLLOWS]
30
<PAGE>
Witnesses as to Borrower "BORROWER"
______________________________ ______________________________
Print Name:___________________ a(n)__________________________
______________________________ By:___________________________
Print Name:___________________ Type/Print Name:______________
Title:________________________
31
<PAGE>
STATE OF ______________ )
) ss.
County of _____________ )
The foregoing was acknowledged before me this ___ day of _____, _____, by
____________________________________________, the _______________________ of
_______ ___________________, a ___________________, on behalf of such
_________________________. He/She is personally known to me or has produced
______________________ as identification.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of _____, _____.
__________________________________________
Notary Public in and for the State
and County aforesaid
My commission expires:
_____________________________________
32
<PAGE>
EXHIBIT A
---------
DESCRIPTION OF THE REAL PROPERTY
--------------------------------
<PAGE>
EXHIBIT B
---------
PERMITTED ENCUMBRANCES
----------------------
<PAGE>
EXHIBIT C
---------
TIME-SHARE INTEREST
-------------------
An undivided fractional fee simple interest as tenant-in-common (or an estate
for years with a remainder over in fractional fee simple as tenant-in-common)
either (a) in a dwelling unit which is part of the Real Property ("Unit")
coupled with an undivided fractional fee simple interest as tenant-in-common in
the common areas of the time-share project of which such Unit is a part ("Time-
Share Project")] or (b) in the entire Time-Share Project, in both cases together
with the exclusive right to occupy and use a specific Unit (or an equivalent
Unit) for a period of at least seven (7) consecutive days every calendar year
(i.e., an annual Time-Share Interest) or every other calendar year (i.e., a
biennial Time-Share Interest) (on a fixed or floating basis) and the non-
exclusive right to use such common elements during the same occupancy period, as
more specifically described in the Approved Time-Share Declaration.
<PAGE>
EXHIBIT 4
FORM OF ENVIRONMENTAL CERTIFICATE
-4-
<PAGE>
ENVIRONMENTAL CERTIFICATE WITH REPRESENTATIONS
COVENANTS AND WARRANTIES
The undersigned, ________________________________, a(n)__________________
purpose of inducing FINOVA CAPITAL CORPORATION, a Delaware corporation
("Lender"), to make available to Borrower under a Loan Agreement dated as of
even date herewith ("Loan Agreement") a loan ("Loan") in a principal amount not
to exceed _____________________________________________ DOLLARS
($__________________). The Loan is to be secured by, among other things, a lien
dated as of even date herewith and encumbering the real property more
particularly described in EXHIBIT A attached hereto and made a part hereof
(collectively, the "Property"). This certificate is dated and effective as of
_______________, ______.
1. Representations, Covenants and Warranties. Except as may be otherwise
-----------------------------------------
expressly stated in the Disclosure Schedule attached hereto as EXHIBIT B
and made a part hereof, Indemnitor(s) hereby represent(s), covenant(s) and
warrant(s) to Lender and its successors and assigns, as follows:
a. Except for or with respect to products which, to the best knowledge and
belief of Indemnitor(s), have been purchased "over the counter," have
been used in connection with the use, operation or maintenance of the
Property in a manner consistent with their intended purposes and in
accordance with the manufacturer's specifications regarding amounts,
frequency and disposal or in accordance with generally accepted use
(i.e., gasoline and petroleum) and have otherwise been used, disposed of
----
and cleaned-up in accordance with Applicable Environmental Laws, (i) to
the best of Indemnitor's knowledge no solid wastes or other substances
known or suspected to pose a threat to health or the environment
("Hazards") or "hazardous substances" as defined below have been
disposed of or otherwise released or present on, over, beneath, in, or
upon the Property or, to the best knowledge of Indemnitor (s), any
adjacent parcels of real estate; (ii) Indemnitor(s) will not cause or
permit any Hazards or "hazardous substances" (A) to be disposed of or
released or present on, over, beneath, in or upon the Property or, with
the knowledge of Indemnitor(s), on any adjacent parcels of real estate;
or (B) to be used in the construction or installation of any buildings,
facilities or improvements of any nature on the Property. No prior use,
either by Indemnitor(s) or, to the best knowledge and belief of
Indemnitor(s), the prior owners of the Property or any other person or
entity, has occurred which violates any "Applicable Environmental Laws"
as defined below. The terms "hazardous substance", "release", "solid
waste" and "disposal" (or "disposed") shall each have the broadest
meanings specified in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the
Resource Conservation and Recovery Act of 1987, as amended ("RCRA"), the
Toxic Substance Control Act,
<PAGE>
the Clean Air Act, the Clean Water Act and any other federal, state or
local law, ordinance, code, rule, regulation, order or decree relating
to or imposing liability or standards of conduct concerning any
hazardous, toxic or dangerous waste or material, as now or at any time
hereafter in effect ("Applicable Environmental Laws").
b. To the best knowledge and belief of Indemnitor(s), there are no on-site
or off-site locations where hazardous substances, including such
substances as asbestos and polychlorinated biphenyls, solid wastes, or
Hazards from the Property, have been stored, treated, recycled or
disposed of, except for products which, to the best knowledge and belief
of Indemnitor(s), have been purchased "over the counter," have been used
in connection with the use, operation or maintenance of the Property in
a manner consistent with their intended purposes and in accordance with
the manufacturer's specifications regarding amounts, frequency and
disposal or in accordance with generally accepted use (i.e., gasoline
----
and petroleum), and have otherwise been used, disposed of and cleaned-up
in accordance with Applicable Environmental Laws.
c. To the best knowledge and belief of Indemnitor(s), there has been no
litigation brought or threatened nor any settlement reached by or with
any parties alleging the presence, disposal, release, or threatened
release, of any hazardous substance, solid wastes or Hazard from the use
or operation of the Property.
d. To the best knowledge and belief of Indemnitor(s) after diligent
investigation and inquiry, the Property is not on any federal or state
"Superfund" list, and not on EPA's Comprehensive Response, Compensation
& Liability System (CERCLIS) list or on any state environmental agency
list of sites under consideration for CERCLIS or sites on which leaking
underground storage tanks have existed, or subject to any
environmentally related liens.
2. Covenant to Clean Up and Notify. Indemnitor(s) shall promptly clean up and
-------------------------------
remove hazardous substances, solid wastes or Hazards on, in, from or
affecting any portion of the Property in accordance with all Applicable
Environmental Laws, to the reasonable satisfaction of Lender and shall
provide Lender, within thirty (30) days after written demand by Lender,
with a bond, letter of credit or similar financial assurance evidencing to
Lender's satisfaction that sufficient funds are available to pay the cost
of removing, treating and disposing of such hazardous substances, solid
wastes or Hazards and discharging any assessments that may be established
on the Property as a result thereof.
3. Site Assessment. If Lender shall have reason to believe that there are
---------------
hazardous substances, solid wastes or Hazards affecting any of the
Property, except for products which, to the best knowledge and belief of
Indemnitor(s), have been purchased "over the counter," have been used in
connection with the use, operation or maintenance of the Property in a
manner consistent with their intended purposes and in accordance with the
-2-
<PAGE>
manufacturer's specifications regarding amounts, frequency and disposal or
in accordance with generally accepted use (i.e., gasoline and petroleum),
----
and have otherwise been used, disposed of and cleaned-up in accordance with
Applicable Environmental Laws, Lender (by its officers, employees and
agents) at any time and from time to time, either prior to or after the
occurrence of an Event of Default (as defined in the Loan Agreement), may
(after a written request to Indemnitor(s) and Indemnitor's(s') failure to
commence such work [the scope of which shall be mutually acceptable to
Lender and Indemnitor(s)] within 30 days from its receipt of such notice)
contract at Indemnitor's(s') cost for the services of persons (the "Site
Reviewers") to enter upon the Property and perform environmental site
assessments ("Site Assessments") for the purpose of determining whether
there exists any environmental condition that could result in any
liability, cost or expense to the owner, occupier or operator of such
Property arising under any Applicable Environmental Laws. The Site
Reviewers shall perform such tests on the property as may be necessary to
conduct the Site Assessments in the reasonable opinion of the Site
Reviewers. Indemnitor(s) will supply such information and make available
appropriate personnel as requested by the Site Reviewers. On request,
Lender shall make the results of such Site Assessments fully available to
Indemnitor(s).
4. Indemnification. Indemnitor(s) covenant(s) that Indemnitor(s) will
---------------
indemnify, defend and hold harmless Lender and any current or former
officer, director, employee, shareholder or agent of Lender (collectively,
the "Indemnitees") for, from and against any and all claims, losses,
damages, response costs, clean-up costs and expenses, other than those
resulting from the gross negligence or willful misconduct of Lender, which
arise out of or in any way relate to the existence of hazardous substances,
solid waste or Hazards over, beneath, in or upon the Property or a breach
of the representations, warranties, covenants and agreements set forth in
paragraph 1 and paragraph 2 hereof, including, but not limited to: (a)
claims of third parties (including governmental agencies) for damages,
penalties, response costs, clean-up costs, injunctive or other relief; (b)
costs and expenses of removal and restoration, including fees of attorneys
and experts, and costs of reporting the existence of hazardous substances,
solid waste or Hazards to any governmental agency; and (c) any and all out-
of-pocket expenses or obligations, including reasonable attorneys' fees,
incurred at, before and after any trial or appeal therefrom whether or not
taxable as costs, including, without limitation, reasonable attorneys'
fees, witness fees, deposition costs, copying and telephone charges and
other expenses, all of which shall be paid by Indemnitor(s) upon demand.
5. Lender's Right to Remove Hazardous Materials. (a) If Indemnitor(s), within
--------------------------------------------
a reasonable period of time following Indemnitor(s) receipt of an order or
judgment by a regulatory agency or other competent authority or other
notice ("Other Notice") asserting the existence of any hazardous
substances, solid wastes or Hazards pertaining to the Property, fail(s) to
clean up, remove, resolve minimize the impact of or otherwise deal with
such existing hazardous substances, solid wastes or Hazards and (b) such
failure could jeopardize Lender's security under the Documents (as defined
in the Loan Agreement) as determined in Lender's reasonable judgment, then
Lender shall have the right, but not the
-3-
<PAGE>
obligation, without in any way limiting Lender's other rights and remedies
under the Documents, to enter onto the Property or to take such other
actions as it deems necessary or advisable to clean up, remove, resolve or
minimize the impact of, or otherwise deal with, any such existing hazardous
substances, solid wastes or Hazards in accordance with such order, judgment
or Other Notice. All reasonable costs and expenses paid or incurred by
Lender in the exercise of any such rights shall be payable by Indemnitor(s)
upon demand, except to the extent Lender is not entitled to indemnification
for such costs and expenses pursuant to paragraph 4 hereof. Notwithstanding
anything in this paragraph to the contrary, Lender shall not take any
action otherwise permitted pursuant to this paragraph on the basis of an
assertion contained in an Other Notice unless: (a) Borrower admits the
existence of the asserted environmental condition; (b) Lender has obtained
a Site Assessment confirming the existence of the asserted environmental
condition; or (c) Lender has failed to obtain a Site Assessment because of
Borrower's failure to cooperate with Lender.
6. Reliance and Binding Nature. Indemnitor(s) acknowledge(s) that Lender has
---------------------------
and will rely upon the representations, covenants, warranties and
agreements set forth in closing and funding the Loan and that the execution
and delivery of this Certificate is an essential condition but for which
Lender would not close or fund the Loan. The representations, warranties
and covenants contained in this Certificate shall survive any acquisition
by Lender of title to the Property by foreclosure or deed in lieu of
foreclosure and shall continue for as long as Lender or any other
Indemnitee may be subject to any claim for which it is entitled to be
indemnified pursuant to paragraph 4 hereof. The representations,
covenants, warranties and agreements herein contained shall be binding upon
Indemnitor(s), its/their successors, assigns and legal representatives and
shall inure to the benefit of Lender, its successors, assigns and legal
representatives.
7. Choice of Law, Choice of Jurisdiction and Venue; and Waiver of Jury Trial.
-------------------------------------------------------------------------
Choice of law, jurisdiction and venue and waiver of jury trial provisions
set forth in the Loan Agreement are incorporated herein by reference.
8. Obligations Joint and Several. The obligations and liability of
-----------------------------
Indemnitor(s) under this Certificate shall be joint and several and shall
be binding upon and enforceable against Indemnitor(s) and shall be secured
by the security for the repayment of the Loan.
-4-
<PAGE>
8. Notice of Change in Representations and Warranties. Indemnitor(s) will
--------------------------------------------------
notify Lender within twenty (20) days after the date Indemnitor(s) know or
should have known of any material adverse change in the representations or
warranties set forth in this Agreement.
Dated and Effective as of the date first above written.
Indemnitor(s)
________________________________________,
a(n) _____________________
By:______________________________________
Type/Print Name:_________________________
Title:___________________________________
STATE OF ___________ )
) ss.
County of ____________ )
The foregoing instrument was acknowledged before me this ____ day of
_______________, ___, by ___________________________________, the
________________ of _______________________________________, a(n)
__________________________, on behalf of such ___________________. He/She is
personally known to me or has produced _________________________ as
identification.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of ______,
_____.
_____________________________________________
Notary Public in and for the State and County
aforesaid
My commission expires:
____________________________
EXHIBIT A - DESCRIPTION OF PROPERTY
EXHIBIT B - DISCLOSURE SCHEDULE
-5-
<PAGE>
EXHIBIT A
REAL PROPERTY DESCRIPTION
-------------------------
-6-
<PAGE>
EXHIBIT B
DISCLOSURE SCHEDULE
-------------------
-7-
<PAGE>
EXHIBIT 5
FORM OF SUBORDINATION AGREEMENT
-5-
<PAGE>
SUBORDINATION
This SUBORDINATION ("Agreement") is made as of ____________, _____, by
VISTANA, INC., a Florida corporation ("Subordinator"), in favor of FINOVA
CAPITAL CORPORATION, a Delaware corporation ("Lender").
R E C I T A L S:
---------------
A. Lender desires to make to ______________________________________, a(n)
______________________________ ("Borrower"), pursuant to a Loan Agreement dated
as of _________, ____, between Lender and Borrower (as from time to time
renewed, amended, restated or replaced, the "Loan Agreement") a loan in an
aggregate principal amount not to exceed ____________________________________
Dollars ($_________) ("Loan"). The Loan will be evidenced by a promissory note
in the original face amount of ____________________________________ Dollars
($_________) (as from time to time renewed, amended, restated or replaced,
"Note").
B. The Loan Agreement, the Note and all other documents executed in
connection with the Loan are hereinafter referred to as the "Documents." The
obligations, covenants, agreements and conditions to be performed, paid,
observed and fulfilled by Borrower under the Documents are hereinafter referred
to as the "Obligations."
C. In order to induce Lender to enter into the Loan Agreement and to make
the Loan, Subordinator has offered to execute and deliver this Agreement.
Subordinator's principal place of business is at 8801 Vistana Center Drive, Lake
Buena Vista, Florida 32821. Subordinator is an affiliate of Borrower; and
Lender has agreed to acquire, renew, amend and make the Loan only if this
Agreement is executed by Subordinator and delivered to Lender.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Subordinator hereby
unconditionally covenants and agrees as follows:
ARTICLE 1
SUBORDINATION
-------------
1.1 Subordinator subordinates to the Obligations (a) all present and
future indebtedness, excluding any indebtedness not expressly required to be
subordinated to the Obligations pursuant to paragraph 6.12 of the Loan
Agreement, of Borrower to Subordinator (including, without limitation, any
indebtedness arising from any right of subrogation, indemnification,
reimbursement or contribution) ("Subordinated Indebtedness") and (b) all liens,
security interests, claims and right of any kind that Subordinator may now have
or hereafter acquire against Borrower and/or the property of Borrower
("Borrower's Property") which secure, result from or otherwise pertain to
<PAGE>
the Subordinated Indebtedness. Subordinator agrees that all liens, security
interests, claims and rights of any kind that Subordinator may now have or
hereafter acquire against Borrower and Borrower's Property which secure, result
from or otherwise pertain to the Subordinated Indebtedness shall be subordinate,
inferior and subject to the liens, security interests, claims and rights of
Lender against Borrower and/or Borrower's Property under the terms of any of the
Documents or at law, whether direct or contingent or whether now or hereafter
created, including but not limited to, any renewals, extensions or modifications
thereof. Subordinator agrees that it may accept payments on the Subordinated
Indebtedness, if and only if, at the time of making such payment and immediately
-- -------
upon giving effect thereto, neither an Event of Default nor an Incipient Default
(as defined in the Documents) exists, and the payments are expressly permitted
to be made under the terms of the Documents. Subordinator will not demand or
accept any payment(s) on the Subordinated Indebtedness from Borrower when there
exists an Event of Default or an Incipient Default, even if no written notice of
such an event has been provided, or under any other circumstances in which such
payments are expressly prohibited under the terms of the Loan Agreement. Any
payment received by Subordinator under such circumstances shall be deemed
received in trust for Lender and shall be immediately remitted to Lender.
1.2 Subordinator will not take any action which will either (a) force the
sale of Borrower's Property in order to satisfy the Subordinated Indebtedness or
(b) affect in any manner any or all of Lender's liens, security interests,
claims or rights of any kind that Lender may now have or hereafter acquire
against Borrower and/or Borrower's Property. Subordinator will refrain from
taking any action which is in any way inconsistent with or in derogation of this
subordination or of the rights of Lender hereunder and covenants to perform such
further acts as necessary or appropriate to giving effect to this subordination.
Without limiting the generality of the foregoing, Subordinator will not assign
any portion of the Subordinated Indebtedness, except expressly subject to the
terms of this Agreement; and Subordinator shall cause all evidence of the
Subordinated Indebtedness to set forth the provisions hereof and shall cause any
instrument representing the Subordinated Indebtedness to be endorsed with the
following legend: "The indebtedness evidenced by this instrument is
subordinated, pursuant to a Subordination ("Agreement") dated as of
________________, ____, by Vistana, Inc. in favor of FINOVA Capital Corporation,
to the prior payment in full of the Obligations (as defined in the Agreement)."
ARTICLE 2
GENERAL COVENANTS AND WAIVERS OF
--------------------------------
SUBORDINATOR; REMEDIES AND RIGHTS OF LENDER
-------------------------------------------
2.1 Neither failure to give, nor defect in, any notice to Borrower or
Subordinator and/or any other surety of the Obligations (any surety, including
Subordinator, of the Obligations being hereinafter referred to as an "Obligor")
concerning a default in the performance of the Obligations, an Event of Default
or any event which might mature into an Event of Default shall extinguish or in
any way affect the obligations of Subordinator hereunder. Neither demand on,
nor the pursuit of any remedies against, Borrower or any other Obligor shall be
required as a condition precedent to, and neither the pendency nor the prior
termination of any action, suit or
-2-
<PAGE>
proceeding against Borrower or any other Obligor (whether for the same or a
different remedy) shall bear on or prejudice the making of a demand on
Subordinator by Lender and commencement against Subordinator after such demand,
of any action, suit or proceeding, at law or in equity, for the specific
performance of any covenant or agreement contained herein or for the enforcement
of any other appropriate legal or equitable remedy.
2.2 Neither (a) the exercise or the failure to exercise by Lender of any
rights or remedies conferred on it under the Documents, hereunder or existing at
law or otherwise, or against any security for performance of the Obligations,
(b) the commencement of an action at law or the recovery of a judgment at law
against Borrower or any other Obligor and the enforcement thereof through levy
or execution or otherwise, (c) the taking or institution of any other action or
proceeding against Borrower or any other Obligor nor (d) any delay in taking,
pursuing or exercising any of the foregoing actions, rights, powers or remedies
(even though requested by Subordinator) by Lender or anyone acting for Lender,
shall extinguish or affect the obligations of Subordinator hereunder.
2.3 Subordinator hereby expressly waives: (a) notice of acceptance by
Lender of this Agreement; (b) notice of the existence, creation or non-payment
of all or any of the Obligations except as otherwise provided herein; (c)
presentment, protest, demand, dishonor, notice of dishonor, protest and all
notices whatsoever except as otherwise expressly provided herein; (d) all
diligence in collection or protection of or realization on the Obligations or
any part thereof, any obligation hereunder, or any security for or guarantee of
any of the foregoing; (e) any defense based upon an election of remedies by
Lender or marshaling of assets; (f) any defense arising because of Lender's
election under Section 1111(b)(2) of the United States Bankruptcy Code
("Bankruptcy Code") in any proceeding instituted under the Bankruptcy Code; (g)
any defense based on post-petition borrowing or the grant of a security interest
by Borrower under Section 364 of the Bankruptcy Code; (h) any duty on the part
of Lender to disclose to Subordinator any facts Lender may now or hereafter know
about Borrower, regardless of whether Lender has reason to believe that any such
facts materially increase the risk beyond that which Subordinator intends to
assume or has reason to believe that such facts are known to Subordinator or has
a reasonable opportunity to communicate such facts to Subordinator, because
Subordinator represents and warrants that it is fully responsible for being and
keeping informed of the financial condition of Borrower and of all circumstances
bearing on the risk of non-payment of any Obligation; (i) any and all suretyship
defenses and defenses in the nature thereof under Arizona and/or any other
applicable law, including, without limitation, the benefits of the provisions of
ARS Sections 12-1641 through 12-1646, A.R.C.P. Sections 17 and 21, and all other
laws of similar import; and (j) all rights and defenses arising out of an
election of remedies by Lender, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for an Obligation, has
destroyed Subordinator's rights of subrogation and reimbursement against the
principal. Without limiting the generality of the foregoing, Subordinator waives
all right and defenses that Subordinator may have because Borrower's debt is at
any time secured by real property. This means, among other things: (a) Lender
may enforce it rights against Subordinator without first foreclosing on any real
or personal property collateral pledged by Borrower; and (b) if Lender
forecloses on any real property collateral pledged by Borrower, Lender may
collect from Subordinator even if Lender, by foreclosing on the real property
collateral, has destroyed any right
-3-
<PAGE>
Subordinator may have to collect from Borrower. This is an unconditional and
irrevocable waiver of any rights and defenses Subordinator may have because
Borrower's debt is secured by real property.
2.4 Without limiting the generality of the foregoing, Subordinator will
not assert against Lender any defense of waiver, release, discharge in
bankruptcy, statute of limitations, res judicata, statute of frauds, anti-
deficiency statute, fraud, usury, illegality or unenforceability which may be
available to Borrower with respect to the Obligations, or any set off available
to Borrower against Lender, whether or not on account of a related transaction.
2.5 The benefits, remedies and rights provided or intended to be provided
hereby for Lender are in addition to and without prejudice to any rights,
benefits, remedies or security to which Lender might otherwise be entitled.
2.6 Anything else contained herein to the contrary notwithstanding,
Lender, from time to time, without notice to Subordinator, may take all or any
of the following actions without in any manner affecting or impairing the
obligations of Subordinator hereunder: (a) obtain a lien on or a security
interest in any property to secure any of the Obligations; (b) retain or obtain
the primary or secondary liability of any party or parties with respect to any
of the Obligations; (c) renew, extend or otherwise change the time for payment
or performance of any of the Obligations for any period; (d) release or
compromise any liability of Subordinator hereunder or any liability of any
nature of any other party or parties with respect to the Obligations; (e)
exchange, enforce, waive, release and apply any security for the performance of
the Obligations and direct the order or manner of sale thereof as Lender may
determine; (f) enforce the obligations hereunder of Subordinator, whether or not
Lender shall proceed against any other party primarily or secondarily liable on
any of the Obligations; (g) agree to any amendment (including, without
limitation, any amendment which changes the amount of interest to be paid under
the Documents or extends the period of time during which Borrower may borrow
under the Documents), any alteration of the Documents or any waiver of any
provisions of the Documents and/or exercise Lender's rights to consent to any
action or non-action of Lender which may violate the covenants and agreements
contained in the Documents with or without consideration, on such terms and
conditions as may be acceptable to Lender in Lender's discretion; or (h)
exercise any of Lender's rights conferred by the Documents or by law.
2.7 No delay on the part of Lender in the exercise of any right or remedy
under this Agreement shall operate as a waiver thereof, and no single or partial
exercise by Lender of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy. No action of
Lender permitted hereunder shall in any way affect or impair the rights of
Lender or the obligations of Subordinator under this Agreement.
2.8 If at any time all or any part of any payment theretofore applied by
Lender to any of the Obligations is or must be rescinded or returned by Lender
for any reason whatsoever (including, without limitation, the insolvency,
bankruptcy or reorganization of Borrower), such Obligation(s), for purposes of
this Agreement, to the extent that such payment is or must be rescinded or
returned, shall be deemed to have never been performed; and this Agreement shall
-4-
<PAGE>
continue to be effective or be reinstated, as the case may be, as to such
Obligations, all as though such application by Lender had not been made.
2.9 To the extent not prohibited by law, until the Obligations have been
paid and performed in full and Lender has no further obligation to extend credit
to Borrower under the Documents, Subordinator shall have no right of subrogation
with respect to the Obligations or any right of indemnification, reimbursement
or contribution from Borrower or from any other Obligor with respect to the
Obligations regardless of any payment made by Subordinator or received by Lender
pursuant to the provisions of this Agreement or any payment of the Subordinated
Indebtedness received by Lender in respect of this Agreement; and Subordinator
hereby unconditionally waives any such right of subrogation, indemnification,
reimbursement or contribution for such period. To the extent any such right
cannot be waived, such right is subordinated to the Obligations and to the
obligations of other Obligors to Lender in accordance with the provisions of
Article 1; and in the case of Obligors other than Borrower, references to
Borrower and to Borrower's Property shall be deemed to be references to the
other Obligor and its property.
2.10 It is not necessary for Lender to inquire into the powers of Borrower
or Borrower's officers, directors, partners or agents purporting to act on its
behalf and the Obligations are hereby guaranteed, and the Subordinated
Indebtedness is hereby subordinated, notwithstanding the lack of power or
authority on the part of Borrower or anyone acting on the Borrower's behalf to
incur the Obligations.
2.11 If Subordinator shall fail to pay any amount or perform any
obligations due Lender hereunder, Lender may institute and pursue any action or
proceeding to judgment or final decree and may enforce any such judgment or
final decree against Subordinator and collect in the manner provided by law out
of its property, wherever situated, the monies adjudged or decreed to be
payable.
ARTICLE 3
SUBORDINATOR'S WARRANTIES
-------------------------
3.1 Subordinator represents, warrants and covenants to Lender that:
(a) Subordinator is an affiliate of Borrower and will benefit from the
Loan and the execution and delivery of the Documents;
(b) Subordinator is a corporation duly organized and now existing in
good standing under the laws of the State of Florida and is duly qualified
and in good standing and authorized to do business in all jurisdictions
wherein the location and nature of the properties used or its business, as
the same is presently or proposed to be conducted, makes such qualification
necessary; and will maintain its corporate existence and right to carry on
operations and acquire, maintain and
-5-
<PAGE>
renew all rights, contracts, powers, privileges, leases, lands, sanctions
and franchises necessary or useful in the conduct of Subordinator's
business operations;
(c) Subordinator has the requisite power and authority to carry on its
business as presently conducted; and the execution, delivery and
performance by Subordinator of this Agreement has been duly authorized by
all necessary corporate action and do not and will not conflict with or
contravene any law, rule, regulation, judgment, order or decree of any
government, governmental instrumentality or court having jurisdiction over
Subordinator or its activities, or conflict with or result in any default
under the governance documents of Subordinator, or any agreement or
instrument of any kind unto which Subordinator is a party or by which
Subordinator or its properties may be bound or affected, except for those
as to which consents have been obtained by Subordinator and delivered to
Lender and are in full force and effect;
(d) neither the execution and delivery by Subordinator of this
Agreement nor the performance by Subordinator hereunder requires the
consent, approval, order or authorization of, or registration with, or the
giving of notice to any governmental authority, domestic or foreign, or any
other person or entity, except such consents as have been obtained by
Subordinator and delivered to Lender and are in full force and effect;
(e) this Agreement has been duly executed and delivered by
Subordinator and constitutes a legal, valid and binding obligation of
Subordinator enforceable against Subordinator in accordance with its terms;
(f) there is no action, litigation or other proceeding pending or
threatened against Subordinator before any court, arbitrator or
administrative agency which in Subordinator's reasonable opinion will have
a materially adverse effect on its assets, business or financial condition
or which would prevent, hinder or jeopardize its performance under this
Agreement;
(g) Subordinator is fully familiar with all of the covenants, terms
and conditions of the Documents;
(h) except for the agreement(s) disclosed on financial statements
previously submitted to Lender, Subordinator is not a party to any
contract, agreement, indenture or instrument or subject to any restriction
which individually or in the aggregate might have a material adverse effect
on its financial condition or businesses or which would in any way
jeopardize the ability of Subordinator to perform hereunder;
(i) all financial information delivered to Lender with respect to
Subordinator fairly and accurately represents the financial condition of
Subordinator;
-6-
<PAGE>
(j) the execution and delivery of this Agreement will not (based on
the reasonable likelihood any contingent obligations shall become actual
obligations) (i) render Subordinator insolvent under generally accepted
accounting principles, (ii) leave Subordinator with remaining assets which
constitute unreasonably small capital given the nature of its business, or
(iii) result in the incurrence of debts (whether matured or unmatured,
liquidated or unliquidated, absolute, fixed or contingent) beyond
Subordinator's ability to pay them when and as they become due; and as used
in this subparagraph, "insolvent" means the present fair saleable value of
assets is less than the probable amount required to be paid on existing
debts when and as they mature; and
(k) there are no oral or written conditions precedent to the
effectiveness of this Agreement.
ARTICLE 4
MISCELLANEOUS PROVISIONS
------------------------
4.1 All the covenants, stipulations, promises and agreements contained in
this Agreement by or on behalf of Subordinator are for the benefit of Lender,
its successors or assigns and shall bind Subordinator, and Subordinator's heirs,
executors, personal representatives, successors and assigns. Lender, without
notice of any kind, may sell, assign or transfer the Documents, and in such
event each and every immediate and successive assignee or transferee thereof may
be given the right by Lender to enforce this Agreement in full, by suit or
otherwise, for Lender's own benefit. Subordinator agrees for the benefit of any
such assignee or transferee that Subordinator's obligations hereunder shall not
be subject to any reduction, abatement, defense, set off, counterclaim or
recoupment for any reason whatsoever.
4.2 All notices, requests or demands required or permitted to be given
hereunder shall be in writing, and shall be deemed effective (a) upon hand
delivery, if hand delivered; (b) one (1) Business Day after such are deposited
for delivery via Federal Express or other nationally recognized overnight
courier service; or (c) three (3) Business Days after such are deposited in the
United States mails, certified or registered mail, all with delivery charges
and/or postage prepaid, and addressed as shown below, or to such other address
as the person being notified may have designated in a notice given to the person
sought to be charged with the effect thereof. Written notice may be given by
telecopy to the telecopier number shown below or to such other telecopier number
as the person being notified may have designated in a notice given to the person
sought to be charged with the effect thereof, which notice shall be effective on
the day of receipt if received during the recipient's normal business hours on
the day of receipt or otherwise on the next Business Day; provided that such
notice shall not be deemed effective unless not later than the next Business
Day, a copy of such notice is hand-delivered or deposited for delivery via
courier or in the United States mails in accordance with the requirements set
forth above. As used herein the term "Business Day" means a day other than a
Saturday, a Sunday, a national holiday, or a day on which banks in Phoenix,
Arizona, are required to be closed. The notice addresses and telecopy numbers
for Subordinator and Lender are:
-7-
<PAGE>
If to Lender: FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attn: Vice President - Resort Finance
Telecopy No.: (602) 874-6444
with a copy to: FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attn: Vice President - Associate General Counsel
Telecopy No.: (602) 874-6445
If to Subordinator: Vistana, Inc.
8801 Vistana Center Drive
Orlando, Florida 32821
Attn: Chief Financial Officer
Telecopy: (407) 289-3222
with a copy to: Susan Werth, Esq.
Vistana, Inc.
701 Brickell Avenue, Suite 2100
Miami, Florida 33131
Telecopy No.: (305) 374-7159
4.3 Terms used and not otherwise defined herein shall have the same
meanings given thereto in the Documents. The recitals set forth above are
incorporated herein by this reference.
4.4 CHOICE OF LAW; JURISDICTION; VENUE; AND WAIVER OF JURY TRIAL.
------------------------------------------------------------
(A) THIS AGREEMENT HAS BEEN DELIVERED IN THE STATE OF ARIZONA. THIS
AGREEMENT AND THE RIGHTS, DUTIES AND OBLIGATIONS OF SUBORDINATOR AND LENDER
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF ARIZONA (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS) AND TO THE
EXTENT THEY PREEMPT THE LAWS OF SUCH STATE, THE LAWS OF THE UNITED STATES.
(B) EACH OF SUBORDINATOR AND (BY ITS ACCEPTANCE HEREOF) LENDER: (A)
HEREBY IRREVOCABLY SUBMITS ITSELF TO THE PROCESS, JURISDICTION AND VENUE OF THE
COURTS OF THE STATE OF ARIZONA, MARICOPA COUNTY, AND TO THE PROCESS,
JURISDICTION, AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA, FOR THE PURPOSES OF SUIT, ACTION OR OTHER PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, OR, IF
-8-
<PAGE>
LENDER INITIATES SUCH ACTION, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH
ACTION AND THE CHOICE OF SUCH VENUE SHALL IN ALL IN STANCES BE AT LENDER'S
ELECTION; AND (B) WITHOUT LIMITING THE GENER ALITY OF THE FOREGOING, HEREBY
WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, DEFENSE OR OTHERWISE IN ANY
SUCH SUIT, ACTION OR PROCEEDING ANY CLAIM THAT SUCH PERSON IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT SUCH SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT,
ACTION OR PROCEEDING IS IMPROPER. EACH OF SUBORDINATOR AND (BY ITS ACCEPTANCE
HEREOF) LENDER HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY JUDGMENT OR
ACTION IN ANY OTHER FORUM.
(C) SUBORDINATOR AND (BY ITS ACCEPTANCE HEREOF) LENDER ACKNOWLEDGE AND
AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT WOULD BE BASED
UPON DIFFICULT AND COMPLEX ISSUES; AND THEREFORE, THEY AGREE THAT ANY LAWSUIT
ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED BY A JUDGE SITTING WITHOUT A
JURY AND KNOWINGLY AND VOLUNTARILY WAIVE TRIAL BY JURY IN ANY SUCH PROCEEDING.
(D) ALL OF THE PROVISIONS SET FORTH IN THIS PARAGRAPH ARE MATERIAL
INDUCEMENTS FOR LENDER'S ACQUIRING, RENEWING, AMENDING AND MAKING THE LOAN.
(SUBORDINATOR'S INITIALS ______)
4.5 If any provision of this Agreement is held to be illegal, invalid,
unenforceable under present or future laws (all of which invalidating laws are
waived to the fullest extent possible), the legality, validity and
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. In lieu of each such illegal, invalid or unenforceable
provision, there shall be added to this Agreement a provision that is legal,
valid and enforceable and as similar in terms to such illegal, invalid and
unenforceable provision as may be possible.
4.6 Time is of the essence in the performance of this Agreement.
4.7 Subordinator, at its sole cost and expense, agrees to deliver and
supply Lender with a favorable opinion of its independent legal counsel, which
counsel must be acceptable to Lender, with respect to such matters as may be
required pursuant to the Loan Agreement.
4.8 If Lender undertakes to enforce this Agreement, Subordinator will pay
to Lender in addition to any other amounts due hereunder, all costs and expenses
of collection, including, without limitation, attorneys' fees and legal
expenses, together with interest thereon at the Default Rate, whether or not
legal proceedings shall be instituted. If legal proceedings are instituted by
either party to enforce or interpret this Agreement, to recover damages for
breach of this
-9-
<PAGE>
Agreement, to obtain declaratory relief in connection with this Agreement, or
otherwise to obtain judicial relief in connection herewith, the prevailing party
shall be entitled to recover attorneys' fees as awarded by the court (and not by
a jury) and all of the costs and expenses of that litigation or proceeding, and
any and all appeals therefrom, including, but not limited to, taxable and
nontaxable costs and expert witness fees, together with interest on those
attorneys' fees, costs and expenses at the Default Rate. Without limiting the
generality of the foregoing, in the event of the commencement of a bankruptcy
proceeding by or against Subordinator or otherwise involving any collateral for
the Obligations, Lender shall, to the extent not already provided for herein, be
entitled to recover, and Subordinator shall be obligated to pay, Lender's
attorneys' fees and costs incurred in connection with: (i) any determination of
the applicability of the Bankruptcy Code to the terms of this Agreement or
Lender's rights hereunder; (ii) any attempt by Lender to enforce or preserve its
rights under the Bankruptcy Code, or to prevent Subordinator from seeking to
deny Lender its rights thereunder; (iii) any effort by Lender to protect,
preserve or enforce its rights against any collateral for the Obligations, or
seeking authority to modify the automatic stay of Section 362 of the Bankruptcy
Code or otherwise seeking to engage in such protection, preservation or
enforcement; or (iv) any proceeding(s) arising under the Bankruptcy Code, or
arising in or related to a case under the Bankruptcy Code.
4.9 This Agreement may be executed in counterparts, and any number of such
counterparts which have been executed by Subordinator and Lender shall
constitute one original.
4.10 This Agreement exclusively and completely states the rights and
obligations of Lender and Subordinator with respect to Subordinator's
subordination relative to the Obligations. No modification, variation,
termination, discharge, abandonment, or waiver of any of the provisions or
conditions of this Agreement shall be valid unless in writing and signed by duly
authorized representatives of the party sought to be bound by such action. This
Agreement supersedes any and all prior representations, warranties and/or
inducements, written or oral, heretofore made by Lender concerning
Subordinator's guaranty and subordination.
IN WITNESS WHEREOF, this Agreement is executed to be effective as of that
date first appearing above.
[SEE SEPARATE SIGNATURE PAGE ATTACHED]
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<PAGE>
SUBORDINATOR:
VISTANA, INC., a Florida corporation
Witness as to Subordinator:
_______________________________ By:______________________________________
Type/Print Name:_______________ Type/Print Name:_________________________
Title:___________________________________
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<PAGE>
STATE OF______________ )
) ss.
County of_____________ )
The foregoing instrument was acknowledged before me this _____ day of
_____________________, ____, by __________________________________________, the
_________________ of VISTANA, INC., a Florida corporation, on behalf of that
corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of ______,
_____.
______________________________________
Notary Public in and for the State and County
aforesaid
My commission expires:
______________________
-12-
<PAGE>
Lender hereby accepts this Agreement of VISTANA, INC.
LENDER: FINOVA CAPITAL CORPORATION, a Delaware
corporation
By____________________________________
Its______________________________
-13-
<PAGE>
EXHIBIT 6
FORM OF GUARANTY
-6-
<PAGE>
GUARANTY AND SUBORDINATION
This GUARANTY AND SUBORDINATION ("Guaranty") is made as of ____________,
_____, by VISTANA, INC., a Florida corporation ("Guarantor"), in favor of FINOVA
CAPITAL CORPORATION, a Delaware corporation ("Lender").
R E C I T A L S:
---------------
A. Lender desires to make to ______________________________________, a(n)
______________________________ ("Borrower"), pursuant to a Loan Agreement dated
as of _________, ____, between Lender and Borrower (as from time to time
renewed, amended, restated or replaced, the "Loan Agreement") a loan in an
aggregate principal amount not to exceed ____________________________________
Dollars ($_________) ("Loan"). The Loan will be evidenced by a promissory note
in the original face amount of ____________________________________ Dollars
($_________) (as from time to time renewed, amended, restated or replaced,
"Note").
B. The Loan Agreement, the Note and all other documents executed in
connection with the Loan are hereinafter referred to as the "Documents." The
obligations, covenants, agreements and conditions to be performed, paid,
observed and fulfilled by Borrower under the Documents are hereinafter referred
to as the "Obligations."
C. In order to induce Lender to enter into the Loan Agreement and to make
the Loan, Guarantor has offered to execute and deliver this Guaranty.
Guarantor's principal place of business is at 8801 Vistana Center Drive,
Orlando, Florida 32821. Guarantor is an affiliate of Borrower; and Lender has
agreed to acquire, renew, amend and make the Loan only if this Guaranty is
executed by Guarantor and delivered to Lender.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Guarantor hereby unconditionally
covenants and agrees as follows:
ARTICLE 1
GUARANTY
--------
1.1 Guarantor absolutely, unconditionally, irrevocably, and jointly and
severally guarantees the full, prompt, complete and faithful performance,
payment, observance and fulfillment by Borrower of all Obligations, including,
without limitation, repayment of the Loan in accordance with the terms of the
Note.
1.2 Guarantor hereby covenants and agrees unconditionally that within (a)
five (5) days of the receipt of written notice from or on behalf of Lender to
the effect that there exists a breach
<PAGE>
or default of the Obligations which Borrower has failed to pay or perform or (b)
such unexpired grace period, if any, as Borrower may then have under the
Documents to cure the breach or default before it becomes an Event of Default
(as defined in the Documents), whichever period is longer, subject to paragraph
1.3, Guarantor (x) will pay the entire unpaid amount thereof to Lender at its
offices at 7272 East Indian School Road, Suite 410, Scottsdale, Arizona 85251 or
such other address as Lender may by notice direct or (y) will provide Lender
with evidence of the performance of the Obligations which Borrower has failed to
perform. If Guarantor fails to pay any sums properly due Lender hereunder within
the period applicable pursuant to terms of the preceding sentence, then, as to
Guarantor, such sums shall bear interest at the Default Rate (as defined in the
Loan Agreement) until paid.
[1.3 IF BORROWER (A) (I) COMMENCES VERTICAL CONSTRUCTION OR SUBSTANTIAL
REMODELING IN A WORK PHASE (AS DEFINED IN THE LOAN AGREEMENT) OR SELLS OR
CONTRACTS TO SELL TIME-SHARE INTERESTS (AS DEFINED IN THE LOAN AGREEMENT) TO BE
CREATED FROM IMPROVEMENTS BEING CONSTRUCTED OR RENOVATED IN A WORK PHASE AND
(II) THEREAFTER FOR ANY REASON FAILS TO PROSECUTE WITH DILIGENCE THE
CONSTRUCTION AND COMPLETION OF THE WORK PHASE (AS DEFINED IN THE LOAN AGREEMENT,
AND HEREINAFTER REFERRED TO AS "COMPLETION OF THE WORK") IN ACCORDANCE WITH THE
LOAN AGREEMENT, OR (B) COMMITS OR PERMITS TO EXIST AN EVENT OF DEFAULT (AS
DEFINED IN THE LOAN AGREEMENT), THEN LENDER, IN ADDITION TO LENDER'S OTHER
RIGHTS, REMEDIES AND RECOURSES, MAY PROCEED UNDER THIS PARAGRAPH 1.3. IN SUCH
EVENT, GUARANTOR WILL, UPON DEMAND BY LENDER, AT GUARANTOR'S SOLE COST AND
EXPENSE, DILIGENTLY PURSUE FINISHING THE WORK PHASE IN ORDER TO CAUSE COMPLETION
OF THE WORK TO OCCUR WITHIN THE TIME AND IN THE MANNER SPECIFIED IN THE LOAN
AGREEMENT. IF FOR ANY REASON BORROWER FAILS OR NEGLECTS TO CAUSE COMPLETION OF
THE WORK WITHIN THE TIME AND IN THE MANNER SPECIFIED IN THE LOAN AGREEMENT, THEN
GUARANTORS WILL, UPON DEMAND BY LENDER, AT GUARANTOR'S SOLE COST AND EXPENSE,
BEGIN TO PURSUE COMPLETION OF THE WORK WITHIN A REASONABLE TIME AFTER SUCH
DEMAND BY LENDER AND WILL THEREAFTER DILIGENTLY PURSUE COMPLETION OF THE WORK SO
THAT IT OCCURS WITHIN A REASONABLE PERIOD OF TIME. GUARANTOR WILL PAY ALL BILLS
IN CONNECTION WITH COMPLETION OF THE WORK AND SHALL INDEMNIFY AND HOLD LENDER
HARMLESS FROM ANY AND ALL LOSSES, COSTS, LIABILITY OR EXPENSES INCURRED IN
CONNECTION WITH COMPLETION OF THE WORK. ADDITIONALLY, LENDER, AT LENDER'S OPTION
SHALL HAVE THE RIGHT TO CAUSE COMPLETION OF THE WORK TO OCCUR IN THE MANNER
PERMITTED PURSUANT TO PARAGRAPH 7.2 OF THE LOAN AGREEMENT WITHOUT FIRST
DEMANDING THAT GUARANTOR DO SO OR RELEASING GUARANTOR FROM ITS OBLIGATIONS
HEREUNDER, AND GUARANTOR WILL IMMEDIATELY PAY TO LENDER, UPON DEMAND, THE AMOUNT
OF ANY AND ALL EXPENDITURES WHICH ARE MADE BY LENDER IN CONNECTION WITH
COMPLETION OF THE WORK, TOGETHER WITH INTEREST ON SUCH EXCESS AT THE DEFAULT
RATE ("LENDER'S DAMAGES"). THE OBLIGATION OF GUARANTOR UNDER THIS PARAGRAPH
SHALL BE JOINT AND SEVERAL WITH THE OBLIGATIONS OF BORROWER FOR COMPLETION OF
THE WORK AND OF ANY OTHER OBLIGOR (AS DEFINED IN PARAGRAPH 3.1). NOTWITHSTANDING
ANYTHING HEREIN TO THE CONTRARY, GUARANTOR SHALL HAVE NO OBLIGATION TO DO ANY
WORK ON A WORK PHASE IF BORROWER DID NOT PREVIOUSLY PERFORM ANY WORK ON SUCH
WORK PHASE INVOLVING VERTICAL CONSTRUCTION OR SUBSTANTIAL REMODELING.
1.4 LENDER NEED NOT COMMENCE CONSTRUCTION OR CAUSE COMPLETION OF THE WORK
BEFORE COMMENCING A LAWSUIT AGAINST GUARANTOR BASED UPON A DEFAULT UNDER
PARAGRAPH 1.3.
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<PAGE>
LENDER SHALL HAVE NO OBLIGATION TO ACCEPT ANY OFFER MADE AT ANY TIME BY
GUARANTOR TO CAUSE COMPLETION OF THE WORK, AND NO SUCH OFFER SHALL CONSTITUTE A
DEFENSE TO LENDER'S CLAIMS FOR LENDER'S DAMAGES AGAINST GUARANTOR. GUARANTOR
EXPRESSLY ACKNOWLEDGES THAT IF LENDER PERFORMS ANY WORK, THE LENDER'S DAMAGES
SHALL NOT BE LIMITED TO THE VALUE OF SUCH WORK.
ARTICLE 2
SUBORDINATION
-------------
2.1 Guarantor subordinates to the Obligations (a) all present and future
indebtedness, excluding any indebtedness expressly not required to be
subordinated to the Obligations pursuant to paragraph 6.12 of the Loan
Agreement, of Borrower to Guarantor (including, without limitation, any
indebtedness arising from any right of subrogation, indemnification,
reimbursement or contribution) ("Subordinated Indebtedness") and (b) all liens,
security interests, claims and right of any kind that Guarantor may now have or
hereafter acquire against Borrower and/or the property of Borrower ("Borrower's
Property") which secure, result from or otherwise pertain to the Subordinated
Indebtedness. Guarantor agrees that all liens, security interests, claims and
rights of any kind that Guarantor may now have or hereafter acquire against
Borrower and Borrower's Property which secure, result from or otherwise pertain
to the Subordinated Indebtedness shall be subordinate, inferior and subject to
the liens, security interests, claims and rights of Lender against Borrower
and/or Borrower's Property under the terms of any of the Documents or at law,
whether direct or contingent or whether now or hereafter created, including but
not limited to, any renewals, extensions or modifications thereof. Guarantor
agrees that it may accept payments on the Subordinated Indebtedness, if and only
-- ----
if, at the time of making such payment and immediately upon giving effect
- --
thereto, neither an Event of Default nor an Incipient Default (as defined in the
Documents) exists, and the payments are expressly permitted to be made under the
terms of the Documents. Guarantor will not demand or accept any payment(s) on
the Subordinated Indebtedness from Borrower when there exists an Event of
Default or an Incipient Default, even if no written notice of such an event has
been provided, or under any other circumstances in which such payments are
expressly prohibited under the terms of the Loan Agreement. Any payment
received by Guarantor under such circumstances shall be deemed received in trust
for Lender and shall be immediately remitted to Lender.
2.2 Guarantor will not take any action which will either (a) force the
sale of Borrower's Property in order to satisfy the Subordinated Indebtedness or
(b) affect in any manner any or all of Lender's liens, security interests,
claims or rights of any kind that Lender may now have or hereafter acquire
against Borrower and/or Borrower's Property. Guarantor will refrain from taking
any action which is in any way inconsistent with or in derogation of this
subordination or of the rights of Lender hereunder and covenants to perform such
further acts as necessary or appropriate to giving effect to this subordination.
Without limiting the generality of the foregoing, Guarantor will not assign any
portion of the Subordinated Indebtedness, except expressly subject to the terms
of this Guaranty; and Guarantor shall cause all evidence of the Subordinated
Indebtedness to set forth the provisions hereof and shall cause any instrument
representing the
-3-
<PAGE>
Subordinated Indebtedness to be endorsed with the following legend: "The
indebtedness evidenced by this instrument is subordinated, pursuant to a
Guaranty and Subordination ("Guaranty") dated as of ________________, ____, by
Vistana, Inc. in favor of FINOVA Capital Corporation, to the prior payment in
full of the Obligations (as defined in the Guaranty)."
ARTICLE 3
GENERAL COVENANTS AND WAIVERS OF
--------------------------------
GUARANTOR; REMEDIES AND RIGHTS OF LENDER
----------------------------------------
3.1 Neither failure to give, nor defect in, any notice to Borrower or
Guarantor and/or any other guarantor or surety of the Obligations (any guarantor
or surety, including Guarantor, of the Obligations being hereinafter referred to
as an "Obligor") concerning a default in the performance of the Obligations, an
Event of Default or any event which might mature into an Event of Default shall
extinguish or in any way affect the obligations of Guarantor hereunder. Neither
demand on, nor the pursuit of any remedies against, Borrower or any other
Obligor shall be required as a condition precedent to, and neither the pendency
nor the prior termination of any action, suit or proceeding against Borrower or
any other Obligor (whether for the same or a different remedy) shall bear on or
prejudice the making of a demand on Guarantor by Lender and commencement against
Guarantor after such demand, of any action, suit or proceeding, at law or in
equity, for the specific performance of any covenant or agreement contained
herein or for the enforcement of any other appropriate legal or equitable
remedy.
3.2 Guarantor's liability hereunder is primary, direct, immediate, joint
and several with that of Borrower and each and every other Obligor. Neither (a)
the exercise or the failure to exercise by Lender of any rights or remedies
conferred on it under the Documents, hereunder or existing at law or otherwise,
or against any security for performance of the Obligations, (b) the commencement
of an action at law or the recovery of a judgment at law against Borrower or any
other Obligor and the enforcement thereof through levy or execution or
otherwise, (c) the taking or institution of any other action or proceeding
against Borrower or any other Obligor nor (d) any delay in taking, pursuing or
exercising any of the foregoing actions, rights, powers or remedies (even though
requested by Guarantor) by Lender or anyone acting for Lender, shall extinguish
or affect the obligations of Guarantor hereunder. Guarantor shall be and remain
liable for all the Obligations until fully paid and performed (and without
limiting Guarantor's obligations under paragraph 3.8), notwithstanding the
previous discharge (total or partial) from further liability of Borrower or any
other Obligor with respect thereto.
3.3 Guarantor hereby expressly waives: (a) notice of acceptance by Lender
of this Guaranty; (b) notice of the existence, creation or non-payment of all or
any of the Obligations except as otherwise provided herein; (c) presentment,
protest, demand, dishonor, notice of dishonor, protest and all notices
whatsoever except as otherwise expressly provided herein; (d) all diligence in
collection or protection of or realization on the Obligations or any part
thereof, any obligation hereunder, or any security for or guarantee of any of
the foregoing; (e) any defense based upon an election of remedies by Lender or
marshaling of assets; (f) any defense arising
-4-
<PAGE>
because of Lender's election under Section 1111(b)(2) of the United States
Bankruptcy Code ("Bankruptcy Code") in any proceeding instituted under the
Bankruptcy Code; (g) any defense based on post-petition borrowing or the grant
of a security interest by Borrower under Section 364 of the Bankruptcy Code; (h)
any duty on the part of Lender to disclose to Guarantor any facts Lender may now
or hereafter know about Borrower, regardless of whether Lender has reason to
believe that any such facts materially increase the risk beyond that which
Guarantor intends to assume or has reason to believe that such facts are known
to Guarantor or has a reasonable opportunity to communicate such facts to
Guarantor, because Guarantor represents and warrants that it is fully
responsible for being and keeping informed of the financial condition of
Borrower and of all circumstances bearing on the risk of non-payment of any
Obligation; (i) any and all suretyship defenses and defenses in the nature
thereof under Arizona and/or any other applicable law, including, without
limitation, the benefits of the provisions of ARS Sections 12-1641 through 12-
1646, A.R.C.P. Sections 17 and 21, and all other laws of similar import; and (j)
all rights and defenses arising out of an election of remedies by Lender, even
though that election of remedies, such as a nonjudicial foreclosure with respect
to security for an Obligation, has destroyed Guarantor's rights of subrogation
and reimbursement against the principal. Without limiting the generality of the
foregoing, Guarantor waives all right and defenses that Guarantor may have
because Borrower's debt is at any time secured by real property. This means,
among other things: (a) Lender may collect from Guarantor without first
foreclosing on any real or personal property collateral pledged by Borrower; and
(b) if Lender forecloses on any real property collateral pledged by Borrower,
Lender may collect from Guarantor even if Lender, by foreclosing on the real
property collateral, has destroyed any right Guarantor may have to collect from
Borrower. This is an unconditional and irrevocable waiver of any rights and
defenses Guarantor may have because Borrower's debt is secured by real property.
3.4 Without limiting the generality of the foregoing, Guarantor will not
assert against Lender any defense of waiver, release, discharge in bankruptcy,
statute of limitations, res judicata, statute of frauds, anti-deficiency
statute, fraud, usury, illegality or unenforceability which may be available to
Borrower with respect to the Obligations, or any set off available to Borrower
against Lender, whether or not on account of a related transaction.
3.5 The benefits, remedies and rights provided or intended to be provided
hereby for Lender are in addition to and without prejudice to any rights,
benefits, remedies or security to which Lender might otherwise be entitled.
3.6 Anything else contained herein to the contrary notwithstanding,
Lender, from time to time, without notice to Guarantor, may take all or any of
the following actions without in any manner affecting or impairing the
obligations of Guarantor hereunder: (a) obtain a lien on or a security interest
in any property to secure any of the Obligations; (b) retain or obtain the
primary or secondary liability of any party or parties, in addition to
Guarantor, with respect to any of the Obligations; (c) renew, extend or
otherwise change the time for payment or performance of any of the Obligations
for any period; (d) release or compromise any liability of Guarantor hereunder
or any liability of any nature of any other party or parties with respect to the
Obligations; (e) exchange, enforce, waive, release and apply any security for
the performance of the Obligations
-5-
<PAGE>
and direct the order or manner of sale thereof as Lender may determine; (f)
resort to Guarantor for payment of any the Obligations or otherwise enforce the
obligations hereunder of Guarantor, whether or not Lender shall proceed against
any other party primarily or secondarily liable on any of the Obligations; (g)
agree to any amendment (including, without limitation, any amendment which
changes the amount of interest to be paid under the Documents or extends the
period of time during which Borrower may borrow under the Documents), any
alteration of the Documents or any waiver of any provisions of the Documents
and/or exercise Lender's rights to consent to any action or non-action of Lender
which may violate the covenants and agreements contained in the Documents with
or without consideration, on such terms and conditions as may be acceptable to
Lender in Lender's discretion; or (h) exercise any of Lender's rights conferred
by the Documents or by law.
3.7 No delay on the part of Lender in the exercise of any right or remedy
under this Guaranty shall operate as a waiver thereof, and no single or partial
exercise by Lender of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy. No action of
Lender permitted hereunder shall in any way affect or impair the rights of
Lender or the obligations of Guarantor under this Guaranty.
3.8 If at any time all or any part of any payment theretofore applied by
Lender to any of the Obligations is or must be rescinded or returned by Lender
for any reason whatsoever (including, without limitation, the insolvency,
bankruptcy or reorganization of Borrower), such Obligation(s), for purposes of
this Guaranty, to the extent that such payment is or must be rescinded or
returned, shall be deemed to have never been performed; and this Guaranty shall
continue to be effective or be reinstated, as the case may be, as to such
Obligations, all as though such application by Lender had not been made.
3.9 To the extent not prohibited by law, until the Obligations have been
paid and performed in full and Lender has no further obligation to extend credit
to Borrower under the Documents, Guarantor shall have no right of subrogation
with respect to the Obligations or any right of indemnification, reimbursement
or contribution from Borrower or from any other Obligor with respect to the
Obligations regardless of any payment made by Guarantor or received by Lender
pursuant to the provisions of this Guaranty or any payment of the Subordinated
Indebtedness received by Lender in respect of this Guaranty; and Guarantor
hereby unconditionally waives any such right of subrogation, indemnification,
reimbursement or contribution for such period. To the extent any such right
cannot be waived, such right is subordinated to the Obligations and to the
obligations of other Obligors to Lender in accordance with the provisions of
Article 2; and in the case of Obligors other than Borrower, references to
Borrower and to Borrower's Property shall be deemed to be references to the
other Obligor and its property.
3.10 It is not necessary for Lender to inquire into the powers of Borrower
or Borrower's officers, directors, partners or agents purporting to act on its
behalf and the Obligations are hereby guaranteed, and the Subordinated
Indebtedness is hereby subordinated, notwithstanding the lack
-6-
<PAGE>
of power or authority on the part of Borrower or anyone acting on the Borrower's
behalf to incur the Obligations.
3.11 If Guarantor shall (a) file or consent by answer or otherwise to the
filing against it of a petition for relief or reorganization, arrangement or any
other petition in bankruptcy or insolvency under the laws of any jurisdiction,
(b) make an assignment for the benefit of its creditors, (c) consent to the
appointment of a custodian, receiver, trustee or other officer with similar
powers for itself or any substantial part of its property, (d) be adjudicated
insolvent, or (e) dissolve or commence to wind-up its affairs, Guarantor will
pay to Lender forthwith the whole then unpaid amount of the Obligations ("Unpaid
Amount") as if such Unpaid Amount were then due and payable; and in any such
event Lender, irrespective of whether any demand shall have been made on
Guarantor, Borrower or any Obligor by intervention in or initiation of judicial
proceedings relative to Guarantor, its creditors or its property, may file and
prove a claim or claims for the whole or any portion of the Unpaid Amount or any
portion thereof and file such other papers or documents as may be necessary or
advisable in order to have such claim allowed in such judicial proceedings and
to collect and receive any monies or other property payable or deliverable on
any such claim, and to distribute the same; and any receiver, assignee or
trustee in bankruptcy or reorganization is hereby authorized to make such
payments to Lender.
3.12 If Guarantor shall fail to pay any amount or perform any obligations
due Lender hereunder, Lender may institute and pursue any action or proceeding
to judgment or final decree and may enforce any such judgment or final decree
against Guarantor and collect in the manner provided by law out of its property,
wherever situated, the monies adjudged or decreed to be payable.
ARTICLE 4
GUARANTOR'S WARRANTIES
----------------------
4.1 Guarantor represents, warrants and covenants to Lender that:
(a) Guarantor is an affiliate of Borrower and will benefit from the
Loan and the execution and delivery of the Documents;
(b) Guarantor is a corporation duly organized and now existing in
good standing under the laws of the State of Florida and is duly qualified
and in good standing and authorized to do business in all jurisdictions
wherein the location and nature of the properties used or its business, as
the same is presently or proposed to be conducted, makes such qualification
necessary; and will maintain its corporate existence and right to carry on
operations and acquire, maintain and renew all rights, contracts, powers,
privileges, leases, lands, sanctions and franchises necessary or useful in
the conduct of Guarantor's business operations;
-7-
<PAGE>
(c) Guarantor has the requisite power and authority to carry on its
business as presently conducted; and the execution, delivery and
performance by Guarantor of this Guaranty has been duly authorized by all
necessary corporate action and does not and will not conflict with or
contravene any law, rule, regulation, judgment, order or decree of any
government, governmental instrumentality or court having jurisdiction over
Guarantor or its activities, or conflict with or result in any default
under the governance documents of Guarantor, or any agreement or instrument
of any kind unto which Guarantor is a party or by which Guarantor or its
properties may be bound or affected, except for those as to which consents
have been obtained by Guarantor and delivered to Lender and are in full
force and effect;
(d) neither the execution and delivery by Guarantor of this Guaranty
nor the performance by Guarantor hereunder requires the consent, approval,
order or authorization of, or registration with, or the giving of notice to
any governmental authority, domestic or foreign, or any other person or
entity, except such consents as have been obtained by Guarantor and
delivered to Lender and are in full force and effect;
(e) this Guaranty has been duly executed and delivered by Guarantor
and constitutes a legal, valid and binding obligation of Guarantor
enforceable against Guarantor in accordance with its terms;
(f) there is no action, litigation or other proceeding pending or
threatened against Guarantor before any court, arbitrator or administrative
agency which in Guarantor's reasonable opinion will have a materially
adverse affect on its assets, business or financial condition or which
would prevent, hinder or jeopardize its performance under this Guaranty;
(g) Guarantor is fully familiar with all of the covenants, terms and
conditions of the Documents;
(h) except for the agreement(s) disclosed on financial statements
previously submitted to Lender, Guarantor is not a party to any contract,
agreement, indenture or instrument or subject to any restriction which
individually or in the aggregate might have a material adverse effect on
its financial condition or businesses or which would in any way jeopardize
the ability of Guarantor to perform hereunder;
(i) all financial information delivered to Lender with respect to
Guarantor fairly and accurately represents the financial condition of
Guarantor;
(j) the execution and delivery of this Guaranty will not (based on
the reasonable likelihood any contingent obligations shall become actual
obligations)
-8-
<PAGE>
(i) render Guarantor insolvent under generally accepted accounting
principles, (ii) leave Guarantor with remaining assets which constitute
unreasonably small capital given the nature of its business, or (iii)
result in the incurrence of debts (whether matured or unmatured, liquidated
or unliquidated, absolute, fixed or contingent) beyond Guarantor's ability
to pay them when and as they become due; and as used in this subparagraph,
"insolvent" means the present fair saleable value of assets is less than
the probable amount required to be paid on existing debts when and as they
mature; and
(k) there are no oral or written conditions precedent to the
effectiveness of this Guaranty.
ARTICLE 5
MISCELLANEOUS PROVISIONS
------------------------
5.1 All the covenants, stipulations, promises and agreements contained in
this Guaranty by or on behalf of Guarantor are for the benefit of Lender, its
successors or assigns and shall bind Guarantor, and Guarantor's heirs,
executors, personal representatives, successors and assigns. Lender, without
notice of any kind, may sell, assign or transfer the Documents, and in such
event each and every immediate and successive assignee or transferee thereof may
be given the right by Lender to enforce this Guaranty in full, by suit or
otherwise, for Lender's own benefit. Guarantor agrees for the benefit of any
such assignee or transferee that Guarantor's obligations hereunder shall not be
subject to any reduction, abatement, defense, set off, counterclaim or
recoupment for any reason whatsoever.
5.2 All notices, requests or demands required or permitted to be given
hereunder shall be in writing, and shall be deemed effective (a) upon hand
delivery, if hand delivered; (b) one (1) Business Day after such are deposited
for delivery via Federal Express or other nationally recognized overnight
courier service; or (c) three (3) Business Days after such are deposited in the
United States mails, certified or registered mail, all with delivery charges
and/or postage prepaid, and addressed as shown below, or to such other address
as the person being notified may have designated in a notice given to the person
sought to be charged with the effect thereof. Written notice may be given by
telecopy to the telecopier number shown below or to such other telecopier number
as the person being notified may have designated in a notice given to the person
sought to be charged with the effect thereof, which notice shall be effective on
the day of receipt if received during the recipient's normal business hours on
the day of receipt or otherwise on the next Business Day; provided that such
notice shall not be deemed effective unless not later than the next Business
Day, a copy of such notice is hand-delivered or deposited for delivery via
courier or in the United States mails in accordance with the requirements set
forth above. As used herein the term "Business Day" means a day other than a
Saturday, a Sunday, a national holiday, or a day on which banks in Phoenix,
Arizona, are required to be closed. The notice addresses and telecopy numbers
for Guarantor and Lender are:
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<PAGE>
If to Lender: FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attn: Vice President - Resort Finance
Telecopy No.: (602) 874-6444
with a copy to: FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attn: Vice President - Associate General Counsel
Telecopy No.: (602) 874-6445
If to Guarantor: Vistana, Inc.
8801 Vistana Center Drive
Orlando, Florida 32821
Attn: Chief Financial Officer
Telecopy: (407) 289-3222
with a copy to: Susan Werth, Esq.
Vistana, Inc.
701 Brickell Avenue, Suite 2100
Miami, Florida 33131
Telecopy No.: (305) 374-7159
5.3 Terms used and not otherwise defined herein shall have the same
meanings given thereto in the Documents. The recitals set forth above are
incorporated herein by this reference.
5.4 CHOICE OF LAW; JURISDICTION; VENUE; AND WAIVER OF JURY TRIAL.
------------------------------------------------------------
(A) THIS GUARANTY HAS BEEN DELIVERED IN THE STATE OF ARIZONA. THIS
GUARANTY AND THE RIGHTS, DUTIES AND OBLIGATIONS OF GUARANTOR AND LENDER SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
ARIZONA (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS) AND TO THE EXTENT
THEY PREEMPT THE LAWS OF SUCH STATE, THE LAWS OF THE UNITED STATES.
(B) EACH OF GUARANTOR AND (BY ITS ACCEPTANCE HEREOF) LENDER: (A)
HEREBY IRREVOCABLY SUBMITS ITSELF TO THE PROCESS, JURISDICTION AND VENUE OF THE
COURTS OF THE STATE OF ARIZONA, MARICOPA COUNTY, AND TO THE PROCESS,
JURISDICTION, AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA, FOR THE PURPOSES OF SUIT, ACTION OR OTHER PROCEEDINGS ARISING OUT OF OR
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<PAGE>
RELATING TO THIS GUARANTY OR THE SUBJECT MATTER HEREOF, OR, IF LENDER INITIATES
SUCH ACTION, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION AND THE CHOICE
OF SUCH VENUE SHALL IN ALL IN STANCES BE AT LENDER'S ELECTION; AND (B) WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, HEREBY WAIVES AND AGREES NOT TO
ASSERT BY WAY OF MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR
PROCEEDING ANY CLAIM THAT SUCH PERSON IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF THE ABOVE-NAMED COURTS, THAT SUCH SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER. EACH OF GUARANTOR AND (BY ITS ACCEPTANCE HEREOF) LENDER
HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY JUDGMENT OR ACTION IN ANY
OTHER FORUM.
(C) GUARANTOR AND (BY ITS ACCEPTANCE HEREOF) LENDER ACKNOWLEDGE AND
AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS GUARANTY WOULD BE BASED
UPON DIFFICULT AND COMPLEX ISSUES; AND THEREFORE, THEY AGREE THAT ANY LAWSUIT
ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED BY A JUDGE SITTING WITHOUT A
JURY AND KNOWINGLY AND VOLUNTARILY WAIVE TRIAL BY JURY IN ANY SUCH PROCEEDING.
(D) ALL OF THE PROVISIONS SET FORTH IN THIS PARAGRAPH ARE MATERIAL
INDUCEMENTS FOR LENDER'S MAKING THE LOAN.
(GUARANTOR'S INITIALS ______)
5.5 If any provision of this Guaranty is held to be illegal, invalid,
unenforceable under present or future laws (all of which invalidating laws are
waived to the fullest extent possible), the legality, validity and
enforceability of the remaining provisions of this Guaranty shall not be
affected thereby. In lieu of each such illegal, invalid or unenforceable
provision, there shall be added to this Guaranty a provision that is legal,
valid and enforceable and as similar in terms to such illegal, invalid and
unenforceable provision as may be possible.
5.6 Time is of the essence in the performance of this Guaranty.
5.7 Guarantor, at its sole cost and expense, agrees to deliver and supply
Lender with a favorable opinion of its independent legal counsel, which counsel
must be acceptable to Lender, with respect to such matters as may be required
pursuant to the Loan Agreement.
5.8 If Lender undertakes to enforce this Guaranty, Guarantor will pay to
Lender in addition to any other amounts due hereunder, all costs and expenses of
collection, including, without limitation, attorneys' fees and legal expenses,
together with interest thereon at the Default
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<PAGE>
Rate, whether or not legal proceedings shall be instituted. If legal
proceedings are instituted by either party to enforce or interpret this
Guaranty, to recover damages for breach of this Guaranty, to obtain declaratory
relief in connection with this Guaranty, or otherwise to obtain judicial relief
in connection herewith, the prevailing party shall be entitled to recover
attorneys' fees as awarded by the court (and not by a jury) and all of the costs
and expenses of that litigation or proceeding, and any and all appeals
therefrom, including, but not limited to, taxable and nontaxable costs and
expert witness fees, together with interest on those attorneys' fees, costs and
expenses at the Default Rate. Without limiting the generality of the foregoing,
in the event of the commencement of a bankruptcy proceeding by or against
Guarantor or otherwise involving any collateral for the Obligations, Lender
shall, to the extent not already provided for herein, be entitled to recover,
and Guarantor shall be obligated to pay, Lender's attorneys' fees and costs
incurred in connection with: (i) any determination of the applicability of the
Bankruptcy Code to the terms of this Guaranty or Lender's rights hereunder; (ii)
any attempt by Lender to enforce or preserve its rights under the Bankruptcy
Code, or to prevent Guarantor from seeking to deny Lender its rights thereunder;
(iii) any effort by Lender to protect, preserve or enforce its rights against
any collateral for the Obligations, or seeking authority to modify the automatic
stay of Section 362 of the Bankruptcy Code or otherwise seeking to engage in
such protection, preservation or enforcement; or (iv) any proceeding(s) arising
under the Bankruptcy Code, or arising in or related to a case under the
Bankruptcy Code.
5.9 This Guaranty may be executed in counterparts, and any number of such
counterparts which have been executed by Guarantor and Lender shall constitute
one original.
5.10 This Guaranty exclusively and completely states the rights and
obligations of Lender and Guarantor with respect to Guarantor's guaranty and
subordination relative to the Obligations. No modification, variation,
termination, discharge, abandonment, or waiver of any of the provisions or
conditions of this Guaranty shall be valid unless in writing and signed by duly
authorized representatives of the party sought to be bound by such action. This
Guaranty supersedes any and all prior representations, warranties and/or
inducements, written or oral, heretofore made by Lender concerning Guarantor's
guaranty and subordination.
IN WITNESS WHEREOF, this Guaranty is executed to be effective as of that
date first appearing above.
[SEE SEPARATE SIGNATURE PAGE ATTACHED]
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<PAGE>
GUARANTOR:
VISTANA, INC., a Florida corporation
Witness as to Guarantor:
_____________________________ By:___________________________________
Type/Print Name:_____________ Type/Print Name:______________________
Title:________________________________
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<PAGE>
STATE OF ___________ )
) ss.
County of _____________ )
The foregoing instrument was acknowledged before me this _____ day of
_____________________, ____, by __________________________________________, the
_________________ of VISTANA, INC., a Florida corporation, on behalf of that
corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of ______,
_____.
____________________________________
Notary Public in and for the State and County
aforesaid
My commission expires:
_______________________
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<PAGE>
Lender hereby accepts this Guaranty and Subordination of VISTANA, INC.
LENDER: FINOVA CAPITAL CORPORATION, a Delaware
corporation
By________________________________________
Its_________________________________
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<PAGE>
EXHIBIT 7
FORM OF ASSIGNMENT OF CONTRACTS, LICENSES, PERMITS AND OTHER INTANGIBLES
-7-
<PAGE>
ASSIGNMENT OF CONTRACTS,
LICENSES, PERMITS, AND OTHER INTANGIBLES
THIS ASSIGNMENT OF CONTRACTS, LICENSES, PERMITS, AND OTHER INTANGIBLES
("Assignment") is entered into as of ____________, _______, by and between
______________, a(n)_______________ ("Assignor"), and FINOVA CAPITAL
CORPORATION, a Delaware corporation ("Assignee").
R E C I T A L S:
A. Assignor, as borrower, and Assignee, as lender, are parties to a Loan
Agreement dated as of even date herewith (as from time to time renewed, amended,
restated or replaced, "Loan Agreement"), pursuant to which Assignor has agreed
to make to Assignor a non-revolving loan in a principal amount not to exceed
_________________ Dollars ($_______________) ("Loan"). The Loan will be
evidenced by a Promissory Note made payable by Assignor to Assignee in the
original face amount of __________________________________________ DOLLARS
($_________________) and dated as of even date herewith (as from time to time
renewed, amended, restated or replaced, "Note").
B. The obligations of Assignor under the Loan Agreement and related
documents are secured, among other ways, by a [CONSTRUCTION] [MORTGAGE] [DEED OF
TRUST] and Financing Statement (With Security Agreement and Assignment of
Leases, Rents, Sales Documents, Sales Proceeds and Developer's Rights) (as from
time to time renewed, amended, restated or replaced, "Security Document") dated
as of even date herewith, and recorded or to be recorded in the real estate
records of ________ County, ________, and encumbering certain real property more
fully described in EXHIBIT A ("Real Property") and related personal property
(such property collectively, "Property"). All capitalized terms used but not
defined herein shall have the same meaning ascribed to such terms in the Loan
Agreement.
C. To facilitate payment and performance of Assignor's obligations under
the Loan Agreement, Assignor has agreed to assign to Assignee, inter alia, all
----- ----
of Assignor's right, title, and interest in and to the following property
(collectively, "Assigned Asset"): the contracts ("Contracts"), licenses
("Licenses"), permits ("Permits") and other intangibles ("Intangibles") now or
hereafter used in connection with the Property and/or the business of Assignor
conducted thereon or with respect thereto, including without limitation, the
Contracts, Licenses, Permits and other Intangibles if any, specifically
described in EXHIBIT B, and any benefits due and to become due thereunder, or
arising from the use or enjoyment of such items, and the proceeds thereof, but
specifically excluding any Leases, Rents, Sales Documents, Sales Proceeds and
Developer's Rights (as defined in the Security Document), any exchange
affiliation agreement and other property specifically excluded from the
definition of Personal Property (as defined in the Loan Agreement) and any
property expressly described in a release of any portion of the Real Property
from the Security Document as also being released from the Security Document or
this Assignment.
<PAGE>
A G R E E M E N T:
NOW, THEREFORE, for and in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Assignor and Assignee agree as follows:
1. THE ASSIGNMENT. Assignor hereby absolutely, irrevocably and
--------------
unconditionally grants, assigns, and transfers to Assignee all of Assignor's
right, title, and interest in and to the Assigned Asset, including but not
limited to any and all benefits arising thereunder. The interest of the
Assignee by virtue of this Assignment is deemed to be vested as of the date
hereof, and shall extend to and cover any and all modifications of, and
substitutions for the Assigned Asset.
2. PURPOSE. This Assignment is made for the purpose of securing all
-------
obligations from Assignor to Assignee ("Obligations"), including, without
limitation, the following:
2.1 Payment of the Note, together with accrued interest, according to
the terms of the Note;
2.2 Payment, performance, observance and satisfaction of all
representations, warranties, covenants, and conditions contained in the
Loan Agreement, the Note, the Security Document and the other Documents (as
defined in the Loan Agreement), including, without limitation, this
Assignment;
2.3 The repayment of all monies expended by the Assignee pursuant to
the provisions of the Documents, together with interest thereon from the
date of expenditure at the Default Rate (as defined in the Loan Agreement);
and
2.4 Any and all other liabilities or obligations of Assignor to
Assignee, direct or indirect, absolute or contingent, due or to become due,
whether now existing or which may hereafter arise in any manner, to the
extent expressly so provided in any document evidencing or creating such
liabilities or obligations.
3. LICENSE. Subject to the terms and conditions of this Assignment,
-------
Assignee confers upon Assignor a license to utilize, collect and retain the
benefits of the Assigned Asset. Upon the occurrence of an Event of Default (as
defined in Paragraph 6.1), such license may be revoked by written notice of
revocation to Assignor and immediately upon such revocation, Assignee may
utilize, collect and retain the benefits of the Assigned Asset without further
notice.
4. PROTECTION OF SECURITY. Notwithstanding anything herein to the
----------------------
contrary, if an Event of Default exists or Assignee determines such action to be
necessary in order to prevent the termination of any Assigned Asset with regard
to which the action is taken, the loss of any material benefit to Assignor or
Assignee under any Assigned Asset with regard to which the action is taken, or
the incurrence of any material detriment to Assignor or Assignee under any
Assigned
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<PAGE>
Asset with regard to which the action is taken, or to be necessary in order to
protect and preserve the right, title and interest of Assignee hereunder in and
to any Assigned Asset with regard to which the action is taken, Assignee may,
but without obligation to do so:
4.1 EXECUTION OF DOCUMENTS. Execute, acknowledge, obtain and deliver
----------------------
all documents (including, without limitation, notices, requests and
instructions) or things necessary or required as a term, covenant or
condition of any Assigned Asset, or which may be necessary or proper under
any Assigned Asset;
4.2 PERFORMANCE OF ASSIGNOR'S OBLIGATIONS. Perform any obligation
-------------------------------------
which Assignor has failed to perform when due under any Assigned Asset or
satisfy any condition of any Assigned Asset;
4.3 ENFORCEMENT OF OTHER PARTY'S OBLIGATIONS. Demand and receive all
----------------------------------------
performances due under or with respect to any Assigned Asset, take all
lawful actions for the enforcement thereof (including, without limitation,
the filing of claims and the commencement of arbitration, litigation or
other lawful proceedings), compromise and settle any claim or cause of
action in favor of Assignor arising from any Assigned Asset and give
acquittances and other sufficient discharges relating thereto;
4.4 MAKE CONCESSIONS. Make concessions to other parties to any
----------------
Assigned Asset; and
4.5 EXERCISE ASSIGNOR'S RIGHTS UNDER CONTRACTS, ETC. Exercise any
------------------------------------------------
and all other rights and remedies to which Assignor may have under any
Assigned Asset and/or are otherwise available to Assignor at law, in equity
or by statute.
All sums expended by Assignee pursuant to this Paragraph 4 shall be payable by
Assignor to Assignee upon demand, together with interest thereon from the date
of expenditure until paid at the Default Rate, and shall constitute part of the
Obligations and be secured by this Assignment and all security for the
Obligations.
5. POWER OF ATTORNEY. Assignee is hereby appointed Assignor's true and
-----------------
lawful attorney-in-fact (coupled with an interest) for and on behalf of
Assignor, whether in the name of Assignor or Assignee or otherwise, to take any
of the actions permitted to it under Paragraph 4. The power of attorney given
herein is a power coupled with an interest and shall be irrevocable until all
the Obligations have been fully paid and performed. Assignee shall have the
option, but not any duty, to exercise any power given to it hereunder.
6. EVENT OF DEFAULT; REMEDIES; ASSIGNEE'S RIGHT TO PERFORM.
-------------------------------------------------------
6.1 EVENT OF DEFAULT. The occurrence of any of the following events
----------------
or conditions shall constitute an Event of Default:
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<PAGE>
6.1.1 A default under or violation of any of the provisions of
Paragraph 7.1 or 7.2;
6.1.2 A default or violation in the performance of Assignor's
Obligations under this Assignment (other than those referred to
elsewhere in this Paragraph 6.1) which continues unremedied (a) for a
period of five (5) Business Days (as defined in Paragraph 6.4) after
notice of such default or violation to Assignor in the case of any
default or violation which can be cured by the payment of money alone
or (b) for a period of thirty (30) days after notice to Assignor in
the case of any other default or violation, provided, an additional
--------
period for cure, not to exceed thirty (30) days, shall be permitted as
to this Paragraph 5.1.2, but only if such default or violation cannot
be cured by the Assignor's diligent procession, and such period shall
be allowed [up to thirty (30) days] only if and so long as Assignor
continues to exercise duly diligent cure efforts;
6.1.3 Any representation or warranty of Assignor contained
herein or in any certificate furnished to Assignee hereunder by or on
behalf of Assignor proves to be, in any material, adverse respect,
false or misleading as of the date deemed made, provided, if such
--------
representation or warranty was not intentionally made falsely, or with
the intent to mislead, or was not made recklessly, such occurrence
shall not constitute an Event of Default unless the actual condition
might adversely affect Assignor's performance of the Obligations, any
of the Assigned Asset, or the business or financial condition of
Assignor or the ability of Assignor to Perform Assignor's Obligations;
6.1.4 Any levy, execution or seizure of any portion of the
Assigned Asset or the institution of any legal action or proceeding
adversely affecting Assignor's or Assignee's interest in any of the
Assigned Asset; or
6.1.5 An "Event of Default" as defined elsewhere in any of the
Documents.
6.2 REMEDIES. At any time after an Event of Default has occurred and
--------
while it is continuing, Assignee may collect and retain all payments due
Assignor under the Assigned Asset and exercise any and all other rights and
remedies which Assignee may have under the Documents, including, without
limitation, this Assignment, and/or are otherwise available to it at law,
in equity or by statute.
6.3 ASSIGNEE'S RIGHT TO PERFORM. Without limiting Assignee's rights
---------------------------
under any other Paragraph, if Assignor fails or refuses to pay or perform
any Obligation hereunder, then at any time thereafter, and without notice
to or demand upon Assignor and without waiving or releasing any other
right, remedy or recourse Assignee may have, Assignee may (but shall not be
obligated to) pay or perform such Obligation in the manner Assignee
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<PAGE>
determines to be necessary or appropriate for the account of and at the
expense of Assignor. All sums expended by Assignee pursuant to this
Paragraph 6.3 shall be payable by Assignor to Assignee upon demand,
together with interest thereon from the date of expenditure until paid at
the Default Rate; and shall constitute part of the Obligations and be
secured by all security for the Obligations.
6.4 BUSINESS DAY. As used herein the term "Business Day" means any
------------
day other than a Saturday, a Sunday, national holiday, or a day on which
banks in Arizona are required to close.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ASSIGNOR. Assignor
-----------------------------------------------------
represents, warrants and covenants to Assignee as follows (all of such
representations, warranties and covenants to remain in full force and effect
until all of Obligations have been fully paid and performed):
7.1 NO ASSIGNMENTS OR ENCUMBRANCES. Assignor is the owner of good,
------------------------------
legal and beneficial title to the Assigned Asset free and clear of all
liens, security interests, encumbrances and claims of any kind, except
those in favor of Assignee and any Permitted Encumbrances (as defined in
the Loan Agreement). Assignor will not assign, pledge, encumber or
otherwise transfer in any way, so long as this Assignment shall remain in
effect, the whole or any part of the Assigned Asset to anyone other than
Assignee; and Assignor will not permit or suffer to exist any lien,
security interest, encumbrance or claim of any kind upon the Assigned
Asset, except those in favor of Assignee.
7.2 CONTRACTS, LICENSES, PERMITS AND OTHER INTANGIBLES IN FULL FORCE
----------------------------------------------------------------
AND EFFECT. The Contracts, Licenses, Permits and other Intangibles
----------
included in the Assigned Asset are in full force and effect, and Assignor
has not executed any other instrument and is not subject to any restriction
which might prevent or limit Assignee from operating under the terms of
this Assignment. Except as may be otherwise expressly permitted pursuant
to terms of the Loan Agreement or elsewhere in this Assignment, Assignor
will not, without prior written consent of Assignee, which consent will not
be unreasonably withheld, modify, waive, terminate or alter in any material
way any of the material terms of any of the Material (as hereinafter
defined) Contracts, Licenses, Permits and other Intangibles included in the
Assigned Asset; and without limiting the generality of the foregoing, will
not consent to any modification which would result in the loss of any
material benefit or the incurrence of any material detriment to Assignor or
Assignee under any Material Contract, License, Permit or other Intangible
included in the Assigned Asset.
7.3 PROMPT AND STRICT COMPLIANCE. Except with respect to
----------------------------
Construction Work Contracts and Renovation Work Contracts which Assignor
has a right to terminate pursuant to the Loan Agreement: Assignor will in
all respects promptly and faithfully pay, perform, observe and satisfy all
of the terms and conditions in or of the Material Contracts, Licenses,
Permits and other Intangibles included in the Assigned Asset to be paid,
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<PAGE>
performed, observed and/or satisfied by Assignor thereunder; will take all
acts reasonably necessary to prevent the forfeiture, rescission,
termination or suspension of the Material Contracts, Licenses, Permits and
other Intangibles included in the Assigned Asset, the loss of any material
benefit to Assignor or Assignee under the Material Contracts, Licenses,
Permits and other Intangibles included in the Assigned Asset, or the
incurrence of any material detriment to Assignor or Assignee under the
Material Contracts, Licenses, Permits and other Intangibles included in the
Assigned Asset; and will require, demand, and enforce, by all available,
lawful and reasonable means, the prompt and faithful payment, performance,
observance and satisfaction of all of the material terms and conditions in
the Material Contracts, Licenses, Permits and other Intangibles included in
the Assigned Asset, to be paid, performed, observed and/or satisfied for
the benefit of Assignor by third parties obligated to perform thereunder.
7.4 NO DEFAULTS. There is no material default by Assignor now
-----------
existing under any of the Material Contracts, Licenses, Permits or other
Intangibles included in the Assigned Asset; and except with respect to
Construction Work Contracts and Renovation Work Contracts which Assignor
has a right to terminate pursuant to the Loan Agreement, to Assignor's
knowledge, no third party obligated to perform thereunder is in default of
its obligations under any of the Material Contracts, Licenses, Permits or
other Intangibles included in the Assigned Asset.
7.5 NOTICE OF DEFAULT, BREACH OR VIOLATION. Assignor, not later than
--------------------------------------
three (3) Business Days after receipt thereof, will give notice to
Assignee of any written notice it receives from a third party of (i) any
default, breach or violation on the part of Assignor with respect to any of
the Material Contracts, Licenses, Permits or other Intangibles included in
the Assigned Asset, (ii) any claim that any of the Material Contracts,
Licenses, Permits or other Intangibles included in the Assigned Asset has
been forfeited, rescinded, surrendered, terminated or suspended, and (iii)
any threat by a third party to forfeit, rescind, surrender, terminate or
suspend any of the Material Contracts, Licenses, Permits or other
Intangibles included in the Assigned Asset, such notice to include, without
limitation, the delivery to Assignee of copies of the notices referred to
above. Assignor will give prompt notice to Assignee of any material
default by any third party obligated to perform under any of the Material
Contracts, Licenses, Permits or other Intangibles included in the Assigned
Asset.
7.6 PERFORMANCE AND BENEFITS. Assignor hereby authorizes all third
------------------------
parties obligated to perform under any Assigned Asset to accept this
Assignment. Assignor hereby authorizes and directs each third party
obligated to perform under any Assigned Asset that, upon written notice to
such third party from Assignee reciting the occurrence of an Event of
Default and the revocation of the license granted to Assignor under
Paragraph 3 to receive such benefits, all monies, performances or other
benefits due thereunder, or in any way respecting the same, shall be paid
or rendered directly to Assignee or its nominee as they become due.
Assignor hereby relieves all third parties
-6-
<PAGE>
obligated to perform under any Assigned Asset from any liability to
Assignor by reason of such making of payments or rendering of performance
or other benefits to Assignee or its nominee. Nevertheless, subject to the
provisions of Paragraph 4, until Assignee notifies a third party obligated
to perform under any Assigned Asset in writing to render performance to
Assignee, Assignor shall be entitled to collect all payments and exercise
and receive all performances and other benefits pursuant to the license
granted to Assignor under Paragraph 3. Assignor hereby directs all third
parties to each Assigned Asset to accept from Assignee any tender of
performance of any of Assignor's obligations thereunder and any exercise of
Assignor's rights thereunder.
7.7 ADVERSE CLAIMS. If a claim of any kind which is not expressly
--------------
permitted herein arises or is asserted against Assignor or the Assigned
Asset which is adverse to Assignee's interest hereunder in and to any of
the Assigned Asset, then Assignor will notify Assignee of the claim and
promptly pay such claim in full or take such other action to cause such
claim to be released. At any time after the assertion of such a claim, if
Assignee has not received proof that the claim has been satisfied, then
Assignee may take whatever action it determines necessary for the defense
of its interest in the Assigned Asset, including, without limitation, the
employment of counsel, the prosecution and defense of litigation and the
payment, compromise or discharge of such claim. Upon demand therefor,
Assignor will reimburse Assignee for the costs incurred in connection with
such action, together with interest thereon at the Default Rate from the
date of incurrence until the date reimbursed by Assignor. In taking any
such action, Assignee shall not be bound to inquire into the accuracy or
validity of any apparent or threatened claim.
7.8 MATERIAL CONTRACTS, LICENSES, PERMITS OR OTHER INTANGIBLES. As
----------------------------------------------------------
used herein, the term "Material" when used to describe any of the
Contracts, Licenses, Permits or other Intangibles included in the Assigned
Asset shall mean a Contract, License, Permit or other Intangible included
in the Assigned Asset, which if forfeited, rescinded, surrendered,
terminated or suspended, would materially adversely affect the value or
intended use of the Property, the business of Assignee conducted thereon or
with respect thereto, or the ability of Assignor to perform its Obligations
under the Documents, including, without limitation, the Contracts (if any)
described in EXHIBIT C.
8. MUTUAL AGREEMENTS OF ASSIGNOR AND ASSIGNEE. Assignor and Assignee
------------------------------------------
mutually agree as follows:
8.1 EFFECT OF ASSIGNMENT. Assignee, by accepting this Assignment:
--------------------
8.1.1 Shall not be subject to any obligation or liability under
any Assigned Asset, as the case may be, arising prior to its
delivering to Assignor and the third party obligated to perform
thereunder its written election ("Assumption Election") that it
assumes Assignor's obligations and liabilities under such Assigned
Asset; but
-7-
<PAGE>
any and all such obligations and liabilities arising prior to
Assignee's Assumption Election shall remain Assignor's as though this
Assignment had not been made; and
8.1.2 Shall not be under any obligation to exercise any of the
rights, remedies, or powers hereby granted to it, and no failure or
delay in exercising any of such rights, remedies, or powers shall
constitute a waiver thereof or of any default by Assignor.
8.2 NO LIMITATION OF ASSIGNEE'S RIGHTS. The rights, remedies, and
----------------------------------
powers granted herein shall not be limited or otherwise affected by the
value of the Assigned Asset as compared to amounts, if any, owed by
Assignor to Assignee and may be exercised by Assignee either independently
of or concurrently with any other right, remedy, or power contained herein
or in any of the other Documents or by law. The taking of this Assignment
by Assignee shall not effect the release of any collateral now or hereafter
held by Assignee as security for the Obligations, and the taking of
collateral for the performance of the Obligations shall not effect a
release or termination of this Assignment, or any terms or provisions
hereof.
8.3 ASSIGNEE MAY ASSIGN. All of Assignor's right, title, and
-------------------
interest assigned hereunder may be reassigned by Assignee and any
subsequent Assignee, and the term "Assignee," as used herein, includes any
subsequent Assignee. This Assignment and the power of attorney contained
herein are solely for the benefit and protection of Assignee, its
successors and assigns and are not intended to confer upon any person other
than the parties hereto and their successors and assigns any right or
remedies under or by reason of this Assignment.
8.4 INDEMNIFICATION AND REIMBURSEMENT. Assignee shall not be
---------------------------------
obligated to perform or discharge, and it does not hereby undertake to
perform or discharge, any obligation, duty, or liability under the Assigned
Asset, or under or by reason of this Assignment, and Assignor shall and
does hereby agree to indemnify, protect, hold harmless and defend Assignee
and its shareholders, directors, officers, employees, servants and agents
for, from and against (a) any and all liability, loss, damage, cost,
expense, penalties or fines which it may or might incur under or by reason
of this Assignment and (b) any and all claims and demands whatsoever which
may be asserted against it by reason of any alleged obligation or
undertaking on its part to perform or discharge any of the terms or
conditions contained in the Assigned Asset; provided, however, that the
foregoing shall apply only to acts and omissions occurring prior to the
Assumption Election and any acts of Assignor after such Assumption
Election, and the foregoing shall not apply to the gross negligence or
willful misconduct of the person seeking to be indemnified. Should
Assignee incur any such liability, loss, damage, cost, expense, penalty or
fine under the Assigned Asset, or under or by reason of this Assignment, or
in the defense against any such claims or demands, or in prosecuting any
claim under this Assignment, the amount thereof, including, without
limitation, reasonable court costs, reasonable attorneys' fees
-8-
<PAGE>
and other reasonable expenses, shall be payable by Assignor to Assignee
immediately upon demand, together with interest thereon at the Default
Rate, until paid, and the same shall constitute part of the Obligations and
be secured by this Assignment and all security for the Obligations. On
written request by a person or other entity covered by the above agreement
of indemnity, Assignor will undertake, at its own cost and expense, on
behalf of such indemnitee, using counsel reasonably satisfactory to the
indemnitee, the defense of any claim or demand asserted against the
indemnitee.
8.5 TERMINATION OF ASSIGNMENT. This Assignment shall become and be
-------------------------
void and of no further effect except for the provisions of Paragraph 8.4,
and Assignee shall execute and deliver to Assignor a release of this
Assignment within a reasonable period of time after receipt of a written
request to do so ("Termination Condition") has been satisfied: (a) Assignor
has performed all the Obligations and (b) Assignee has no further
obligation to extend credit under the Documents. The affidavit of any
officer of Assignee the non-satisfaction of any of the elements of the
Termination Condition shall be and constitute prima facie evidence of the
validity, effectiveness and continuing force of this Assignment and any
person may and is hereby authorized to rely thereon. The partial release
of a Unit or Time-Share Interest from the lien of the Mortgage shall ipso
facto cause the release of all of the Assigned Asset exclusively related to
such Unit or Time-Share Interest from the terms of this Assignment.
9. NO WAIVER. No delay or omission on the part of Assignee to exercise
---------
any power, right, or remedy hereunder shall operate as a waiver of any such
power, right or remedy; and no single or partial exercise of any such power,
right or remedy shall preclude any other or further exercise thereof or the
exercise of any other power, right, or remedy of Assignee under this Assignment
or which may be provided by law. Any extension or indulgence at any time
allowed by Assignee to Assignor shall be in reliance upon the understanding that
such shall not affect or prejudice the rights, powers, and remedies of Assignee
except to the extent specifically set forth at the time in writing by Assignee;
and no waiver shall be construed as a waiver of any breach or default thereafter
occurring.
10. TIME OF THE ESSENCE. Time is of the essence in the performance of
-------------------
this Assignment.
11. BINDING EFFECT. This Assignment shall inure to the benefit of and be
--------------
binding upon the parties hereto and their respective heirs, personal
representatives, successors, and assigns.
12. NOTICES. All notices, demands, documents, or other writings as
-------
between Assignor and Assignee which are required or permitted to be given
hereunder shall be given and deemed delivered in accordance with the provisions
of the Loan Agreement.
13. OTHER DOCUMENTS. This Assignment is in addition to, and not in
---------------
limitation of, any rights in and to the Assigned Asset which Assignee may
acquire under any other Document; and
-9-
<PAGE>
to the extent of any ambiguity or inconsistency between this Assignment and any
other Document, the provisions imposing the greatest obligation upon Assignor
and granting the most expansive rights to Assignee shall control.
14. CHOICE OF LAW, JURISDICTION, VENUE, AND WAIVER OF JURY TRIAL. THE
------------------------------------------------------------
CHOICE OF LAW, JURISDICTION, VENUE AND WAIVER OF JURY TRIAL PROVISIONS OF THE
LOAN AGREEMENT SHALL BE EQUALLY APPLICABLE TO THIS ASSIGNMENT AND ARE
INCORPORATED HEREIN BY THIS REFERENCE.
15. FURTHER ASSURANCES; SECURITY AGREEMENT; SALE OF ASSIGNED ASSET. To
--------------------------------------------------------------
further assure the security intended by this Assignment, upon receipt of a
written request of Assignee from time to time, Assignor will execute and deliver
all further instruments or assurances, which may be reasonably required or
appropriate to perfect or further evidence Assignor's interest in the Assigned
Asset or to otherwise effect the intent and purposes of this Assignment,
including, without limitation, notices of this Assignment to the third party
obligors under any Assigned Asset, and mortgages, deeds of trust and/or
memorandums of this Assignment in connection with Assignor's interest under any
assigned real property leases. If necessary for Assignee to acquire or perfect
a lien or security interest in any portion of the Assigned Asset, this
Assignment shall be deemed a security agreement under the Uniform Commercial
Code with respect to such portion of the Assigned Asset. If this Assignment
must be or is deemed to be a security interest under the Uniform Commercial
Code, Assignor hereby grants to Assignee a security interest in the Assigned
Asset; and Assignee shall be entitled to sell the Assigned Asset at public or
private sale and/or to the exercise of all other rights and remedies under the
Uniform Commercial Code if an Event of Default exists, in addition to all the
other rights and remedies available to it pursuant to Paragraph 6.2. Any notice
of sale or other disposition of the Assigned Asset given not less than ten (10)
Business Days prior to such proposed action in connection with the exercise of
Assignee's rights and remedies shall constitute reasonable and fair notice of
such action. Assignee may postpone or adjourn any such sale from time to time
by announcement at the time and place of sale stated on the notice of sale or by
announcement of any adjourned sale, without being required to give a further
notice of sale. Any such sale may be for cash or, unless prohibited by
applicable law, upon such credit or installments as Assignee may determine. The
net proceeds of such sale shall be credited to the Obligations only when such
proceeds are actually received by Assignee in good current funds. All proceeds
realized by Assignee from the Assigned Asset after termination of the license
granted under Paragraph 3 and through and including a sale of the Assigned
Asset, net of the costs of any such sale, shall be applied by Assignee to the
Obligations in such order and manner as Assignee may determine. Assignor shall
be liable for any deficiency remaining after application of such proceeds to the
Obligations.
16. TERMINATION OF CONTRACT FOR CAUSE; TERMINATION AND MODIFICATION OF
------------------------------------------------------------------
SALES CONTRACTS. Assignee agrees that if Assignee's consent to such termination
- ---------------
is required, it will notify Assignor that Assignee is giving or withholding its
consent to the termination for cause of any Material Contract included in the
Assigned Asset within ten (10) Business Days after Assignee
-10-
<PAGE>
has actually received from Assignor a written request to allow Assignor to
terminate such Material Contract for cause which sets forth with reasonable
specificity the reasons for the action Assignor proposes to take and explaining
how the business of Assignor conducted on or with respect to the Property will
be affected after termination of such Material Contract. Assignee's failure to
deliver such notice within such time period shall be deemed to cause a consent
to the then-applicable request. Notwithstanding anything in this Assignment to
the contrary, Assignor may modify and terminate in good faith in the ordinary
course of its business contracts which have been entered into by it for sales of
portions of the Property and have not yet closed.
17. SEVERABILITY. If any provision of this Assignment is held to be
------------
illegal, invalid or unenforceable under present or future laws (all of which
invalidating laws are waived to the fullest extent possible), the legality,
validity and enforceability of the remaining provisions of this Assignment shall
not be affected thereby. In lieu of each such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this Assignment a
provision that is legal, valid and enforceable and as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
18. PERMITTED CONTESTS. After prior written notice to Assignee, Assignor
------------------
at its expense may contest, by appropriate legal or other proceedings conducted
in good faith and with due diligence, the amount or validity of (a) any, tax,
charge or assessment assessed, levied or imposed upon the Assigned Asset, (b)
any law or regulation or (c) any monetary lien, so long as: (i) in the case of
an unpaid tax, charge, assessment or lien, such proceedings suspend the
collection thereof from Assignee and the Material Contracts, Licenses, Permits
and other Intangibles included in the Assigned Asset; (ii) none of the Material
Contracts, Licenses, Permits and other Intangibles included in the Assigned
Asset is, in the judgment of Assignee, in any imminent danger of being sold,
forfeited or lost; (iii) in the case of any law or regulation, neither Assignor
or Assignee is in any danger of any civil or criminal liability for failure to
comply therewith; and (iv) Assignor has furnished such security, if any, as may
be required in the proceedings or as Assignee reasonably requests up to one
hundred fifty percent (150%) of the amount in controversy.
19. COUNTERPART EXECUTION. This Assignment may be executed in
---------------------
counterparts, each of such counterparts which have been executed by Assignor and
Assignee shall constitute one original.
IN WITNESS WHEREOF, Assignor and Assignee have executed this instrument as
of the day and year first hereinabove written.
[SEPARATE SIGNATURE PAGES FOLLOW]
-11-
<PAGE>
WITNESS AS TO ASSIGNOR: ASSIGNOR:
______________________________,
a(n) __________________________
Witness:____________________
Type/Print Name:____________ By:___________________________________
Type/Print Name:______________________
Title:________________________________
ASSIGNEE:
FINOVA CAPITAL CORPORATION, a Delaware
corporation
By:___________________________________
Type/Print Name:______________________
Title:________________________________
-12-
<PAGE>
STATE OF ___________ )
) ss.
County of __________ )
The foregoing instrument was acknowledged before me this _____ day of
_____________________, ____, by __________________________________________, the
_________________ of ________________________________________,
a(n)_______________, on behalf of such____________________. He/She is
personally known to me or has produced ________________ as identification.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of _______,
______.
_____________________________________________
Notary Public in and for the State and County
aforesaid
My commission expires:
_____________________
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
-----------------
<PAGE>
EXHIBIT B
LIST OF CERTAIN CONTRACTS, LICENSES, PERMITS AND OTHER INTANGIBLES
------------------------------------------------------------------
THE FAILURE TO COMPLETE THIS EXHIBIT OR TO LIST ANY CONTRACT, LICENSE,
PERMIT OR OTHER INTANGIBLE SHALL NOT BE INTERPRETED AS THE INTENTION OF ASSIGNOR
OR ASSIGNEE THAT SUCH ITEM NOT BE DEEMED TO BE ASSIGNED.
<PAGE>
EXHIBIT C
THE FAILURE TO COMPLETE THIS EXHIBIT OR TO LIST ANY CONTRACT SHALL NOT BE
INTERPRETED AS THE INTENTION OF ASSIGNOR OR ASSIGNEE THAT SUCH CONTRACT NOT BE
DEEMED TO BE MATERIAL.
<PAGE>
EXHIBIT 8
REAL PROPERTY
1. The real property is owned in fee simple by the Vistana Entity requesting
the Loan, and such Vistana Entity is the developer of the real property.
2. The Real Property is located in one of the states of the United States of
America.
-8-
<PAGE>
VISTANA 1998-A TIMESHARE MORTGAGE CORP.
as Issuer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Trustee, Securities Intermediary, and Back-up Servicer
___________________________________
INDENTURE
Dated as of July 31, 1998
___________________________________
$31,973,000.00 5.891% TIMESHARE MORTGAGE-BACKED NOTES, SERIES 1998-A,
CLASS A
AND $34,180,583.90 6.282% TIMESHARE MORTGAGE-BACKED NOTES, SERIES 1998-A,
CLASS B
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
THE NOTES
<TABLE>
<S> <C>
Section 201. AUTHORIZATION OF NOTES.............................................................. 2
----------------------
Section 202. FORM OF NOTES....................................................................... 2
-------------
Section 203. EXECUTION; RECOURSE OBLIGATION...................................................... 7
------------------------------
Section 204. CERTIFICATE OF AUTHENTICATION....................................................... 7
-----------------------------
Section 205. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE OF NOTES........................ 7
------------------------------------------------------------
Section 206. MUTILATED, DESTROYED, LOST AND STOLEN NOTES......................................... 9
-------------------------------------------
Section 207. RATABLY SECURED..................................................................... 10
---------------
Section 208. DELIVERY, RETENTION AND CANCELLATION OF NOTES....................................... 10
---------------------------------------------
ARTICLE III
PAYMENT OF NOTES, STATEMENTS TO NOTEHOLDERS
Section 301. FLOW OF FUNDS....................................................................... 11
-------------
Section 302. RESERVE ACCOUNT..................................................................... 13
---------------
Section 303. THE LETTER OF CREDIT................................................................ 14
--------------------
Section 304. COLLECTION ACCOUNT.................................................................. 17
------------------
Section 305. INVESTMENT OF MONIES HELD IN THE COLLECTION ACCOUNT................................. 18
---------------------------------------------------
Section 306. REPORTS TO NOTEHOLDERS.............................................................. 19
----------------------
Section 307. RECORDS............................................................................. 19
-------
Section 308. LOCKBOX BANK; LOCKBOX ACCOUNT....................................................... 20
-----------------------------
Section 309. SECURITIES ACCOUNT.................................................................. 20
------------------
Section 310. SECURITIES INTERMEDIARY............................................................. 20
-----------------------
Section 311. TRUSTEE'S COVENANTS AS SECURED PARTY IN THE SECURITY ACCOUNTS....................... 22
-------------------------------------------------------------
Section 312. TRUSTEE'S COVENANTS AS BAILEE UNDER THE CUSTODIAL AGREEMENT......................... 23
-----------------------------------------------------------
Section 313. FAILURE OF SERVICER TO DELIVER SERVICER REPORT...................................... 23
----------------------------------------------
ARTICLE IV
COLLATERAL
Section 401. COLLATERAL.......................................................................... 24
----------
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Section 402. GRANT OF SECURITY INTEREST.......................................................... 24
--------------------------
Section 403. MORTGAGE DOCUMENTS.................................................................. 25
------------------
Section 404. PRO RATA INTEREST................................................................... 25
-----------------
Section 405. RELEASE OF SECURITY INTEREST........................................................ 25
---------------------
ARTICLE V
SPECIAL PROVISIONS REGARDING
COLLATERAL
Section 501. ADMINISTRATION OF COLLATERAL........................................................ 26
----------------------------
Section 502. PAYMENTS OF COLLATERAL.............................................................. 28
----------------------
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 601. REPRESENTATIONS AND WARRANTIES OF THE ISSUER........................................ 29
--------------------------------------------
Section 602. AFFIRMATIVE COVENANTS OF THE ISSUER................................................. 35
-----------------------------------
Section 603. ISSUER'S NEGATIVE COVENANTS......................................................... 41
---------------------------
Section 604. REPRESENTATIONS AND WARRANTIES OF PROSPECTIVE NOTEHOLDERS........................... 44
---------------------------------------------------------
Section 605. CONSOLIDATION AND MERGER............................................................ 44
------------------------
Section 606. OTHER AGREEMENTS.................................................................... 44
----------------
ARTICLE VII
DISCHARGE OF INDENTURE
Section 701. FULL DISCHARGE...................................................................... 45
--------------
Section 702. OPTIONAL PREPAYMENT OF NOTES........................................................ 45
----------------------------
ARTICLE VIII
DEFAULT PROVISIONS AND REMEDIES
Section 801. EVENT OF DEFAULT.................................................................... 47
----------------
Section 802. ACCELERATION OF STATED MATURITY; RESCISSION AND ANNULMENT........................... 48
---------------------------------------------------------
Section 803. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE..................... 49
---------------------------------------------------------------
Section 804. REMEDIES............................................................................ 50
--------
Section 805. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES.............................. 51
------------------------------------------------------
Section 806. POWER OF ATTORNEY; ALLOCATION OF MONEY COLLECTED.................................... 51
------------------------------------------------
Section 807. LIMITATION ON SUITS................................................................. 51
-------------------
Section 808. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND INTEREST.................... 52
----------------------------------------------------------------
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
Section 809. RESTORATION OF RIGHTS AND REMEDIES.................................................. 52
----------------------------------
Section 810. RIGHTS AND REMEDIES CUMULATIVE...................................................... 53
------------------------------
Section 811. DELAY OR OMISSION NOT WAIVER........................................................ 53
----------------------------
Section 812. CONTROL BY HOLDERS.................................................................. 53
------------------
Section 813. WAIVER OF PAST DEFAULTS............................................................. 53
-----------------------
Section 814. UNDERTAKING FOR COSTS............................................................... 54
---------------------
Section 815. WAIVER OF STAY OR EXTENSION LAWS.................................................... 54
--------------------------------
Section 816. OPTIONAL PRESERVATION OF COLLATERAL................................................. 54
-----------------------------------
Section 817. SALE OF COLLATERAL.................................................................. 55
------------------
Section 818. ACTION ON NOTES..................................................................... 55
---------------
ARTICLE IX
CONCERNING THE INDENTURE TRUSTEE
Section 901. DUTIES OF TRUSTEE................................................................... 56
-----------------
Section 902. CERTAIN MATTERS AFFECTING THE TRUSTEE............................................... 57
-------------------------------------
Section 903. TRUSTEE NOT LIABLE.................................................................. 58
------------------
Section 904. TRUSTEE MAY OWN NOTES............................................................... 58
---------------------
Section 905. LIEN FOR TRUSTEE'S FEES AND EXPENSES................................................ 59
------------------------------------
Section 906. ELIGIBILITY REQUIREMENTS FOR TRUSTEE................................................ 59
------------------------------------
Section 907. RESIGNATION AND REMOVAL OF TRUSTEE.................................................. 59
----------------------------------
Section 908. SUCCESSOR TRUSTEE................................................................... 60
-----------------
Section 909. MERGER OR CONSOLIDATION OF TRUSTEE.................................................. 61
----------------------------------
Section 910. SEPARATE TRUSTEES, CO-TRUSTEES AND CUSTODIANS....................................... 61
---------------------------------------------
Section 911. REPRESENTATIONS AND WARRANTIES...................................................... 62
------------------------------
Section 912. TRUSTEE OFFICES..................................................................... 63
---------------
Section 913. NOTICE OF EVENT OF DEFAULT.......................................................... 63
--------------------------
Section 914. BACK-UP SERVICER AND SECURITIES INTERMEDIARY........................................ 63
--------------------------------------------
ARTICLE X
SUPPLEMENTAL INDENTURES
Section 1001. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.................................. 64
--------------------------------------------------
Section 1002. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS..................................... 64
-----------------------------------------------
Section 1003. EXECUTION OF SUPPLEMENTAL INDENTURES................................................ 65
------------------------------------
Section 1004. EFFECT OF SUPPLEMENTAL INDENTURES................................................... 65
---------------------------------
Section 1005. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES....................................... 65
---------------------------------------------
Section 1006. NOTICE OF SUPPLEMENTAL INDENTURES................................................... 65
---------------------------------
Section 1007. BANK TO APPROVE AMENDMENTS.......................................................... 65
--------------------------
</TABLE>
ARTICLE XI
HOLDERS LISTS
-iii-
<PAGE>
<TABLE>
<S> <C>
Section 1101. ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS........................... 66
--------------------------------------------------------
Section 1102. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS............................. 66
------------------------------------------------------
ARTICLE XII
REPURCHASE AND SUBSTITUTION
Section 1201. OPTIONAL PURCHASE OR SUBSTITUTION BY ISSUER OR SERVICER............................ 67
-------------------------------------------------------
Section 1202. RELEASE OF PREDECESSOR MORTGAGE LOAN............................................... 67
------------------------------------
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 1301. COMPLIANCE CERTIFICATES AND OPINIONS............................................... 69
------------------------------------
Section 1302. FORM OF DOCUMENTS DELIVERED TO TRUSTEE............................................. 69
--------------------------------------
Section 1303. ACTS OF HOLDERS.................................................................... 70
---------------
Section 1304. Reserved........................................................................... 70
Section 1305. LIMITATION OF RIGHTS............................................................... 70
--------------------
Section 1306. SEVERABILITY....................................................................... 71
------------
Section 1307. NOTICES............................................................................ 71
-------
Section 1308. CAPTIONS........................................................................... 72
--------
Section 1309. GOVERNING LAW...................................................................... 72
-------------
Section 1310. NO PETITION........................................................................ 72
-----------
Section 1311. GENERAL INTERPRETIVE PRINCIPLES.................................................... 72
-------------------------------
Section 1312. THIRD PARTY BENEFICIARIES.......................................................... 72
-------------------------
Section 1313. BANK CONSENT AND DIRECTION RIGHTS.................................................. 72
---------------------------------
Section 1314. EFFECTIVE DATE OF TRANSACTION...................................................... 73
-----------------------------
Section 1315. CONFIDENTIALITY.................................................................... 73
---------------
</TABLE>
EXHIBIT A - Instrument Schedule
EXHIBIT B - Transfer Certificate (Rule 144A)
EXHIBIT C - Transfer Certificate (other than Rule 144A) by an Institutional
Accredited Investor
EXHIBIT D - Form of Non-Recourse Release
EXHIBIT E - Form of Assignment of Mortgage
APPENDIX A - Definitions
-iv-
<PAGE>
Indenture, dated as of July 31, 1998 (as amended or supplemented from
time to time as permitted hereby, the "Indenture"), between Vistana 1998-A
---------
Timeshare Mortgage Corp., a Delaware corporation (the "Issuer"), and Norwest
------
Bank Minnesota, National Association, a national banking association, as trustee
(the "Trustee"), securities intermediary (the "Securities Intermediary"), and
------- -----------------------
back-up Servicer (the "Back-up Servicer").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Issuer desires to issue its 5.891% Timeshare Mortgage-
Backed Notes, Series 1998-A, Class A and 6.282% Timeshare Mortgage-Backed Notes,
Series 1998-A, Class B (the "Notes") pursuant to this Indenture; and
-----
WHEREAS, the Notes will be limited-recourse obligations of the Issuer,
secured by the Collateral; and
WHEREAS, all acts and things have been done and performed which are
necessary to make the Notes, when executed by the Issuer, authenticated by the
Trustee and issued, the legal, valid and binding obligations of the Issuer,
enforceable in accordance with their terms, and to make this Indenture a valid
and binding agreement for the security of the Notes authenticated and delivered
under this Indenture;
NOW, THEREFORE, in consideration of the premises and of the covenants
and undertakings herein expressed, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used in this Indenture shall have the meanings
assigned to such terms in Appendix A hereto.
<PAGE>
ARTICLE II
THE NOTES
Section 201. Authorization of Notes. There shall be issued under,
-----------------------
and secured in accordance with, this Indenture the Notes which shall be
designated as the Issuer's 5.891% Timeshare Mortgage-Backed Notes, Series 1998-
A, Class A and 6.282% Timeshare Mortgage-Backed Notes, Series 1998-A, Class B,
in the initial aggregate principal amounts of $31,973,000.00 and $34,180,583.90,
respectively.
The Notes shall be initially issued in minimum denominations of
$1,000,000 and any amount in excess thereof.
Section 202. Form of Notes. The Notes issued under this Indenture
-------------
shall be substantially in the following form with such appropriate variations,
omissions, additions and insertions as are permitted or required by this
Indenture:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT
BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED, UNLESS SUCH TRANSFER IS MADE
TO A PERSON REASONABLY BELIEVED TO BE A QUALIFIED INSTITUTIONAL BUYER ("QIB")
UNDER RULE 144A, AS AMENDED ("RULE 144A") OR TO AN ACCREDITED INVESTOR UNDER
SECTION 501(a)(1), (2), (3) AND (7) OF THE SECURITIES ACT ("ACCREDITED
INSTITUTIONAL INVESTOR") IN A TRANSACTION WHICH DOES NOT REQUIRE REGISTRATION
UNDER THE SECURITIES ACT AND PURSUANT TO AN EFFECTIVE REGISTRATION OR
QUALIFICATION UNDER ANY STATE SECURITIES OR "BLUE SKY" LAWS, OR IN A TRANSACTION
WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION. IN ADDITION, SUCH
TRANSACTION MUST COMPLY WITH THE PROVISIONS SET FORTH IN SECTION 205 OF THE
INDENTURE. BECAUSE OF THE PROVISIONS FOR THE PAYMENT OF PRINCIPAL CONTAINED
HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE MAY BE LESS THAN THE
AMOUNT SHOWN ON THE FACE HEREOF. ANYONE PURCHASING THIS NOTE MAY ASCERTAIN THE
OUTSTANDING PRINCIPAL AMOUNT HEREOF BY INQUIRY OF THE TRUSTEE.
VISTANA 1998-A TIMESHARE MORTGAGE CORP.
____% TIMESHARE MORTGAGE-BACKED NOTE, SERIES 1998-A, CLASS __
$___________________ No. R-_______________
______________, 19___
KNOW ALL PERSONS BY THESE PRESENTS that Vistana 1998-A Timeshare
Mortgage Corp. (the "Issuer"), for value received, hereby promises (i) to pay to
------
_________________, or registered assigns, at the principal corporate trust
office of the Trustee named below, the principal sum of
____________________________________ Dollars ($_____________), which sum shall
be payable on the dates and in the amounts set forth in the
-2-
<PAGE>
Indenture (the "Indenture") dated as of July 31, 1998 between the Issuer and
---------
Norwest Bank Minnesota, National Association (the "Trustee") and (ii) to pay
-------
interest on the outstanding principal amount of this Note at the rate of
________ and ________ percent (_____%) per annum on the dates set forth in the
Indenture. Capitalized terms not otherwise defined herein shall have the meaning
ascribed thereto in the Indenture.
Payment of the principal of and interest on this Note shall be made in
lawful money of the United States of America which at the time of payment is
legal tender for payment of public and private debts. Principal and interest
are payable on each Payment Date by wire transfer of immediately available funds
to the account designated on or prior to the immediately preceding Record Date
by the Holder of record as of such immediately preceding Record Date. The
Issuer shall, at all times and subject to the terms and conditions of the
Indenture, pay (on each Payment Date and on the final maturity date, whether by
acceleration or otherwise) interest on any unpaid amounts (provided, however,
that no interest shall be payable on Overdue Interest) owing pursuant to the
terms of the Indenture to the extent permitted by applicable law.
This Note is one of an authorized series of notes identified in the
title hereto and issued in the aggregate original principal amount of
$__________ (the "Notes"). The Notes are issued pursuant to the Indenture, to
-----
which Indenture reference is made for a statement of the respective rights,
limitations, duties and immunities of the Issuer, the Trustee and the Holders of
the Notes. The Notes and interest due thereon shall be a limited-recourse
obligation of the Issuer, and shall be secured by the Collateral and subject to
limitations set forth in the Indenture, for the equal and ratable benefit
(subject to the subordination provisions of the Indenture) of the Holders, from
time to time, of the Notes (the "Noteholders") and the Bank. No Person other
-----------
than the Issuer shall be liable for any obligation of the Issuer under the
Indenture or this Note or any losses incurred by the Holder of this Note other
than the Bank pursuant to, and only with respect to, the Letter of Credit.
This Note is transferable as provided in the Indenture, subject to
certain limitations therein contained, only upon the books for registration and
transfer kept by the Note Registrar, and only upon surrender of this Note for
transfer to the Trustee duly endorsed by, or accompanied by a written instrument
of transfer in form substantially similar to Exhibit B or Exhibit C of the
Indenture, as appropriate, reasonably satisfactory to the Trustee duly executed
by, the registered Holder hereof or his or her attorney duly authorized in
writing. No such transfer shall be so made unless such transfer is made either
to a person reasonably believed to be a QIB pursuant to Rule 144A, or to an
Accredited Institutional Investor in a transaction which does not require
registration under the Securities Act, and pursuant to an effective registration
or qualification under any State securities or "Blue Sky" laws, or in a
transaction which does not require such registration or qualification and the
Holder thereof delivers to the Trustee the certification required under the
Indenture with respect to the Securities Act and certain other matters, as set
forth in the applicable Exhibit to the Indenture. The Issuer, the Trustee and
each Holder by acceptance of this Note (and any Person that is a beneficial
owner of any interest in this Note, by virtue of such Person's acquisition of a
beneficial interest therein) agrees to treat this Note for purposes of federal,
state and local income or franchise taxes (and any other tax imposed on or
measured by income) as indebtedness. The Holder of this Note agrees that it
will cause any Person acquiring an interest in this Note through it to
acknowledge such Note's characterization as indebtedness and to agree to comply
with this Indenture as to treatment of the Notes as indebtedness for such tax
purposes.
-3-
<PAGE>
The Notes are issuable as fully registered notes in the initial
minimum denomination of $1,000,000. No service charge will be made for any
registration of transfer or exchange of Notes, but payment of a sum sufficient
to cover any tax or other governmental charge may be required. The Trustee or
Issuer may require payment by the Holder of a sum sufficient to cover any tax
expense or other governmental charge payable in connection therewith.
The Issuer, the Trustee, the Servicer and any agent of the Issuer may
treat the person in whose name this Note is registered as the absolute owner
hereof for all purposes, and neither the Issuer, the Trustee, the Servicer nor
any other such agent shall be affected by notice to the contrary. Any reference
herein to the "Noteholder" or the "Holder" shall be deemed to include and apply
---------- ------
to every subsequent Holder of this Note including, but not limited to, any
Trustee.
If an Indenture Event of Default shall occur and be continuing, the
principal of and accrued interest on this Note may be declared to be due and
payable in the manner and with the effect provided in the Indenture. The Notes
are subject to prepayment upon the prepayment (whether voluntary or upon
acceleration) of any Mortgage Loan and, at the Issuer's option, on any Payment
Date succeeding a Collection Period at the end of which the aggregate Note
Balance for both classes of Notes is less than twenty percent (20%) of the
aggregate Note Balance for both classes of Notes on the Closing Date and under
other circumstances as provided in the Indenture. Reference is made to the
Indenture for all other provisions concerning mandatory and voluntary principal
and interest repayments, Collateral, prepayments, acceleration, subordination
and other material terms affecting this Note, including priority of payment as
between the Class A Notes and the Class B Notes.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof at any time with the consent of the Issuer, the Trustee,
certain of the Noteholders and the Bank. The Indenture also permits, with
certain exceptions as therein provided, the issuance of supplemental indentures
with the consent of certain of the Noteholders and the Bank, in certain
specifically described instances. Any consent given by a Holder of this Note
shall be conclusive and binding upon such Holder and on all future Holders of
this Note and of any Note issued in lieu hereof whether or not notation of such
consent is made upon this Note. Supplements and amendments to the Indenture may
be made only to the extent and in circumstances permitted by the Indenture.
The Holder of this Note shall have no right to enforce the provisions
of the Indenture against the Issuer or to institute action to enforce the
covenants, or to take any action with respect to a default under the Indenture,
or to institute, appear in or defend any suit or other proceedings with respect
thereto, except as provided under certain circumstances described in the
Indenture; provided, however, that nothing contained in the Indenture shall
affect or impair any right of enforcement conferred on the Holder hereof to
enforce any payment of the principal of and interest on this Note when due or to
require the Trustee to enforce and abide by the provisions of the Indenture;
provided further, that the Holder hereof hereby covenants and agrees that it
will not institute against the Issuer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any federal or state bankruptcy or similar law, at any time other than at such
time as permitted by Section 1310 of the Indenture. By accepting this Note, the
Holder hereof irrevocably appoints the Trustee under the Indenture as its
attorney-in-fact for the Holder, vested with full power on behalf of the Holder,
to effect and enforce the rights of such Holder and the provisions of the
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<PAGE>
Indenture for the benefit of the Holder. The preceding sentence in no way shall
limit the right of the Holder hereof to demand payment hereunder or bring an
action to enforce payment hereof.
All terms and provisions of the Indenture are herein incorporated by
reference as if set forth herein in their entirety. AS PROVIDED IN THE
INDENTURE, THIS NOTE AND THE INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED, that all acts,
conditions and things required to exist, happen and be performed precedent to
the execution and delivery of the Indenture and the issuance of this Note and
the issue of which it is a part, do exist, have happened and have been timely
performed in regular form and manner as required by law.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature of one of its authorized officers, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
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<PAGE>
IN WITNESS WHEREOF, Vistana 1998-A Timeshare Mortgage Corp. has caused
this Note to be duly executed by __________________ on this _____ day of
______________, 19__.
VISTANA 1998-A TIMESHARE MORTGAGE
CORP.
By:_____________________________________
Name:
Its:
This Note is one of the Notes described in the within-mentioned
Indenture.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By:____________________________________
Its Authorized Officer
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<PAGE>
Section 203. Execution; Recourse Obligation.
------------------------------
In case any officer of the Issuer or the Trustee whose signature shall
appear on the Notes shall cease to be an officer of the Issuer or the Trustee
before the authentication and delivery of such Notes, such signature or
facsimile signature shall nevertheless be valid and sufficient for all purposes.
At the written direction of the Issuer, the Trustee shall authenticate
and deliver the Notes. It shall not be necessary that the same authorized
signatory of the Trustee execute the certificate of authentication on each of
the Notes.
All Notes and the interest thereon shall be limited-recourse
obligations of the Issuer, secured by the Collateral. The Notes shall never
constitute obligations of the Trustee, the Bank, any Originator or of any
partner or any Affiliate of the Trustee, the Bank or any Originator (other than
the Issuer) or any officers, directors, employees or agents of any thereof, and
no recourse may be had under or upon any obligation, covenant or agreement of
this Indenture, or of any Notes, or for any claim based thereon or otherwise in
respect thereof, against any incorporator or against any past, present, or
future owner, partner of an owner or any officer, employee or director thereof
or of any successor entity, or any other Person, either directly or through the
Issuer, whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly agreed
that this Indenture and the obligations issued hereunder are solely obligations
of the Issuer, and that no such personal liability whatever shall attach to, or
is or shall be incurred by, any other Person under or by reason of this
Indenture or any Notes or implied therefrom, or for any claim based thereon or
in respect thereof, all such liability and any and all such claims being hereby
expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issue of such Notes. No Person other than
the Issuer shall be liable for any obligation of the Issuer under this Indenture
or any Note or any losses incurred by the Holder of any Note other than the Bank
pursuant to, and only with respect to, the Letter of Credit.
Section 204. Certificate of Authentication. No Note shall be
-----------------------------
secured hereby or entitled to the benefit hereof or shall be or become valid or
obligatory for any purpose unless there shall be endorsed thereon a certificate
of authentication, substantially in the form as set forth in the form of Note in
Section 202 hereof, executed by the Trustee; and such certificate on any Note
issued by the Issuer shall be conclusive evidence and the only competent
evidence that it has been duly authenticated and delivered hereunder.
Section 205. Registration; Registration of Transfer and Exchange of
------------------------------------------------------
Notes.
- -----
(a) Books and Records. The note registrar (the "Note Registrar")
----------------- --------------
shall keep at its principal office books (the "Note Register") for the
-------------
registration and transfer of the Notes. The Issuer hereby appoints the Trustee
as its initial Note Registrar and transfer agent to keep such books and make
such registrations and transfers as hereinafter set forth in this Section 205.
The names and addresses of the Holders of all Notes and all transfers of, and
the names and addresses of the transferees of, all Notes will be registered in
such register. Upon prior written request by the Rating Agency, the Trustee
will make reasonably available to the Rating Agency any information contained in
the Note Register. The Person in whose name any Note is registered shall be
deemed and treated
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<PAGE>
as the owner and Holder thereof for all purposes of this Indenture, and the
Trustee, the Bank and the Issuer shall not be affected by any notice or
knowledge to the contrary. If a Person other than the Trustee is appointed by
the Issuer to maintain the Note Register, the Issuer will give the Trustee
prompt written notice of such appointment and of the location, and any change in
the location, of the successor note registrar, and the Trustee shall have the
right to inspect the Note Register at all reasonable times and to obtain copies
thereof, and the Trustee shall have the right to rely upon a certificate
executed on behalf of the Note Registrar by an officer thereof as to the names
and addresses of the Holders of the Notes and the principal amounts and number
of such Notes.
(b) Note Register Lists. The Trustee shall preserve in as current a
-------------------
form as is reasonably practicable the most recent list available to it of the
names and addresses of Noteholders. If the Trustee is not the Note Registrar,
the Issuer shall furnish to the Trustee on each Determination Date and at such
other times as the Trustee may request in writing a list in such form and as of
such date as the Trustee may reasonably require of the names and addresses of
Noteholders on the related Record Date or any other Record Dates.
(c) Noteholder Communication. If any Noteholder (herein referred to
------------------------
as an "applicant") applies in writing to the Trustee, and such application
states that the applicant desires to communicate with other Noteholders with
respect to their rights under this Indenture or under the Notes, then the
Trustee shall, within three Business Days after the receipt of such application,
afford such applicant(s) access to the information preserved at the time by the
Trustee in accordance with Section 205(b).
(d) Noteholder Disclosure of Addresses. Every Noteholder, by
----------------------------------
receiving and holding a Note, agrees with the Issuer and the Trustee that
neither the Issuer nor the Trustee nor any agent of either of them shall be held
accountable by reason of the disclosure of any of the names and addresses of the
Noteholders in accordance with Section 205(c), regardless of the source from
which such information was derived, and that the Trustee shall not be held
accountable by reason of providing any material pursuant to a request made under
Section 205(c).
(e) Payments to Registered Holders Only. Payments of Monthly
-----------------------------------
Principal, Overdue Principal, Monthly Interest and Overdue Interest on each Note
shall be payable on each Payment Date only to the registered Holder thereof on
the Record Date immediately preceding such Payment Date.
(f) Transfer Amounts. Any Note is transferable only upon the
----------------
surrender to the Trustee of such Note together with the certificates required
pursuant to Section 205(i) hereof. Upon satisfaction of the requirements set
forth in the preceding sentence, each Holder of a Note shall have the right,
upon surrender of such Note to the Trustee, to require a new Note or Notes to be
issued to it, in a minimum denomination of the lesser of (x) $1,000,000 or (y)
the entire principal balance of the Note being surrendered, in substitution of
the Note being surrendered.
(g) Service Charges. No service charge will be made for any
---------------
registration of transfer or exchange of Notes. The Trustee or the Issuer may
require payment by the holder of a sum sufficient to cover any tax expense or
other governmental charge payable in connection therewith.
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<PAGE>
(h) ERISA. Each Noteholder, by its acceptance of its Note,
-----
understands and acknowledges that the acquisition of Notes by an employee
benefit plan subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the provisions of Section 4975 of the Code (a "Plan"),
----- ----
could result in a prohibited transaction under ERISA or Section 4975 of the
Code, unless such acquisition is subject to a statutory or administrative
exemption.
(i) Permitted Transferees. No transfer of any Note shall be made
---------------------
unless such transfer is made to a Person reasonably believed to be either a QIB
that purchases for its own account or an Accredited Institutional Investor in a
transaction which does not require registration under the Securities Act and
pursuant to an effective registration or qualification under any State
securities or "Blue Sky" laws, or in a transaction which does not require such
registration or qualification. If such a transfer is to be made in reliance
upon an exemption from the Securities Act other than Rule 144A under the
Securities Act, the Trustee shall require the Prospective Owner to execute a
certificate substantially in the form of Exhibit C hereto. If such transfer is
to be made in reliance upon Rule 144A under the Securities Act, the Trustee
shall require the Prospective Owner to execute a certificate, substantially in
the form of Exhibit B hereto. The Issuer shall promptly furnish to any Holder,
or any Prospective Owners designated by a Holder, the information required to be
delivered to such Holder and Prospective Owner in connection with a resale of
the Notes to permit compliance with Rule 144A(d) in connection with such resale.
No Note may be subdivided (including any assignment or transfer of a
participation or beneficial interest therein) for resale or other transfer into
a unit smaller than a unit the initial offering price of which would have been
$1,000,000.
(j) Confidentiality. Each Holder, by acceptance of its Note, agrees
---------------
and covenants that it shall hold in confidence all Confidential Information.
Section 206. Mutilated, Destroyed, Lost and Stolen Notes. (a) 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 such security or indemnity as it and the
Issuer may require to hold the Issuer, the Bank and the Trustee harmless (it
being understood that the unsecured indemnity of a Rated Institutional
Noteholder shall be satisfactory for such purpose), then, in the absence of
notice to the Issuer or the Trustee that such Note has been acquired by a bona
fide purchaser or a protected purchaser (within the meaning of Section 8-303 of
the UCC), the Issuer shall execute and the Trustee shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Note, a replacement Note of the same maturity and of like terms as the
mutilated, destroyed, lost or stolen Note; provided, however, that if any such
destroyed, lost or stolen Note, but not a mutilated Note, shall have become, or
within seven days shall be, due and payable, or shall have been called for
redemption, the Issuer may pay such destroyed, lost or stolen Note when so due
or payable instead of issuing a replacement Note.
(b) If, after the delivery of such replacement Note, or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the preceding
sentence, a bona fide or protected purchaser of the original Note in lieu of
which such replacement Note was issued presents for payment such original Note,
the Issuer, the Trustee and the Bank shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any loss, damage, cost
or expense incurred by the Issuer, the Trustee or the Bank in connection
therewith.
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<PAGE>
(c) The Trustee and Issuer may, for each new Note authenticated and
delivered under the provisions of this Section, require the advance payment by
the Noteholder of any tax or governmental charge which may be incurred by the
Trustee or Issuer. Any Note issued under the provisions of this Section in lieu
of any Note alleged to be destroyed, mutilated, lost or stolen, shall be equally
and proportionately entitled to the benefits of this Indenture with all other
Notes issued hereunder. The provisions of this Section 206 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 207. Ratably Secured. Subject to the subordination
---------------
provisions herein (including the provisions of Section 301 as to priority of
payments), all Notes issued hereunder are and are to be, to the extent provided
in this Indenture, equally and ratably secured by this Indenture without
preference, priority or distinction on account of the actual time or times of
the authentication or delivery of the Notes so that, all Notes at any time
Outstanding (including Notes owned by an Originator or any of their Affiliates,
other than the Issuer) shall have the same right, lien and preference under this
Indenture and shall all be equally and ratably secured hereby with like effect
as if they had all been executed, authenticated and delivered simultaneously on
the date hereof.
Section 208. Delivery, Retention and Cancellation of Notes. Each
---------------------------------------------
Noteholder shall certify in writing to Issuer the Monthly Interest, Overdue
Interest (if any) and Ultimate Principal that such Holder anticipates receiving
as the final payment on its Note, provided that the Trustee shall have requested
such certification at least thirty (30) days prior to the final payment date.
Each Noteholder shall return such Holder's Note to the Trustee within thirty
(30) days after receipt of written request for such return from the Trustee but
in no event earlier than the thirtieth (30/th/) day following the date on which
final payment due on such Note has been made. The Trustee is required, and
hereby agrees, to give such requests for certification and return of the Notes,
upon at least (5) days prior written request from Issuer to do so. The request
for certification and the request for return of the Note may be contained in the
same request from the Trustee. Any such Note as to which the Trustee has made
the final payment thereon shall be deemed cancelled and shall no longer be
Outstanding or outstanding for any purpose of this Indenture, whether or not
such Note is ever returned to the Trustee. Matured Notes delivered upon final
payment to the Trustee and any Notes transferred or exchanged for other Notes
shall be cancelled and destroyed by the Trustee and the Trustee shall promptly
deliver to the Issuer an affidavit confirming the destruction of any Notes. If
the Trustee, for its own account, shall acquire any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Notes. Notes which have been cancelled by the
Trustee shall be deemed paid and discharged for all purposes under this
Indenture.
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<PAGE>
ARTICLE III
PAYMENT OF NOTES, STATEMENTS TO NOTEHOLDERS
Section 301. Flow of Funds. The Trustee shall direct the bank or
-------------
trust company (the "Lockbox Bank") at which the lockbox account (the "Lockbox
------------ -------
Account") is established and maintained to remit on every other Business Day to
- -------
the Collection Account all immediately available funds in the Lockbox Account
less any amounts designated in writing by Servicer as (i) Miscellaneous Amounts,
(ii) Misdirected Payments, or (iii) Late Fees. The Issuer will cause the
Servicer to remit to the Lockbox Account all amounts received by Servicer on or
in respect of the Mortgage Loans which are neither such Miscellaneous Amounts,
Misdirected Payments or Late Fees on or before the second Business Day after
receipt. The Trustee shall deposit into the Collection Account in accordance
with the Servicer Report amounts withdrawn from, first, the Reserve Account to
pay the shortfall, if any, that otherwise would occur on each Payment Date, in
amounts payable as Monthly Principal, Overdue Principal, Monthly Interest and
Overdue Interest after application of all the Available Amounts; and second,
from the Letter of Credit (to the extent of the LOC Amount available) such
amount as is required to pay any shortfall in Monthly Interest, Overdue
Interest, Monthly Principal, Overdue Principal, or, on the Stated Maturity Date
only, Ultimate Principal after application of all the Available Amounts and
amounts drawn from the Reserve Account pursuant to this sentence; provided that
amounts drawn from the Letter of Credit shall only be applied toward payment of
Monthly Interest, Overdue Interest, Monthly Principal or Overdue Principal and
(at the Stated Maturity Date) Ultimate Principal on the Notes after all amounts
on deposit in the Reserve Account have been depleted. In accordance with the
written notice delivered by the Bank to the Servicer of any amounts due and
owing to the Bank under the Reimbursement Agreement (which information the
Issuer shall cause the Servicer to include in the related Servicer Report), the
Trustee shall pay to the Bank on each Payment Date such amounts from the
Collection Account in accordance with the priority of payment established by the
provisions of this Section 301 as are specified in or attached to such Servicer
Report. The Trustee shall deposit all other amounts received by it during each
Collection Period in respect of the Mortgage Loans in such accounts as are
provided in this Indenture.
On each Payment Date, the Trustee shall disburse all Available Amounts
and, to the extent provided herein, amounts drawn under the Letter of Credit or
from the Reserve Account, in the amounts required, in the following order of
priority and in the amounts stated on the Servicer Report:
(i) to the Trustee, the Trustee Fee (including all amounts from all
investment income earned from the Determination Date related to such
Payment Date to the opening of Business on such Payment Date on the amounts
to be paid pursuant to clauses (ix) - (xii) of this Section 301 deposited
in the Collection Account) due to the Trustee on such Payment Date and any
expenses incurred by the Trustee relating to the Notes and in accordance
with this Indenture or Section 2.6 of the Lockbox Agreement;
(ii) to the Back-Up Servicer, if any, the Back-Up Servicing Fee due
to the Back-Up Servicer on or prior to such Payment Date;
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<PAGE>
(iii) to the Custodian, if any, the fee due to the Custodian as set
forth on Exhibit C to the Custodial Agreement due to the Custodian on or
prior to such Payment Date;
(iv) to the Servicer, any Servicing Fee that was, prior to such
Payment Date, due and payable but unpaid;
(v) to the Servicer, the Servicing Fee due to the Servicer on such
Payment Date;
(vi) to the Servicer, any unreimbursed Nonrecoverable Advances and,
to the extent paid by the applicable Mortgagor and deposited in the
Collection Account, any unreimbursed Servicer Advances;
(vii) to the Bank, any amount due and payable on the Letter of Credit
Fee prior to such Payment Date that, as of such Payment Date, was unpaid;
(viii) to the Bank, any amount due on such Payment Date with respect
to the Letter of Credit Fee;
(ix) to the Class A Noteholders, pro rata, in the following order of
priority: (A) the Class A Overdue Interest due on the Notes as of such
Payment Date, if any; and (B) the Class A Monthly Interest due on the Notes
on such Payment Date;
(x) to the Class B Noteholders, pro rata, in the following order of
priority: (A) the Class B Overdue Interest due on the Notes as of such
Payment Date, if any; and (B) the Class B Monthly Interest due on the Notes
on such Payment Date;
(xi) until the outstanding Class A Note Balance has been reduced to
zero, to the Class A Noteholders, pro rata, in the following order of
priority: (A) the Class A Overdue Principal due on the Notes on such
Payment Date, if any; and (B) the Class A Monthly Principal due on the
Notes as of such Payment Date;
(xii) until the outstanding Class B Note Balance has been reduced to
zero, to the Class B Noteholders, pro rata, in the following order of
priority: (A) the Class B Overdue Principal due on the Notes on such
Payment Date, if any; and (B) the Class B Monthly Principal due on the
Notes as of such Payment Date;
(xiii) to the Bank, all amounts necessary to reimburse the Bank for
the outstanding amount of any unreimbursed Letter of Credit Drawings;
(xiv) to the Reserve Account, the Reserve Account Deposit Amount;
(xv) to the Bank, (A) all interest (at the Bank Rate) due on any
unreimbursed Letter of Credit Drawings and (B) all other amounts remaining
due with respect to the Reimbursement Agreement (other than amounts paid
pursuant to clauses (vii), (viii) and (xiii) above); and
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<PAGE>
(xvi) if no Restricting Event shall have occurred and be continuing,
any remaining Available Amounts on deposit in the Collection Account shall
be paid to the Issuer or the Issuer's designee (if any), provided that if a
Restricting Event has occurred and is continuing, then such amounts that
would otherwise be paid to the Issuer pursuant to this Section 301(xvi)
will instead be deposited into the Reserve Account.
Section 302. Reserve Account. (a) On or prior to the Closing Date,
---------------
the Trustee shall establish the Reserve Account to be held (together with all
funds, amounts, investment income and other property on deposit therein from
time to time) by and maintained with the Trustee for the benefit of the
Noteholders and the Bank in accordance with the terms hereof. The Reserve
Account shall be held as one or more segregated trust accounts in the Trustee's
corporate trust department and shall be titled as follows: "Norwest Bank
Minnesota, National Association, as Trustee for the benefit of the registered
Holders of Vistana 1998-A Timeshare Mortgage Corp. 5.891% Timeshare Mortgage-
Backed Notes, Series 1998-A, Class A and 6.282% Timeshare Mortgage-Backed Notes,
Series 1998-A, Class B -- Reserve Account". On the Closing Date, no amounts
shall be deposited in the Reserve Account, but instead the Reserve Account shall
receive the Reserve Account Deposit Amount on each Payment Date pursuant to
Section 301 hereof from Available Amounts (and the Trustee hereby agrees to so
deposit, in accordance with each Servicer Report received by it, such amounts
actually received by the Trustee in the Collection Account). The Trustee shall
make or permit withdrawals from the Reserve Account only in accordance with the
Servicer Report with respect to any shortfall in the amounts otherwise available
in the Collection Account to make the payments in Monthly Principal, Overdue
Principal, Monthly Interest and Overdue Interest due on the Notes, in accordance
with Sections 301(ix) through (xii) hereof (each such shortfall, a "Reserve
-------
Account Payment"). All property in the Reserve Account shall constitute
- ---------------
property of the Issuer which shall be and is hereby pledged to the Trustee
pursuant to Section 402 hereof to secure payments due to the Noteholders and the
Bank.
(b) The Issuer shall cause the Servicer to determine the Reserve
Account Payment, if any, and notify the Trustee of such amount in each Servicer
Report. The Trustee shall promptly, but in no event later than the close of
business on the Determination Date, withdraw from the Reserve Account and
deposit in the Collection Account the Reserve Account Payment. If the Servicer
Report is received after noon on the Determination Date (or, in the event that,
contrary to the terms of the Documents, the Servicer Report arrives after noon
or on a day after the Determination Date), the Trustee may deposit the Reserve
Account Payment on the Business Day immediately succeeding the date upon which
such Servicer Report is received.
(c) On each Payment Date, the Trustee shall, on the basis of the
related Servicer Report, deposit in the Reserve Account, pursuant to Sections
301 and 302(a) hereof, an amount equal to the Reserve Account Deposit Amount and
any other amounts required pursuant to Section 301(xvi). The obligation of the
Trustee to deposit amounts into the Reserve Account in accordance with the terms
of this Indenture shall be limited to the deposit of amounts in the Collection
Account available for such purpose pursuant to Sections 301 and 302(a) hereof.
The Issuer agrees to treat all money, security and other property (including
income and gains or losses thereon) (the "Reserve Account Property") as its
------------------------
assets (and earnings) for federal, state and local tax purposes and not to sell,
transfer or otherwise dispose of any Reserve Account Property or its interest
therein other than as expressly provided hereby.
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<PAGE>
(d) On each Payment Date, if the balance in the Reserve Account (after
the payment of amounts required by clause (ix) through (xii) of Section 301) is
greater than the Reserve Account Required Amount, and no Restricting Event shall
have occurred and be continuing, the Trustee shall, in accordance with the
Servicer Report, release and pay the amount (such amount, a "Reserve Account
---------------
Withdrawal") of such excess to the Issuer or its designee. In the event that a
- ----------
Restricting Event has occurred and is continuing, such excess is required to
remain in the Reserve Account. Also on or prior to each Payment Date, in
accordance with the Servicer Report, the Trustee shall withdraw from the Reserve
Account and deposit in the Collection Account for further distribution in
accordance with Section 301 or Article 8 hereof, as applicable, all amounts
earned (net of investment losses) from Eligible Investments in the Reserve
Account during the related Collection Period. Amounts properly paid to the
Issuer pursuant to this paragraph or pursuant to Section 301 hereof, either
directly from the Collection Account without deposit in the Reserve Account or
from the Reserve Account, shall be deemed released from the Collateral, and the
Issuer shall not in any event thereafter be required to refund any such paid
amounts.
(e) With respect to the Reserve Account Property, the Issuer and the
Trustee agree that any Reserve Account Property that is held in segregated trust
accounts shall be held solely in the name of the Trustee, on behalf of the
Noteholders, the Bank and the Issuer to the extent of their interests therein.
Each such segregated trust account shall be subject to the exclusive custody and
control of the Trustee, and the Trustee shall have sole signature authority with
respect thereto.
(f) Upon termination of this Indenture, any amounts on deposit in the
Reserve Account, after payment of all amounts due to the Noteholders and the
Bank under this Indenture and the other Documents, upon Servicer's written
request to the Trustee, shall be paid to the Issuer or its designee.
Section 303. The Letter of Credit. (a) On each Determination Date,
--------------------
the Issuer shall cause the Servicer to determine with respect to the immediately
following Payment Date the amounts that will be on deposit in the Collection
Account on such Payment Date with respect to the Collection Period related
thereto, after giving effect to any Reserve Account Deposit Amount to be paid
into the Reserve Account and/or any Reserve Account Payment to be made to the
Collection Account on such Determination Date, and the excess of (A) the
Required Payments on the immediately following Payment Date over (B) the
Available Amounts (after giving consideration to any draws made on the Reserve
Account pursuant to Section 302(b) hereof) and shall inform the Trustee in
writing no later than 10:00 a.m., New York City time, on such Determination Date
of the results of such determination.
(b) If on any Payment Date or the Stated Maturity Date, as the case
may be, there would exist a shortfall (as determined pursuant to Section 303(a)
hereof) in the payment of any Monthly Interest, Overdue Interest, Monthly
Principal or Overdue Principal to be made on such Payment Date or, on the Stated
Maturity Date only, Ultimate Principal as set forth in the related Servicer
Report, then the Trustee shall complete a Drawing Certificate in the form of
Exhibit A or Exhibit B to the Letter of Credit, as the case may be, and in
either case submit such Drawing Certificate to the Bank no later than 12:00 noon
New York City time on the second Business Day preceding such Payment Date or
Stated Maturity Date as a claim for a Letter of Credit Drawing in
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<PAGE>
an amount equal to the lesser of (A) such shortfall in Monthly Interest, Overdue
Interest, Monthly Principal, Overdue Principal or Ultimate Principal, as the
case may be, and (B) the LOC Amount available on such date (such lesser amount,
the "Letter of Credit Drawing"). For purposes of Letter of Credit Drawings,
------------------------
"Class A Monthly Principal", "Class A Overdue Principal", "Class B Monthly
Principal" and "Class B Overdue Principal" with respect to any Payment Date
other than the Stated Maturity Date, shall be calculated without regard to
clause (C) of the respective definitions of "Class A Monthly Principal" or
"Class B Monthly Principal" set forth in the definitions hereto.
(c) Upon receipt of the amount of a Letter of Credit Drawing from the
Bank, the Trustee shall immediately deposit such amount in the Collection
Account and, on the immediately succeeding Payment Date, shall distribute such
Letter of Credit Drawing to the Noteholders exclusively in payment of the
shortfall in Monthly Interest, Overdue Interest, Monthly Principal or Overdue
Principal or, on the Stated Maturity Date only, in Ultimate Principal as the
case may be, in accordance with Section 301 hereof. The parties hereto
recognize that the making of Letter of Credit Drawings does not relieve any of
the parties hereto of any obligation hereunder or under any other Document.
(d) The Trustee shall (x) receive Letter of Credit Drawings as
attorney-in-fact for each of the Noteholders and (y) disburse such Letter of
Credit Drawings to the Noteholders in the following manner: (a) amounts drawn
under the Letter of Credit for Monthly Interest or Overdue Interest shall be
applied as set forth in clauses (ix) and (x) of Section 301 hereof and (b)
amounts drawn for Monthly Principal or Overdue Principal and, on the Stated
Maturity Date only, Ultimate Principal, payable shall be applied as set forth in
clauses (xi) and (xii) of Section 301 hereof. The Bank shall be entitled to
receive the related Letter of Credit reimbursement amount pursuant to Section
301(xiii) (from funds other than Reserve Account Payments or any Letter of
Credit Drawings) hereof with respect to the Letter of Credit Drawings made by
the Bank and to receive interest thereon pursuant to Section 301 (xv) hereof.
The Trustee hereby agrees for the benefit of each Noteholder and for the benefit
of the Bank that it recognizes, to the extent the Bank pays Letter of Credit
Drawings, either directly or indirectly (as by paying through the Trustee or
from the Letter of Credit Account), (i) the Trustee's first priority perfected
security interest in the Collateral shall support the Bank's right to receive
the related Letter of Credit reimbursement amount pursuant to Section 301(xiii)
without giving effect to any Letter of Credit Drawings and (ii) the Bank shall
be subrogated (but, as to the Collateral, solely in the order of priority set
forth in Section 301) to the rights of the Holders of the Notes to receive
distributions generated by the Mortgage Loans of principal and interest on the
Instruments in accordance with the terms hereof and the flow of funds provisions
of this Indenture.
(e) The Notes will be supported by the Letter of Credit pursuant to
the terms set forth therein, notwithstanding any provisions to the contrary
contained in this Indenture.
(f) If a Responsible Officer of the Trustee has actual knowledge, at
any time, that there will not be a sufficient amount on deposit in the
Collection Account to make all required payments of Monthly Interest, Overdue
Interest, Monthly Principal, Overdue Principal or, if applicable and `on the
Stated Maturity Date only, Ultimate Principal on the Notes to the Noteholders on
the applicable Payment Date, the Trustee shall immediately notify the Bank or
its designee by
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<PAGE>
telephone, promptly confirmed in writing by overnight mail or facsimile
transmission, of the amount of such deficiency.
(g) If at any time prior to the Termination Date (as defined in the
Letter of Credit), the short-term unsecured debt rating of the Bank is lowered
below D-1+ by the Rating Agency (if rated by the Rating Agency), A-1+ by S&P or
P-1 by Moody's, the Bank shall notify the Issuer and the Trustee of the same and
within sixty days of delivering such notice, the Bank at its election shall
either (i) deposit the LOC Amount available in a segregated trust account
maintained by and in the name of the Trustee (the "Letter of Credit Account")
------------------------
and all references herein to the "Letter of Credit" and drawings thereon or
payments with respect thereto shall thereafter be deemed to be references to
such Letter of Credit Account or (ii) replace the Letter of Credit with a
substitute Letter of Credit, on the same terms and conditions as the Letter of
Credit, including an identical Letter of Credit Fee and identical interest rate
on reimbursement of letter of credit drawings, issued by an institution with a
short-term unsecured debt rating of at least D-1+ by the Rating Agency (if rated
by the Rating Agency), A-l+ from S&P, and P-1 from Moody's, and, upon the
exercise by the Bank of option (ii), the obligations of the Bank under the
Letter of Credit shall terminate and all references herein to the "Letter of
Credit" and the "Bank" shall thereafter be deemed to be references to such
replacement letter of credit and the issuer thereof. In the event the Bank
chooses to exercise option (i) above, any Letter of Credit Drawings that would
otherwise be made on the Bank will instead be made by the Trustee in accordance
with this Indenture from amounts on deposit in the Letter of Credit Account.
There shall be no drawing (as provided in this Section) from the Letter of
Credit Account unless a Letter of Credit Drawing would be required under Section
303(b) on the date of such drawing if the Letter of Credit were still in
effect. Any withdrawal of amounts from the Letter of Credit Account to pay
Monthly Interest, Overdue Interest, Monthly Principal, Overdue Principal or, on
the Stated Maturity Date only, Ultimate Principal on the Notes shall be deemed
to be a Letter of Credit Drawing, reimbursable in accordance with the terms of
this Indenture and the Reimbursement Agreement; provided that, notwithstanding
anything to the contrary set forth herein, any amounts paid as reimbursement of
any such Letter of Credit Drawings shall be deposited into and retained in the
Letter of Credit Account, but, if no Indenture Event of Default has occurred and
is continuing and no Collateral Liquidation has occurred, only to the extent
that the amount on deposit therein is less than the LOC Amount which would be
required if the Letter of Credit were still in effect. If an Indenture Event of
Default has occurred and is continuing on such date or a Collateral Liquidation
has occurred, any amounts in excess of that otherwise required to be deposited
in the Letter of Credit Account shall be deposited into and retained in the
Letter of Credit Account until drawn upon or, if no Collateral Liquidation shall
have occurred and no Indenture Event of Default shall be continuing, such excess
is otherwise permitted to be paid to the Bank. Upon the written direction of
the Bank, the Trustee shall withdraw from the Letter of Credit Account and pay
to the Bank that funded such Letter of Credit Account on each Payment Date so
long as no Indenture Event of Default has occurred and is continuing on such
date and no Collateral Liquidation has occurred, the amount, if any, equal to
12% of the decline in the Aggregate Instrument Principal Balance on such
Payment Date from the immediately preceding Payment Date (or the Cut-off Date,
in the case of the first Payment Date) (whether or not there shall have been any
drawings thereon but without duplication of any reduction on account of
drawings); provided, however, that the amount in the Letter of Credit Account
shall not be reduced (except as a result of drawings thereunder) to an amount
less than 12% of the then Aggregate Instrument Principal Balance; and, provided,
further that if the amount on deposit in the Reserve Account at the close of
business on any Payment Date
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<PAGE>
would be less than $711,328.82 then the amount in the Letter of Credit Account
shall not be reduced below $711,328.82 (except as the result of drawings
thereon). Anything above to the contrary notwithstanding, the amount on deposit
in the Letter of Credit Account during the Post Maturity Period, shall equal the
sum of all principal and interest payments made on the Mortgage Loans during the
three Collection Periods preceding the final payment on the Notes. At such time
as the aggregate Note Balance for all Notes has been reduced to zero and any
Post Maturity Period has elapsed, all amounts and other Property remaining in
the Letter of Credit Account during the Post Maturity Period shall be paid
forthwith to the Bank that funded such Letter of Credit Account upon its written
request. If at any time after the exercise of option (i) above, the short-term
unsecured debt rating of the Bank is raised to at least D-1+ by the Rating
Agency (if the Bank is rated by the Rating Agency), A-l+ by S&P and P-1 by
Moody's, the Bank shall issue a new Letter of Credit to the Trustee, on the same
terms and conditions of the original Letter of Credit and the Trustee shall pay
over to the Bank all Property, including interest and any other earnings on
investments, then on deposit in the Letter of Credit Account.
(h) In the event that the Bank exercises option (i) set forth in the
first sentence of subsection (g) above, the Bank shall direct the Trustee in
writing to invest the amounts in such segregated trust account in Eligible
Investments that mature no later than the Business Day preceding the next
Determination Date following the investment of such amounts. All income from
investment of monies held in such account (net of any losses thereon) shall be
paid to the Bank. The Trustee shall not be liable or responsible for the
selection of or losses on any investments made by it pursuant to and in
compliance with such instructions of the Bank pursuant to this Section 303. In
the absence of such written direction, the Trustee shall invest such monies in
investments meeting the criteria set forth in clause (vii) of the definition of
"Eligible Investments" Any funds in the Letter of Credit Account not so invested
must be fully insured by the Federal Deposit Insurance Corporation to the amount
of such insurance.
Section 304. Collection Account. (a) On or prior to the Closing
------------------
Date, the Trustee, on behalf of the Issuer, shall establish the Collection
Account to be held (together with all property therein from time to time) by and
maintained with the Trustee for (i) the benefit of the Noteholders and the Bank
in accordance with the terms hereof and (ii) the Issuer to the extent of its
interest therein as provided in this Indenture. The Collection Account shall be
held in the Trustee's corporate trust department and shall be titled as follows:
"Norwest Bank Minnesota, National Association, as Trustee for the benefit of the
registered Holders of Vistana 1998-A Timeshare Mortgage Corp. 5.891% Timeshare
Mortgage-Backed Notes, Series 1998-A, Class A and 6.282% Timeshare Mortgage-
Backed Notes, Series 1998-A, Class B -- Collection Account". The Trustee shall
make or permit withdrawals from the Collection Account only as provided in this
Indenture.
(b) The following amounts shall be deposited in the Collection Account
at the times indicated below:
(i) The Trustee shall cause the Lockbox Bank to remit from the
Lockbox Account to the Collection Account in immediately available funds
the aggregate amount of all payments actually made by Mortgagors with
respect to the Mortgage Loans (such payments, "Actual Payments") pursuant
to Section 308 hereof;
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<PAGE>
(ii) The Issuer shall, or shall cause an Originator or the Servicer
to, remit to the Trustee in immediately available funds the aggregate
Mortgage Purchase Price, due and payable by the Issuer, Originator or
Servicer not later than 12:00 noon New York City time on the Determination
Date immediately following the date on which the Issuer, Servicer or
Originator becomes obligated or elects to pay or to so cause to pay such
Mortgage Purchase Price and the Trustee shall immediately deposit in the
Collection Account any Mortgage Purchase Price received by it from the
Issuer, any Originator or the Servicer;
(iii) The Trustee shall deposit in immediately available funds from
the Reserve Account any amount required to be deposited in the Collection
Account pursuant to Section 302(b) hereof, such deposit to be made not
later than the close of business on the Determination Date or such other
date as required pursuant to Section 302(b) hereof;
(iv) The Trustee shall deposit in immediately available funds an
amount equal to any Letter of Credit Drawing received from the Bank or from
the Letter of Credit Account, such deposit to be made immediately upon
receipt of such amounts by the Trustee;
(v) Reserved.
(vi) The Trustee shall deposit in immediately available funds into
the Collection Account all income earned from Eligible Investments (net of
investment losses), during the related Collection Period from deposits in
the Collection Account and the Reserve Account, pursuant to Section 305
hereof; and
(vii) The Issuer shall cause the Servicer to deposit an amount equal
to the Mortgage Purchase Price of all Mortgage Loans purchased by the
Servicer pursuant to Section 6.01 of the Servicing Agreement.
(c) The Trustee, at the written direction of the Servicer or a
subservicer, shall withdraw (no more than once per calendar week) from the
Lockbox Account or the Collection Account, as the case may be, and return to the
Servicer, such subservicer or the related Originator, as directed by the
Servicer or such subservicer, any amounts which were mistakenly deposited by the
Servicer, a subservicer or such Originator, as the case may be, in the Lockbox
Account or the Collection Account, including, without limitation, amounts
representing Misdirected Payments, Miscellaneous Amounts or Late Fees. Neither
the Trustee nor the Back-up Servicer shall be responsible for verifying any such
amounts.
Section 305. Investment of Monies Held in the Collection Account and
-------------------------------------------------------
the Reserve Account. The Trustee shall invest any cash deposited in the
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Collection Account or the Reserve Account in such Eligible Investments as the
Servicer shall direct. Each Eligible Investment (including reinvestment of the
proceeds of Eligible Investments) shall be held to its maturity and shall mature
not later than the next succeeding Determination Date, and, in any event, not
later than one Business Day prior to the Payment Date or the Stated Maturity
Date on which the amounts invested are to be disbursed. If the Trustee has not
received written instructions from the Servicer as to the investment of funds
then on deposit in any of the aforementioned accounts, the Trustee shall invest
such funds (except to the extent set forth in Section 702(c) hereof) in Eligible
Investments
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<PAGE>
described in clause (vii) of the definition thereof until such Determination
Date provided that upon release of such Eligible Investments in accordance with
Section 701 or 702 hereof, the Trustee shall transfer such Eligible Investments
into the name of the Issuer or its designee. The Trustee shall not be liable or
responsible for losses on any investments made by it pursuant to and in
compliance with such instructions of the Servicer. Any income, or net gain, from
such investments shall be deposited into the Collection Account on the close of
business on the Determination Date for distribution as Available Amounts on the
next Payment Date, and any net loss of principal (determined on a month-by-month
basis) resulting from such investment of the amounts in the above accounts shall
be charged from funds in the Collection Account. Any funds in the Collection
Account or the Reserve Account not so invested must be fully insured by the
Federal Deposit Insurance Corporation to the amount of such insurance.
Section 306. Reports to Noteholders. (a) Within one Business Day
----------------------
after each Determination Date, the Trustee will furnish a copy of the Servicer
Report due on such date to the Issuer, Rating Agency, the Bank and each
Noteholder (or if such report has not been received, a written statement to such
effect) together with a statement setting forth the amount on deposit in the
Reserve Account and the Collection Account, in each case after giving effect to
all withdrawals, applications or transfers required on the related Determination
Date.
(b) In addition, within a reasonable period of time after the end of
each calendar year, the Trustee upon request will furnish to each Noteholder of
record and to the Rating Agency a report as to the aggregate of amounts reported
pursuant to paragraph (a) above for such calendar year or, in the event such
person was a Noteholder of record during a portion of such calendar year, for
the applicable portion of such year.
(c) By January 31 of each calendar year following any year during
which the Notes are outstanding, commencing January 31, 1999, the Trustee upon
request will request from the Servicer and, to the extent such information is
received from the Servicer, furnish to each Noteholder of record and the Rating
Agency at any time during such preceding calendar year, a statement setting
forth the aggregate amount of Monthly Principal, Overdue Principal, Monthly
Interest and Overdue Interest paid to such Holder during the preceding calendar
year.
(d) Promptly, but in no event later than five Business Days after
receipt thereof, the Trustee shall furnish to each Noteholder and the Bank a
copy of all reports (other than Servicer Reports), financial statements and
notices received by the Trustee pursuant to the terms of this Indenture, the
Servicing Agreement or any Transfer Agreement, provided that the Trustee shall
not be required to separately send to any such Person any such report,
statements or notice which is specifically required to be delivered to such
Person by any other Person in accordance with the provisions of any Documents.
Section 307. Records. The Trustee shall cause to be kept and
-------
maintained adequate records pertaining to the Collection Account, the Letter of
Credit Account and the Reserve Account and all disbursements therefrom. The
Trustee shall file at least monthly an accounting thereof in the form of a trust
statement with the Issuer, the Bank, the Noteholders and the Servicer.
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<PAGE>
Section 308. Lockbox Bank; Lockbox Account. (a) The Issuer has
-----------------------------
established in the name of the Trustee for the benefit of the Noteholders and
the Bank, a Lockbox Account with the Lockbox Bank for the receipt directly from
the Mortgagors of all Actual Payments on, or in respect of, each Mortgage Loan.
No Person other than the Trustee shall be permitted to have access to such
Lockbox Account. On every other Business Day, all Actual Payments relating to a
Mortgage Loan received in the Lockbox Account shall be deposited into the
Collection Account. The Issuer acknowledges that all Actual Payments relating
to a Mortgage Loan received by the Lockbox Bank and so deposited in the Lockbox
Account constitute part of the Collateral. The Trustee shall, within one
Business Day of receipt, deliver to the Bank all notices received by it in
accordance with the Lockbox Agreement. The Trustee shall also deliver to the
Bank within one Business Day after receipt thereof all copies of all media and
other data provided to the Trustee pursuant to Section 2.4(c) of the Lockbox
Agreement. The Issuer shall promptly deliver written notice to the Rating
Agency, and deliver a true copy to the Bank and each Noteholder, of any
amendment to or modification of the Lockbox Agreement.
(b) The Trustee shall within one Business Day after receipt deposit
all amounts received from the Lockbox Account into the Collection Account.
(c) With respect to the Trustee's rights and obligations under the
Lockbox Agreement, the Trustee shall (i) make and deliver the Remittance
Certificate (as defined in the Lockbox Agreement) only in accordance with the
provisions hereof, and (ii) neither terminate the Lockbox Agreement, remove the
Lockbox Bank, appoint a successor Lockbox Bank nor enter into a new lockbox
agreement with another entity without the prior written consent of the Bank, the
Class A Majority, and the Class B Majority (and the Trustee shall deliver
contemporaneous written notice of such action to the Rating Agency).
(d) In the event that the Lockbox Bank resigns from its duties under
the Lockbox Agreement and no successor Lockbox Bank has been appointed and has
accepted appointment within sixty (60) days after the giving of such notice of
resignation, the Issuer shall petition a court of competent jurisdiction for the
appointment of a successor Lockbox Bank.
Section 309. Securities Account.
------------------
(a) Notwithstanding any other provision of this Indenture, with
respect to each of the Securities Accounts, Norwest Bank Minnesota, National
Association, as the Securities Intermediary, hereby agrees that it will comply
with Entitlement Orders delivered by the Trustee without the need for any
consent by the Issuer.
(b) Each of the Issuer, the Securities Intermediary, and the Trustee
intends that the provisions of this Section will give (to the extent that the
other provisions of this Indenture do not otherwise give) the Trustee "control"
over the Securities Accounts within the meaning of Article 8 of the UCC.
Section 310. Securities Intermediary. With respect to the Account
-----------------------
Property credited to any Securities Account, the Securities Intermediary agrees
that:
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<PAGE>
A. with respect to any Account Property that is held in Securities
Accounts, each such Securities Account shall be subject to the exclusive
custody and control of the Securities Intermediary, and the Securities
Intermediary shall have sole signature authority with respect thereto;
B. each Securities Account shall be invested only in cash or
Eligible Investments which the Securities Intermediary (or other eligible
institution maintaining such Securities Account) agrees to treat as
Financial Assets; and
C. any such Account Property that is a Financial Asset shall be
credited to an account in the name of the Securities Intermediary pursuant
to this Indenture in accordance with the Securities Intermediary's
customary procedures such that the Securities Intermediary establishes a
Security Entitlement with respect thereto over which the Trustee has
Control.
(ii) Norwest Bank Minnesota, National Association, as the Securities
Intermediary, hereby confirms with respect to all Securities Accounts
subject hereto that (A) each of the Securities Accounts is or will be a
Securities Account and shall, subject to the terms of this Indenture, treat
the Trustee as entitled to exercise the rights that are attendant to any
Financial Asset credited to such account, (B) all Account Property in
respect of any such Securities Account established pursuant to this
Indenture will be promptly credited by the Securities Intermediary to such
Securities Account, and (C) all securities, Securities Entitlements or
other property underlying any Financial Assets credited to such Securities
Account shall be held in accordance with the customary procedures of such
Securities Intermediary for holding similar property and in no case will
any Financial Asset credited to such Securities Account be registered in
the name of the Issuer, payable to the order of the Issuer or specially
endorsed to the Issuer except to the extent the foregoing have been
specially endorsed to the Securities Intermediary or in blank.
(iii) Norwest Bank Minnesota, National Association, as the Securities
Intermediary, hereby agrees that each item of property (whether investment
property, financial asset, security, instrument or cash) credited to each
Securities Account shall be treated as a Financial Asset.
(iv) If at any time Norwest Bank Minnesota, National Association, as
the Securities Intermediary, shall receive any order from the Trustee
directing transfer or redemption of any Financial Asset relating to any
Securities Account established pursuant to the terms of this Indenture and
any Supplement hereto, the Securities Intermediary shall comply with such
Entitlement Order without further consent by the Issuer or any other
Person. If at any time the Trustee notifies the Securities Intermediary in
writing that this Indenture has been terminated in accordance with the
provisions hereof and the security interest granted hereunder has been
released, then thereafter if the Securities Intermediary shall receive any
order from the Issuer directing transfer or redemption of any Financial
Asset relating to each Securities Account, the Securities Intermediary
shall comply with such Entitlement Order without further consent by the
Trustee or any other Person.
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<PAGE>
(v) In the event that Norwest Bank Minnesota, National Association
(in its individual capacity) has or subsequently obtains by agreement,
operation of law or otherwise a security interest in any Securities Account
established pursuant to the terms of this Indenture, or any Financial Asset
credited thereto, Norwest Bank Minnesota, National Association hereby
agrees that such security interest shall be subordinate to the security
interest of the Trustee. The Financial Assets credited to any Securities
Account established pursuant to the terms of this Indenture will not be
subject to deduction, set-off, banker's lien, or any other right in favor
of any Person (except that Norwest Bank Minnesota, National Association,
in its capacity as Securities Intermediary, may set off (i) all amounts due
to it in respect of its customary fees and expenses for the routine
maintenance and operation of such Securities Account, and (ii) the face
amount of any checks which have been credited to such Securities Account
but are subsequently returned unpaid because of uncollected or insufficient
funds).
(vi) There are no other agreements entered into between Norwest Bank
Minnesota, National Association, as a Securities Intermediary, in such
capacity and the Issuer with respect to any Securities Account established
pursuant to the terms of this Indenture and any Supplement hereto. In the
event of any conflict between this Indenture (or any provision of this
Indenture) and any other agreement now existing or hereafter entered into,
the terms of this Indenture shall prevail.
(vii) The rights and powers granted herein to the Securities
Intermediary that have been granted in order to perfect the Trustee's
security interest in each Securities Account created pursuant to this
Indenture and the Security Entitlements to the Financial Assets credited
thereto are powers coupled with an interest and will neither be affected by
the bankruptcy of the Issuer nor by the lapse of time. The obligations of
Norwest Bank Minnesota, National Association, as the Securities
Intermediary hereunder, shall continue in effect until the security
interest of the Trustee in each Securities Account created pursuant to this
Indenture and such Security Entitlements related thereto has been
terminated pursuant to the terms of this Indenture and the Trustee has
notified the Securities Intermediary of such termination in writing, which
the Trustee shall do so promptly.
(viii) Notwithstanding anything else contained herein, the Issuer
agrees that each Securities Account will be established only with the
Securities Intermediary or another institution (to which the Trustee and
the Bank shall have consented in writing in advance) which agrees
substantially as follows: (i) it will comply with Entitlement Orders
related to such account issued by the Trustee without further consent by
the Issuer; (ii) until termination of the Indenture, it will not enter into
any other agreement related to such account pursuant to which it agrees to
comply with Entitlement Orders of any Person other than the Trustee; and
(iii) all assets delivered or credited to it in connection with such
account and all investments thereof will be promptly credited to such
account.
Section 311. Trustee's Covenants as Secured Party in the Security
----------------------------------------------------
Accounts. In the event that a Servicer under the Documents resigns or is
- --------
terminated pursuant to the terms of the Servicing Agreement or if either a
Servicer Event of Default an Indenture Event of Default occurs, the Trustee
shall promptly deliver to the Securities Intermediary a Notice of Sole Control,
in accordance with the terms of the Securities Account Control Agreement.
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Section 312. Trustee's Covenants as Bailee under the Custodial
-------------------------------------------------
Agreement. (a) With respect to the Trustee's rights and obligations under the
- ----------
Custodial Agreement, the Trustee shall (i) comply with the Bank's directions to
the Trustee to request insurance certificates in accordance with the provisions
of Section 2.1(k) of the Custodial Agreement and (ii) neither terminate the
Custodial Agreement, remove the Custodian nor appoint a successor custodian as
set forth in Section 2.4(b) of the Custodial Agreement without the prior written
consent of the Bank, the Class A Majority and the Class B Majority. The Issuer
shall promptly deliver written notice to the Rating Agency, and deliver one true
copy to the Bank and each Noteholder, of any amendment to or modification of the
Custodial Agreement. In the event that the Custodian resigns from its duties
under the Custodial Agreement and no successor Custodian has been appointed and
has accepted appointment within 60 days after the giving of such notice of
resignation, the Issuer shall petition a court of competent jurisdiction for the
appointment of a successor Custodian.
Section 313. Failure of Servicer to Deliver Servicer Report. In the
-----------------------------------------------
event that the Trustee has not received the Servicer Report by the end of the
Business Day immediately preceding any related Payment Date, the Trustee shall
without further direction apply, to the extent necessary, funds in the
Collection Account and the Reserve Account to the payment of the amounts due on
such Payment Date in accordance with clauses (i) (other than the investment
income payment thereunder), (ii), (iii) (if notice of such amount is transmitted
in writing by the Custodian to the Trustee prior to such Payment Date), (iv),
(v), (vi) (if written notice of such amount is transmitted in writing by the
Servicer to the Trustee prior to such Payment Date), (vii), (viii), (ix) and (x)
of Section 301 hereof. Except as provided for in the preceding sentence, all
amounts in the Collection Account and the Reserve Account shall be applied by
the Trustee in accordance with a Servicer Report. Upon receipt of any late
Servicer Report the Trustee shall promptly, but not later than one Business Day
after receipt of such Servicer Report, take all action, including making
transfers from the Reserve Account and Letter of Credit Drawings as the Trustee
would have made under this Indenture if the Servicer Report had been received on
the Determination Date, and if the related Payment Date shall have passed, the
Trustee, not later than three Business Days after receipt of such Servicer
Report, shall distribute in accordance with Section 301 amounts (not already
disbursed on the related Payment Date) that would have been paid on such date if
such Servicer Report had been timely received.
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ARTICLE IV
COLLATERAL
Section 401. Collateral. The Notes and the Obligations of the
----------
Issuer hereunder shall be limited-recourse obligations of the Issuer as provided
in Section 203 hereof. The Noteholders shall also have the benefit of, and the
Notes shall be secured by and additionally be payable from all of the Issuer's
right, title and interest in, to and under the following (collectively, except
as set forth in the next paragraph, the "Collateral"):
----------
(a) Each original, executed Instrument and the related Mortgage Loan
(including each Substitute Mortgage Loan, if any) evidencing the indebtedness of
a Mortgagor and arising from the sale of a Timeshare Interest by an Originator
to such Mortgagor, which Instrument together with all related mortgage
collateral has been sold or transferred by such Originator to the Issuer, and
all payments due or to become due thereon or thereunder, (b) the Servicing
Agreement and under each Transfer Agreement, (c) the Documents, (d) any interest
rate swap agreement pertaining to the Mortgage Loan Coupon Rates that are
related to Instruments, (e) the Lockbox Account, the Collection Account, Reserve
Account, the Letter of Credit Account and any other account established pursuant
to this Indenture and all amounts from time to time deposited therein, and all
Eligible Investments (including amounts constituting the Trustee's Fee and
earnings thereon, net of investment losses) made with respect to all such
accounts, (f) all products, income and proceeds from any of the foregoing and
(g) any and all other Property and assets which from time to time are Granted by
the Issuer as security for the Performance of the Obligations of the Issuer.
Notwithstanding the foregoing, the Collateral shall not include any of
the following, each of which shall automatically be released from the lien of
this Indenture: (i) any Mortgage Loan, the other related items of Property and
the income thereon and proceeds thereof, all of which have been released from
the security interest of this Indenture in accordance with the provisions of
Section 405 or Article VII hereof; and (ii) any amount properly distributed to a
Person pursuant to Sections 301 or 302 hereof or properly retained by the
Servicer or a subservicer in accordance with the provisions of the Servicing
Agreement.
Section 402. Grant of Security Interest. (a) To secure the (i)
--------------------------
payment of the Monthly Principal, Overdue Principal, Monthly Interest, Overdue
Interest and Ultimate Principal on the Notes and any other cost or pecuniary
liability of the Issuer relating to the Notes and any and all other Documents
and (ii) performance and observance of all covenants, obligations, terms and
conditions of the Issuer under the Notes and any and all other Documents
(clauses (i) and (ii) collectively, the "Obligations"), the Issuer hereby
-----------
presently, irrevocably and unconditionally conveys, assigns and pledges to the
Trustee, and grants the Trustee a security interest in and to, all of the
Issuer's right, title and interest in and to the Collateral.
(b) The Trustee does not assume, and shall have no liability to
perform, any of the Issuer's obligations under the Servicing Agreement or any
other agreement included in the Collateral and shall have no liability arising
from the failure of the Issuer to duly perform any of such obligations.
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Section 403. Mortgage Documents. The Issuer, concurrently with the
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execution and delivery hereof, shall cause the Mortgage Documents for each of
the Mortgage Loans to be delivered to and deposited with the Custodian, as
custodian and bailee for the Trustee on behalf of the Noteholders and the Bank.
Section 404. Pro Rata Interest. The Trustee acknowledges that,
-----------------
subject to the priorities of distribution set forth in Section 301 hereof, the
Collateral shall be for the use and benefit of the Bank and all present and
future bona fide Noteholders.
Section 405. Release of Security Interest. (a) The Trustee, at the
----------------------------
written direction of the Servicer, shall release from the security interest
created pursuant to the terms of this Indenture, any Mortgage Loan and Mortgage
Loan File directly related thereto (1) for which (and to the extent that) the
Mortgage Purchase Price has been deposited in the Collection Account in
accordance with the provisions of Section 304 hereof, or (2) upon payment in
full of all principal and interest due, and other amounts payable, under such
Mortgage Loan pursuant to the terms of such Mortgage Loan or (3) for which a
Substitute Mortgage Loan has been provided. In effectuating such release, the
Trustee shall be entitled to rely in good faith on a certificate of the Servicer
identifying each Mortgage Loan or other items of Collateral to be released from
this Indenture in accordance with the provisions of this Section 405.
(b) The Trustee will, promptly upon receipt of such certificate from
the Servicer and at the Issuer's expense, execute and deliver to the Issuer, the
related Originator, the Servicer or subservicer, as appropriate, a non-recourse
certificate of release substantially in the form of Exhibit D hereto and such
additional documents and instruments as that Person may reasonably request to
evidence the termination and release from the Lien of this Indenture of such
Mortgage Loan, the other related items of Collateral and the income thereon and
proceeds thereof.
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ARTICLE V
SPECIAL PROVISIONS REGARDING
COLLATERAL
Section 501. Administration of Collateral. (a) The Trustee hereby
----------------------------
acknowledges the appointment by the Issuer of the Servicer and the Custodian to
service and administer the Collateral in accordance with the provisions of the
Servicing Agreement and the Custodial Agreement, respectively, and agrees to
provide the Servicer or the Custodian with such documentation in its possession,
and to take all such actions, as the Servicer or a subservicer or the Custodian
may reasonably request, in accordance with the provisions of the Servicing
Agreement and the Custodial Agreement.
(b) (i) The Trustee shall immediately notify the Noteholders, the
Rating Agency and the Bank in writing of any Servicer Event of Default of which
it has Knowledge (each such notice a "Servicer Termination Event Notice").
---------------------------------
After the Trustee delivers such Servicer Termination Event Notice, then so long
as such Servicer Event of Default shall not have been remedied, the Servicer
shall remain as Servicer unless and until (x) in accordance with the Servicing
Agreement, (i) a new Servicer reasonably acceptable to, the Class A Majority,
the Class B Majority, the Rating Agency, the Bank and the Issuer, and such
successor Servicer enters into a servicing agreement in form and substance
satisfactory to the Trustee, the Class A Majority, the Class B Majority, the
Bank and the Issuer, which contains an assumption by such successor Servicer of
the due and punctual performance and observance of each covenant and condition
to be performed or observed by the Servicer under the Servicing Agreement from
and after the date of assumption and (ii) the Trustee, the Class A Majority, the
Class B Majority, the Rating Agency and the Bank consent to the assumption of
the duties, obligations and liabilities of the Servicer under the Servicing
Agreement by such successor Servicer, such consent not to be unreasonably
withheld, unless, (y) at the written direction of the Bank or a Majority of
Holders, the Trustee shall, without further action, succeed in all respects to
the Servicer under the Servicing Agreement (unless and until a successor
Servicer reasonably acceptable to the Bank, the Rating Agency, the Class A
Majority, the Class B Majority and the Issuer has been selected and qualified)
and be subject to all of the responsibilities, duties and liabilities relating
thereto placed on the Servicer by the terms and provisions thereof; provided,
however, that the Trustee shall not be liable for any acts or omissions of the
outgoing Servicer or for any breach by the outgoing Servicer of any of its
representations and warranties contained in the Servicing Agreement and shall
not be required to make any Servicer Advance if such Servicer Advance would be
prohibited by applicable law and provided further, that nothing contained herein
shall prohibit the Trustee, in its capacity as successor Servicer, from
assigning (with the prior written consent of the Bank, the Rating Agency, the
Issuer, the Class A Majority and the Class B Majority) its obligations as
Servicer to a Person whose regular business includes the servicing of
receivables and instruments of a nature similar to the Mortgage Loans. As
compensation for acting as Servicer, the Trustee shall be entitled to such
Servicer Fees and other compensation (whether payable out of the Lockbox
Account, Collection Account or otherwise) as the Servicer would have been
entitled to under the Servicing Agreement and this Indenture if no such Servicer
Termination Event Notice had been given. The Issuer shall promptly reimburse
the Trustee for all Transition Costs incurred in connection with any assumption
by the Trustee of responsibilities of the successor Servicer. Notwithstanding
the above, if the Trustee shall have become the successor Servicer and at any
time
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thereafter shall be incapable or legally prohibited from performing the duties
of Servicer, the Trustee shall, prior to appointing a successor Servicer or
petitioning a court to appoint a successor Servicer pursuant to this Section,
give notice to the Bank, the Rating Agency, the Issuer and each Noteholder of
such incapacity or legal prohibition and the Bank shall have the sole right,
during the sixty days immediately succeeding receipt of such notice, to appoint
a successor Servicer acceptable to the Issuer and Class A Majority and the Class
B Majority. If the Bank is unable to locate and qualify a successor Servicer
within such sixty day period, then the Trustee may appoint, or petition a court
of competent jurisdiction to appoint, any established financial institution
acceptable to the Bank, the Rating Agency, the Issuer, the Class A Majority and
the Class B Majority, having a net worth of not less than $10,000,000 and whose
regular business includes the servicing of receivables of a similar nature to
the Mortgage Loans, as the successor of all of the responsibilities, duties or
liabilities of the Trustee as Servicer under the Servicing Agreement. In the
event that the Trustee becomes the successor Servicer, the Trustee shall
continue to fulfill its duties and responsibilities as successor Servicer until
such time as its successor, if any, acceptable to Issuer, the Bank, the Class A
Majority and the Class B Majority is appointed and has assumed such
responsibilities. In connection with such appointment and assumption, the
Trustee may, with the written consent of the Bank, the Issuer, and the Class A
Majority and the Class B Majority, make such arrangements for the compensation
of such successor out of payments on Mortgage Loans as the Trustee and such
successor shall agree; provided, however, that no such revised compensation
shall be in excess of the Servicer Fee permitted the Servicer under the
Servicing Agreement and the arrangement for reimbursement of expenses shall be
no more favorable than that set forth in the Servicing Agreement unless (i) the
Bank, the Class A Majority, the Class B Majority, and the Issuer shall approve
such higher amounts or (ii) the Issuer, the outgoing Servicer or the Bank shall
agree to pay, out of its own funds, the successor Servicer any such excess
compensation and reimbursement; provided, further, that in no event shall the
Trustee be liable to any successor Servicer for the Servicer Fee or any
additional amounts (including expenses) payable to such successor Servicer,
either pursuant to the Servicing Agreement or otherwise. The Trustee and such
successor shall take such action, consistent with the Servicing Agreement, as
shall be necessary to effectuate any such succession. Upon the resignation or
termination of the Servicer, such outgoing Servicer shall deliver to the
successor Servicer all documents, statements, records, funds and accounts held
by it under the Servicing Agreement and shall execute and deliver such
instruments and do such other things as may be reasonably required to fully
transfer its rights, powers, duties and obligations.
(ii) Notwithstanding the preceding provisions of this Section
501(b), the Issuer shall have no rights hereunder to consent to or accept any
successor Servicer, or the arrangements under which such successor Servicer
shall serve (other than increased Servicer compensation), if either the Servicer
being replaced or any previous Servicer was (x) an Affiliate of Vistana and (y)
was terminated as a result of a Servicer Event of Default.
(c) In the event that the Servicer resigns or is removed, until a
successor Servicer is appointed in accordance with the terms and conditions of
this Indenture and the Servicing Agreement, the Trustee hereby agrees to act as
the temporary successor Servicer as required or requested pursuant to the terms
of the preceding paragraph or the Servicing Agreement and to receive all
documents, statements, records, funds and accounts held by the outgoing Servicer
pursuant to such outgoing Servicer's duties under the Documents as may be
necessary or prudent to act as temporary successor Servicer.
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(d) In anticipation of any possible resignation or termination of
the initial Servicer or any other Servicer under the Servicing Agreement, the
Trustee hereby agrees, in exchange for and in consideration of the Back-up
Servicing Fee, until such time as the Lien of the Indenture is released pursuant
to the Documents, to serve as back-up Servicer (the "Back-up Servicer") and
----------------
perform the following functions:
(i) confirm in writing to the Bank and the initial Holders on or
prior to the Closing Date that the data format of the Servicer was, in the
reasonable business judgment of the Trustee in its capacity as the Back-up
Servicer, of acceptable quality to it and that such format was in
accordance with the Servicing Standards,
(ii) receive each Servicer Report and each monthly Servicer data
tape, and, in the event of a resignation or termination of any Servicer
(other than the Trustee itself) under the Documents, review each such
Servicer Report and data tape as well as the departing Servicer's
collection systems, procedures and servicing transition plan, and
(iii) take all other actions as reasonably necessary to enable it to
assume its duties as successor Servicer in a prompt manner and cooperate
with any other successor Servicer in its assumption of the duties of the
Servicer, including delivering a copy of each Servicer Report it has
received to such successor Servicer.
(e) Upon obtaining actual knowledge, or the receipt of notice, by
the Trustee of a breach of any representations, warranties or covenants by
either Originator under the applicable Transfer Agreement, including
notification of any such breach by the Bank, and upon failure of the Servicer or
the Issuer to enforce any ensuing purchase or repurchase obligation in
accordance with the next succeeding sentence, the Trustee shall enforce such
obligation under the applicable agreement. Upon the request of the Trustee or
the Bank, the Issuer shall enforce, or shall cause the Servicer to enforce, any
such purchase or repurchase obligations, and cause to be deposited in the
Collection Account in accordance with the provisions of Section 304(b) hereof,
the Mortgage Purchase Price received from, or on behalf of, the applicable
Originator with respect to such purchase or repurchase obligation.
Section 502. Payments of Collateral. If the Issuer shall receive
----------------------
from any Mortgagor or any other Person any payments with respect to the
Collateral (to the extent such Collateral has not been released from the Lien of
this Indenture in accordance with Section 405 hereof), the Issuer shall receive
such payment in trust for the Trustee, as secured party hereunder, and subject
to the Trustee's security interest and shall within two Business Days transmit
and deliver such payment to the Lockbox Account to be held in accordance with
the terms hereof.
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ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS
For so long as any Obligation of the Issuer under this Indenture and
the Notes is outstanding:
Section 601. Representations and Warranties of the Issuer. The
--------------------------------------------
Issuer hereby represents and warrants to the Trustee, the Noteholders and the
Bank, and upon which the Issuer understands and agrees that the Noteholders and
the Bank are relying in their purchase of Notes or issuance of the Letter of
Credit, on the Closing Date (provided that any representation or warranty
limited by its terms to a specific date shall be so limited):
(a) Special Purpose Entity. The Issuer is a Special Purpose Entity.
----------------------
(b) Collateral. As of the Closing Date, it has good title to, and is
----------
the sole owner of, the Collateral, free and clear from any Lien, except for the
rights of the Mortgagors under the Mortgage Loans and the Lien of the Trustee
under this Indenture and has not assigned to any Person other than the Trustee
any of its right, title or interest in the Collateral. The Issuer covenants and
agrees to warrant and forever defend the title to the Collateral against the
claims and demands of any Person (other than the Trustee or any Person claiming
through the Trustee, including the Bank and the Noteholders), whether now or
hereafter arising, and hereby grants the Trustee full power and authority to
take all actions as the Trustee deems necessary or advisable to effectuate this
sentence. The Issuer will promptly deliver to the Trustee (or its Custodian) any
Instrument evidencing a Mortgage Loan within two Business Days after the receipt
thereof, appropriately and duly endorsed to the order of the Trustee, and in a
manner that satisfies all requirements of endorsement and assignment, in order
to transfer all right, title and interest of the Issuer in each such Instrument,
as further security for payment and performance in full of the Obligations. The
Issuer will cause this Indenture to constitute a valid first-priority perfected
security interest in the Collateral at all times.
(c) Ownership; Names; Address. The Parent is the sole legal and
-------------------------
beneficial owner of the Issuer and owns 100% of the issued stock thereof. The
legal names of the Issuer and the Parent are as set forth in this Indenture.
The Issuer has not operated under any other names. The Issuer does not have any
trade names, fictitious names, assumed names or "doing business as" names. The
principal place of business and chief executive office of the Issuer are as set
forth in Section 1307 hereof and there are no such other locations.
(d) Organization and Good Standing. The Issuer is a corporation that
------------------------------
has been duly organized and is validly existing and in good standing under the
laws of Delaware, and has the power to own its assets and to engage in the
activities in which it is presently engaged and is duly qualified and in good
standing under the laws of each jurisdiction where its ownership of property or
the conduct of its activities requires such qualification, if the failure to so
qualify would have a Material Adverse Effect. The Issuer has no subsidiaries.
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(e) Due Execution. The Issuer Documents, other than the Notes, have
-------------
been duly executed and delivered by the Issuer, and the Notes, when issued in
accordance with the terms of the Note Purchase Agreement and of this Indenture,
will have been duly executed and delivered.
(f) Power and Authority. The Issuer has the legal right, power and
-------------------
authority to execute, deliver and perform its obligations under this Indenture
and the other Issuer Documents and carry out their terms and to Grant the
Security Interest in the Collateral to the Trustee; and the execution, delivery
and performance of this Indenture and the other Issuer Documents have been duly
authorized by the Issuer by all necessary action.
(g) Binding Obligation. Each of the Issuer Documents (other than the
------------------
Notes), assuming due authorization, execution and delivery by the other parties
thereto, constitutes, and the Notes, when issued and authenticated in accordance
with the terms of the Note Purchase Agreement and of this Indenture, will
constitute, a legal, valid and binding obligation of the Issuer, enforceable
against the Issuer in accordance with its terms, except that such enforcement
may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or
other similar laws (whether statutory, regulatory or decisional) now or
hereafter in effect relating to creditors' rights generally and (B) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(h) No Violation. The consummation of the transactions contemplated
------------
by this Indenture and the other Issuer Documents and the fulfillment of the
terms hereof and thereof shall not conflict with, result in any material breach
of any of the terms and provisions of, nor constitute (with or without notice or
lapse of time or both) a default under, the organizational documents of the
Issuer or any Originator, or any Instrument, Mortgage, Timeshare Declaration or
any indenture, agreement, deed of trust, commitment letter, funding arrangement
with any lending institution or investment bank or other instrument to which the
Issuer is a party or by which it is bound; nor result in the creation or
imposition of any Lien upon any of its Properties pursuant to the terms of any
such indenture, agreement, mortgage, deed of trust, commitment letter, funding
arrangement with any lending institution or investment bank or other instrument
(other than this Indenture); nor violate any law, order, rule or regulation
applicable to the Issuer of any Governmental Authority having jurisdiction over
the Issuer or its Properties.
(i) Consents. No approval, authorization, consent, or other actions
--------
of any other Person under any agreement, contract, lease or license or similar
document or instrument to which Issuer is a party or by which Issuer is bound,
is required to be obtained by Issuer in order to make or consummate the
transactions contemplated under the Documents which has not been obtained on or
prior to the Closing Date. All consents, orders and approvals of, filings and
registrations with, and other actions in respect of, all Governmental
Authorities required to be obtained by Issuer in order to make or consummate the
transactions contemplated under this Indenture and the other Documents have
been, or prior to the time when required will have been, obtained, given, filed
or taken and are or will be in full force and effect on or prior to the Closing
Date.
(j) No Proceedings. There are no Proceedings or investigations to
--------------
which the Issuer, or any Affiliate of the Issuer, is a party pending or, to the
Issuer's Knowledge, threatened before any Governmental Authority or threatened
by others and no injunctions, writs, restraining
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orders of any nature having jurisdiction over the Issuer or its Properties: (A)
asserting the invalidity of this Indenture or the other Documents; (B) seeking
to prevent the consummation of any of the transactions contemplated by this
Indenture or the other Documents; or (C) seeking any determination or ruling
that might have a Material Adverse Effect. There are no Proceedings pending or,
to the best of the Issuer's Knowledge, threatened before any Governmental
Authority involving the Timeshare Projects that will cause a Material Adverse
Effect.
(k) Solvent. The Issuer is Solvent.
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(l) Representations. The representations and warranties made by
---------------
the Issuer contained in the Documents to which the Issuer is a party are true
and correct in all material respects as of the date when made. The Servicer, the
Trustee, the Bank and the Noteholders may rely on such representations and
warranties to the same extent as if such representations and warranties were set
forth by the Issuer herein.
(m) Nonconsolidation. The Issuer is operated in such a manner
----------------
that it would not be substantively consolidated with Vistana, the Servicer, any
of the Originators or the Parent, in accordance with applicable bankruptcy or
insolvency laws, and in such a manner that the separate existence of the Issuer
would not be disregarded in the event of a bankruptcy or insolvency of Vistana,
the Servicer, any of the Originators or the Parent, and in such regard, among
other things:
(i) The Issuer maintains, and will continue to maintain, management
over its daily business affairs independent from that of, and free of any
undue or excessive control exercised by, Vistana, the Servicer, any of the
Originators or the Parent in any day-to-day management of the Issuer;
provided, however, that nothing contained in this clause (i) shall prohibit
VCH Portfolio Services, Inc. from acting as Servicer pursuant to the terms
of the Servicing Agreement;
(ii) the Parent maintains a separate business office from the
Issuer;
(iii) all business correspondence of the Issuer and other
communications are conducted in the Issuer's own name and on its own
stationery; and
(iv) the Issuer does not act as an agent of Vistana, the Servicer,
any Originator or the Parent in any capacity and neither Vistana, the
Servicer, any Originator nor the Parent thereof acts as agent for the
Issuer, but instead presents itself to the public as a corporation separate
from the Issuer; provided that VCH Portfolio Services, Inc. may act as the
Servicer under the Servicing Agreement.
(n) Security Interest. At all times, the Trustee will have a
-----------------
valid, first-priority perfected Security Interest in the Collateral prior to all
other Liens subject to Permitted Encumbrances. The Issuer has marked its books
and records to reflect (a) each assignment and transfer of each Mortgage Loan,
the related Instrument and a security interest in the related Collateral subject
thereto from the appropriate Originator and (b) the Security Interest of the
Trustee in such Collateral, including the Mortgage Loans.
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(o) No Other Security Interests. No Security Interest (other than the
---------------------------
Security Interest granted to the Trustee hereunder, or as may be conveyed to the
Issuer pursuant to either Transfer Agreement) has been or will be granted by any
Vistana Transaction Entity or Vistana with respect to any component or part of
the Collateral that has not been released pursuant to a legal, valid and binding
release of the party releasing such Security Interest.
(p) Correct Copies. The Instruments and each other Mortgage Document
--------------
related thereto have been delivered by Issuer to Custodian, as bailee on behalf
of the Trustee, and are true and correct originals of such documents (in all
material respects), each of which is in full force and effect and has not been
amended, modified or terminated in any respect other than such amendments,
modifications or terminations as have been previously and explicitly approved by
Trustee in writing.
(q) No Defaults. No payment under an Instrument is more than sixty
-----------
(60) days past due as of the Cut-off Date pursuant to the terms of such
Instrument.
(r) Notices of Defaults. None of Vistana, any Originator, the Parent
-------------------
or the Servicer has notified Issuer, directly or indirectly, that any Originator
or Servicer is in default under any of its obligations under or with respect to
any Instrument or Mortgage which is part of the Collateral as of the Closing
Date.
(s) No Set-Offs. To the Knowledge of the Issuer, there are no
-----------
setoffs, counterclaims, or defenses on the part of any Mortgagor to pay any
amounts due under any Instrument related to it.
(t) Margin Stock. The Issuer does not own any "margin security", as
------------
that term is defined in Regulations T, U and X of the Federal Reserve Board, and
the proceeds of the Notes under this Indenture will be used only for the
purposes contemplated hereunder. None of the proceeds of the Notes will be
used, directly or indirectly, for the purpose of purchasing or carrying any
margin security, for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry any such "margin security" or for
any other purpose which might cause the Notes to be considered "purpose
credit(s)" within the meaning of Regulations T, U and X of the Federal Reserve
Board. The Issuer will not take or permit any agent acting on its behalf to
take any action which might cause this Indenture or any document or instrument
delivered pursuant hereto to violate any regulation of the Federal Reserve
Board.
(u) Taxes. All federal, state, local and foreign tax returns, reports
-----
and statements required to be filed by Issuer have been filed with the
appropriate Governmental Authority except where failure to file will not have
any Material Adverse Effect, and all material charges and other impositions
shown thereon to be due and payable by Issuer have been paid prior to the date
on which any fine, penalty, interest or late charge may be added thereto for
nonpayment thereof other than those charges that the Issuer is protesting in
good faith and has set aside adequate reserves therefore in accordance with
GAAP. The Issuer has paid when due and payable all material charges upon the
books of the Issuer and no Government Authority has asserted any Lien against
the Issuer with respect to unpaid charges. Proper and accurate amounts have been
withheld by the Issuer from any employees for all periods in full and complete
compliance (other than such non-compliance that shall not have any Material
Adverse Effect) with the tax, social security and unemployment withholding
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provisions of applicable federal, state, local and foreign law and such
withholdings have been timely paid to the respective Governmental Authorities.
Any taxes, fees and other governmental charges payable by the Issuer in
connection with the execution and delivery of the Issuer Documents, the pledge
of the Collateral to the Trustee, and the execution, delivery and sale of the
Notes, have been paid.
(v) ERISA. The Issuer and each of its ERISA Affiliates are in
-----
compliance in all respects with the applicable provisions of ERISA and the
regulations, thereunder other than non-compliance which would not in the
aggregate have a Material Adverse Effect. No Reportable Event has occurred with
respect to any Plan administered by the Issuer or any ERISA Affiliate or any
administrator designated by the Issuer or any ERISA affiliate. With respect to
each such Plan: (i) no such Plan which is subject to section 302 of ERISA or
section 412 of the Code has incurred any "accumulated funding deficiency" (as
defined in either such section), whether or not waived; (ii) the Issuer has
complied with and each such Plan conforms to all applicable laws and
regulations, including but not limited to ERISA and the Code other than non-
compliance which would not in the aggregate have a Material Adverse Effect;
(iii) each such Plan which is a pension plan intended to qualify under section
401(a) or 403(a) of the Code has received a favorable determination letter form
the Internal Revenue Service with respect to such qualification, its related
trust has been determined to be exempt from taxation under section 501(a) of the
Code and nothing has occurred since the date of such letter that would adversely
affect such qualification or exemption in a manner that would have a Material
Adverse Effect; and (iv) there are no actions, suits or claims pending (other
than routine claims for benefits) or, to the Knowledge of the Issuer or any
ERISA Affiliate, threatened with respect to any Plan or against the assets of
any Plan which would have a Material Adverse Effect. Neither the Issuer nor any
ERISA Affiliate nor any Plan administered by the Issuer or any ERISA Affiliate
has engaged in any Prohibited Transaction within the meaning of section 406 of
ERISA and section 4975 of the Code for which the Issuer or any ERISA Affiliate
of may incur liability.
(w) Securities Law. Neither the Issuer, directly or indirectly, nor
--------------
anyone acting on its behalf (including, but not limited to, the Placement Agent)
has offered any Note or any part thereof for issue or sale to, or has solicited
or will solicit any offer to acquire any of the same from, anyone so as to bring
the issuance and sale of the Note within the provisions of Section 5 of the
Securities Act of 1933, as amended. The Issuer is neither an "investment
company" nor a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended. This Indenture need
not be qualified as an "indenture" pursuant to the terms of the Trust Indenture
Act, as amended. To the extent the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), may be deemed to apply to the Notes, none of the
------------
transactions contemplated in the Issuer Documents (including, without limitation
thereof, the use of the proceeds from the sale of the Notes) will violate or
result in a violation of Section 7 of the Exchange Act, or any regulations
issued pursuant thereto.
(x) Compliance with Law. The Issuer has complied with all applicable
-------------------
laws and regulations, including, without limitation, all federal and state laws
and regulations of all of the states in which each of the Timeshare Projects
relating to any component, as of the applicable Transfer Date, of the Collateral
are located and all other governmental jurisdictions in which such Timeshare
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Projects are located or in which Timeshare Interests relating thereto have been
or are being sold or offered for sale, other than any noncompliance that shall
not have a Material Adverse Effect.
(y) Endorsement. Each Instrument pledged to the Trustee hereunder
-----------
has been duly endorsed by the Issuer to such Trustee and in a manner that
satisfies all requirements of endorsement and assignment, in order to transfer
all right, title and interest of the Issuer in each such Instrument.
(z) Omissions and Statements. The Private Placement Memorandum, the
------------------------
certificates to opinions described in Section 7(d) and (e) of the Note Purchase
Agreement and the other documents requested by and delivered to the initial
Noteholders and identified on Schedule III to the Note Purchase Agreement, do
not contain any untrue statement of any material fact or omit to state a fact
---
which has or will have a Material Adverse Effect; provided, however, that this
representation shall not be deemed to be made with respect to any information
regarding Persons not affiliated with Vistana (the "Other Party Information")
but provided further, that no Person affiliated with Issuer has actual knowledge
that any of the Other Party Information contains an untrue statement of material
fact or omits to state a fact which has or will have a Material Adverse Effect.
(aa) No Indebtedness. Issuer is not in default of any payment on
---------------
account of Indebtedness or in violation of or in default under any material term
in any agreement, order, decree or judgment of any court, arbitration or
governmental authority to which it is a party or by which it is bound.
(bb) No Injunctions. There is no injunction, writ, restraining order
--------------
or other order of any nature outstanding that will have a Material Adverse
Effect.
(cc) Inspection. The Issuer agrees and warrants that Trustee's or the
----------
Custodian's examination, inspection, or receipt of information pertaining to the
Collateral or the Timeshare Projects shall not in any way be deemed to reduce
the full scope and protection of the warranties, representations and Obligations
contained in this Indenture.
(dd) Foreign Mortgagors. Not more than five percent (5%) of the
------------------
Initial Aggregate Instrument Principal Balance arose from Mortgage Loans of
which the Mortgagor is a resident of any single nation other than the United
States (including Puerto Rico, U.S. Virgin Islands and Guam). Not more than
twenty-three percent (23%) of the Initial Aggregate Instrument Principal Balance
was obligated to be paid by Foreign Mortgagors, and all Instruments are payable
in U.S. Dollars.
(ee) Purchase Treatment. The Issuer will mark the transfer of
------------------
Instruments to it as a purchase, not a loan, on its books and records for tax
and accounting reporting purposes.
(ff) Year 2000 Representation. The Issuer has reviewed, or will
------------------------
expeditiously review, its operations as well as the operations of each Vistana
Transaction Entity with a view to assessing whether its businesses will be
vulnerable to a Year 2000 Problem or will be vulnerable to the effects of a Year
2000 Problem suffered by any of its major commercial counter-parties. The
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Issuer represents and warrants that each of the Vistana Transaction Entities has
a reasonable basis to believe that no Year 2000 Problem will cause a Material
Adverse Effect.
(gg) Survival of Representations and Warranties. Until payment and
------------------------------------------
Performance in full of the Obligations, the representations and warranties
contained herein shall have a continuing effect as having been true as of the
date when made.
(hh) Supplemental Nature of Article VI; Effect of Breach. The
---------------------------------------------------
representations, warranties and covenants contained in this Article VI are in
addition to, and not in derogation of, the representations, warranties and
covenants contained elsewhere in the Documents and shall be deemed to be made
and reaffirmed on each Transfer Date with respect to the Mortgage Loans,
Instruments and related property substituted on such date, provided that, when
specifically referencing Instruments, reaffirmation shall be made only with
respect to all of the Instruments being sold, transferred, conveyed or assigned
upon such Transfer Date, and provided, further, that if such representation,
warranty or covenant relates to an Instrument that constitutes a Defaulted
Instrument and Issuer replaces or substitutes the affected Mortgage Loan in
accordance with the terms of this Indenture, no Indenture Event of Default shall
occur hereunder.
Section 602. Affirmative Covenants of the Issuer. The Issuer hereby
-----------------------------------
agrees that, until full, complete and indefeasible payment and performance of
the Obligations, unless the Trustee shall otherwise consent in writing, Issuer
shall do or cause to have done all of the following:
(a) Special Purpose Entity. The Issuer at all times shall remain a
----------------------
Special Purpose Entity.
(b) Reserved.
(c) Principal Place of Business. The Issuer shall give Trustee at
---------------------------
least 30 days' prior written notice of any change in the location of its or any
Originator's principal place of business, chief executive office or the place at
which its books and records are kept from its current principal place of
business.
(d) Originator or Mortgagor Defaults. The Issuer shall use its
--------------------------------
commercially reasonable efforts to cooperate fully with the Trustee and the
Servicer in connection with the collection of any amounts payable by an
Originator or a Mortgagor, as the case may be.
(e) Reserved.
(f) Servicer's Reports. For so long as the Servicer is an Affiliate
------------------
of Vistana, the Issuer shall cause to be delivered to the Trustee and the Bank
when due the Servicer Report and any other reports and information as required
in Section 6.01 of the Servicing Agreement.
(g) Reserved.
(h) Other Information. Issuer shall deliver to the Trustee, the
-----------------
Significant Noteholders and the Bank such other information or data respecting
the condition or operations,
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<PAGE>
financial or otherwise, of Issuer as the Trustee, or any Significant Noteholder
may from time to time reasonably request.
(i) Existence; Compliance with Law. Issuer shall preserve and
------------------------------
maintain its existence and all of its licenses, permits, governmental approvals,
rights, privileges and franchises necessary or desirable in the normal conduct
of its business as now conducted or presently proposed to be conducted
(including, without limitation, its qualification to do business in each
jurisdiction in which such qualification is necessary or desirable in view of
its business other than such qualification that shall not have a Material
Adverse Effect); conduct its business and maintain its Property in an orderly
and regular manner; and comply with (a) the provisions of its Articles of
Incorporation, (b) the requirements of all applicable laws, rules, regulations
or orders of any Governmental Authority and requirements for the maintenance of
Issuer's insurance, licenses, permits, governmental approvals, rights,
privileges and franchises and (c) the requirements of all Environmental Laws (as
applicable), except, in any case, to the extent that the failure to comply
therewith would not, in the aggregate, have a Material Adverse Effect.
(j) Taxes and Other Liabilities. Issuer shall pay or cause to be paid
---------------------------
all taxes (which individually or in the aggregate are material), fees,
assessments, governmental charges and levies, including claims for labor,
material and supplies when due and payable or levied against its assets,
properties or income, including any Property that is part of the Collateral,
except to the extent Issuer is contesting the same in good faith and has set
aside adequate reserves in accordance with Partial GAAP for the payment thereof.
(k) Inspection Rights; Assistance. Upon reasonable prior notice, at
-----------------------------
any reasonable time and from time to time during normal business hours, permit
the Trustee, the Bank, each Significant Noteholder or any agent, representative
or employee thereof, to examine and make copies of and abstracts from the
financial records and books of account of the Issuer and other documents in the
possession or under the control of the Issuer relating to any Obligation of the
Issuer arising under or contemplated by this Indenture or any other Document and
to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees and independent accountants (and by this provision the
Issuer hereby authorizes its independent accountants to discuss with such
representative such affairs, finances and accounts) all at such reasonable times
and as often as may be reasonably requested, and to visit the offices of the
Issuer. The Trustee, the Holders and the Bank shall, and each shall cause its
representatives to, hold in confidence all such Confidential Information. Any
reasonable out-of-pocket expense incident to the reasonable exercise by the
Trustee, the Bank, any of their designees and, provided that an Indenture Event
of Default has occurred and is continuing, any Significant Noteholder or any of
its designees, of any right under this Section shall be borne by the Issuer.
(l) Reserved.
--------
(m) Notice of Liens. The Issuer will notify the Trustee and the Bank
---------------
of the existence of any Lien (except Permitted Encumbrances and the Lien of this
Indenture) on any of the Collateral immediately upon discovery thereof.
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<PAGE>
(n) Performance of Obligations. Issuer will duly and punctually
--------------------------
fulfill all obligations on its part to be fulfilled under or in connection with
each Document to which it is a party and will do nothing to impair the rights of
the Trustee in the Collateral and the Documents.
(o) Documentation; Further Assurances.
---------------------------------
(i) Issuer shall, and covenants to cause the Servicer to agree, from
time to time, at the expense of Issuer to, promptly execute and deliver all
further instruments of transfer and conveyance, all such other instruments,
and all supplements and amendments hereto, instruments and documents, and
take all further action, that may be necessary or desirable or that either
the Trustee or the Bank may reasonably request or are necessary in order to
maintain, perfect, continue to perfect and protect the Lien and Security
Interest of the Trustee in the Collateral (including, without limitation,
any financing statements under the UCC, this Indenture or any Supplement
related hereto) or to enable either the Trustee or the Bank to exercise and
enforce its rights and remedies hereunder with respect to any Collateral or
the Letter of Credit, respectively. Without limiting the generality of the
foregoing, within ten (10) Business Days after receipt of written request
therefor, Issuer shall execute and file such financing or continuation
statements, or amendments thereto, execute and record transfer instruments
or take possession of such records or documents of title, and such other
instruments or notices, and make such recordings, as may be necessary or
desirable, or as either the Trustee or the Bank may reasonably request, in
order to (a) perfect, maintain, protect and preserve the lien and Security
Interest Granted or purported to be Granted in this Indenture and the other
Documents; (b) publish notice of, or protect the validity of, any Grant or
assignment made or to be made by this Indenture and perfect the security
interest contemplated hereby in favor of the Trustee in the Mortgage Loans
and the related Collateral or any other Collateral; (c) enforce or cause
the Servicer to enforce any of the Mortgage Loans in a manner consistent
with the Servicing Agreement and applicable law; or (d) preserve and defend
title to any Mortgage Loan (including the right to receive all payments due
or to become due thereunder subsequent to the applicable Cut-off Date), the
Security Interest of the Trustee in the Collateral and preserve and defend
the rights of the Trustee and the Noteholders in any Mortgage Loan or other
property constituting Collateral (including the right to receive all
payments due or to become due thereunder subsequent to the applicable Cut-
off Date), against the claims of all persons and parties. The Issuer, upon
the Issuer's failure to do any of the foregoing, hereby designates the
Trustee its agent and attorney-in-fact to execute any UCC financing
statement, continuation statement or other document or instrument required
pursuant to this Section; provided, however, that such designation shall
not be deemed to create a duty in the Trustee to monitor the compliance of
the Issuer with the foregoing covenants.
(ii) Issuer shall furnish to the Trustee, from time to time or upon
reasonable request of the Trustee or the Bank, statements and schedules
further identifying and describing the Collateral.
(iii) The Issuer will deliver to the Trustee, each Noteholder, the
Bank and the Rating Agency, within 120 days after the end of each fiscal
year, an Officer's Certificate, stating that
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<PAGE>
(A) a review of the activities of the Issuer during such year and
of performance under this Indenture has been made under such officer's
supervision;
(B) to the best of such officer's Knowledge, based on such
review, (a) the Issuer has fulfilled all of its obligations under this
Indenture throughout such year and (b) the Servicer has fulfilled all of
the Servicer's obligations under the Servicing Agreement; and
(C) whether the officer has any Knowledge of any Indenture Event
of Default or Servicer Event of Default throughout such year or, in the
officer's good faith and reasonable business judgment, an Incipient Default
is occurring which is reasonably likely to result in an Indenture Event of
Default and, if there has been an Indenture Event of Default or Servicer
Event of Default, or, in the officer's good faith and reasonable business
judgment, an Incipient Default is occurring which is reasonably likely to
result in an Indenture Event of Default, specifying each such default known
to him and the nature and status thereof and the nature of the action taken
with respect thereto.
(p) Performance of Obligations under Mortgages and Timeshare Program
----------------------------------------------------------------
Governing Documents. Issuer at all times will fulfill and will cause its agents
- -------------------
and independent contractors at all times to fulfill all of Issuer's obligations
to Purchasers, except where failure to do so will not have a Material Adverse
Effect. Issuer will cause its Affiliates to perform, prior to the expiration of
any applicable grace period, all of their respective obligations under the
Timeshare Program Governing Documents, including, without limitation, the
obligation of any Affiliate that is a Manager to perform diligently its
obligation to collect maintenance fees and tax payments from the Association's
members and timely disburse such collected funds for the payment of taxes and
hazard and business interruption insurance maintained by the Association all in
accordance with the applicable Management Agreement, except where failure to so
perform would not give rise to a Material Adverse Effect.
(q) Collection of Payments. Issuer will cause Servicer to undertake
----------------------
the diligent and timely collection consistent with the Servicing Agreement and
applicable law of amounts delinquent under each Instrument which constitutes
part of the Collateral. Unless Trustee is acting as Servicer pursuant to the
terms of Article V hereof, Trustee shall have no obligation to undertake any
action to collect under any Instrument.
(r) Trustee as Additional Insured. Timely after the Closing Date,
-----------------------------
Issuer will use reasonable commercial efforts to (i) cause to be maintained and
(ii) deliver or cause to be delivered to the Custodian on behalf of the Trustee,
evidence of insurance policies required by the Timeshare Program Governing
Documents relating to the Timeshare Projects, naming the Trustee an additional
insured and written by insurers, in amounts and on forms as are customary in the
timeshare resort industry.
(s) No Indebtedness. The Issuer will promptly discharge any and all
---------------
Indebtedness owing by it other than the Notes and the Issuer's obligations under
the Reimbursement Agreement. The Issuer will cause any and all Indebtedness
owing by it or secured by its property (including the Collateral) which does not
relate to the Notes, a Permitted Encumbrance, the Lien of the Indenture or the
Letter of Credit and the Reimbursement Agreement, to be fully extinguished;
provided,
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<PAGE>
however, that if no Indenture Event of Default has occurred and is continuing,
the Issuer may make regularly scheduled payments on any such Indebtedness and
other normal and customary payments for services rendered.
(t) Payment of Principal and Interest;. The Issuer will duly and
----------------------------------
punctually pay the principal of and interest on the Notes in accordance with the
terms of the Notes and this Indenture.
(u) Maintenance of Office. The principal place of business and chief
---------------------
executive office of the Issuer is located at 8801 Vistana Centre Drive, Orlando,
Florida 32821. The Issuer shall not establish a new location for its principal
place of business and chief executive office unless (i) it shall have given to
the Trustee and the Bank not less than thirty (30) days' prior written notice of
its intention so to do, clearly describing such new location and providing such
other information in connection therewith as the Trustee may reasonably request,
and (ii) with respect to such new location, it shall have taken at its own cost
all action necessary so that such change of location does not impair the
Security Interest of the Trustee in the Collateral, and shall have delivered to
the Trustee copies of all filings required in connection therewith.
(v) Performance of Obligations. The Issuer will not take, or fail to
--------------------------
take, any action, and will use its best efforts with respect to Persons that
Vistana has Control of, and reasonable commercial efforts with respect to all
other Persons, not to permit any action to be taken by such Person which would
release any Person from any of such Person's covenants or obligations under any
agreement or instrument included in the Collateral, or which would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any such agreement or instrument, except as
expressly permitted hereby or in the Servicing Agreement.
(w) Money for Payments to Noteholders to Be Held in Trust.
-----------------------------------------------------
(i) All payments of amounts due and payable with respect to any Notes
that are to be made from amounts withdrawn from the Collection Account, the
Reserve Account or any other account established pursuant to the Documents
shall be made on behalf of the Issuer by the Trustee, and no amounts so
withdrawn from any such account for payments of Notes shall be paid over to
the Issuer under any circumstances.
(ii) In making payments hereunder, the Trustee will:
(A) allocate all sums received for payment to the Noteholders on
each Payment Date in accordance with the terms of this Indenture;
(B) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
and
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<PAGE>
(C) comply with all requirements of the Code, as amended (or any
successor statutes), and all regulations thereunder, with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith, in each case, consistent
with the treatment of the Notes as indebtedness.
(x) Information as to the Issuer. Upon any officer of the Issuer
----------------------------
obtaining Knowledge of any of the following events, the Issuer shall file with
the Trustee, the Bank and the Rating Agency:
(i) upon becoming aware of the existence of any condition or event
which constitutes either an Indenture Event of Default or, in the good
faith and reasonable judgment of the Issuer, an Incipient Default, a
written notice describing its nature and period of existence and what
action the Issuer is taking or proposes to take with respect thereto; and
(ii) promptly upon the Issuer's becoming aware:
(A) that any Person other than a Vistana Transaction Entity has
given any notice to Issuer or taken any other action with respect to an
Indenture Event of Default or a claimed misrepresentation, breach or
default under any Document which, if true, could give rise to a liability
of no less than $100,000,
(B) of the institution of any litigation or of the receipt of
written notice from any Governmental Authority as to the commencement of
any formal investigation involving an alleged or asserted liability of
Issuer of any amount or any adverse judgment in any litigation involving a
potential liability of Issuer of any amount,
(C) of any event or circumstance which reasonably may be
expected to have a Material Adverse Effect, or
(D) of any pending or proposed court or administrative
proceeding which involves or may involve the possibility, individually or
in the aggregate, of a Material Adverse Effect,
a written notice specifying the nature of such Incipient Default, Indenture
Event of Default, notice, litigation, judgment, Material Adverse Effect,
investigation or proceeding and what action the Issuer has taken, is taking or
proposes to take with respect thereto and evaluating its merits.
(y) Year 2000 Covenant. The Issuer shall take, and shall use its best
------------------
efforts with respect to Persons it has control of, and reasonable commercial
efforts with respect to all other Persons, to cause each such Person to take,
all actions necessary and commit adequate resources to assure that each of their
computer-based and other systems are able to effectively process data, including
dates before, on and after January 1, 2000, without experiencing any Year 2000
Problem that could cause a Material Adverse Effect. At the request of either
the Trustee or the Bank, the Issuer will cause each of the Vistana Transaction
Entities to provide the Bank and the Trustee with assurances and substantiations
(including, but not limited to, the results of internal or external audit
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<PAGE>
reports prepared in the ordinary course of business) reasonably acceptable to
the Bank and the Trustee as to the capability of such Vistana Transaction
Entities to conduct their businesses and operations before, on and after January
1, 2000 without experiencing a Year 2000 Problem causing a Material Adverse
Effect.
(z) Validity. The Issuer will maintain the validity and effectiveness
--------
of this Indenture.
Section 603. Issuer's Negative Covenants. Issuer covenants and
---------------------------
agrees as follows that, until full, complete and indefeasible payment and
performance of the Obligations, unless the Trustee (acting at the direction of a
Majority of Holders) and the Bank shall otherwise consent in writing, Issuer
shall not do any of the following:
(a) Liens; Negative Pledges; and Encumbrances. Issuer shall not
-----------------------------------------
create, incur, assume or suffer to exist (i) any Lien of any nature upon or with
respect to the Collateral (except as permitted by this Indenture or as permitted
by the Servicing Agreement); (ii) any Indebtedness in excess of $10,000 (other
than the Obligations) with respect to itself or (iii) any direct or indirect
contingent obligation with respect to itself except in the ordinary course of
business; nor shall Issuer do anything to impair the rights of the Trustee in
the Collateral.
(b) Disposition of Assets. Issuer shall not sell, assign, convey,
---------------------
transfer, exchange or otherwise dispose of, any of the Collateral, nor enter
into any sale and sale agreement covering any of the Collateral other than as
expressly contemplated by the Documents. The foregoing shall not prohibit the
sale, assignment, conveyance or other transfer of any Instrument that is not
part of the Collateral.
(c) No Subsidiaries. Issuer shall not create any Subsidiaries.
---------------
(d) Amendments. The Issuer shall neither amend its Articles of
----------
Organization nor agree to amend any Document (other than this Indenture,
pursuant to Article X hereof, and, with respect to the Mortgage Documents, as
permitted by the Servicing Agreement), without the consent of the Bank and the
Trustee (which shall not give such consent without the approval of a Class A
Majority and the Class B Majority). The Issuer shall not take any action in
violation of its Articles of Incorporation.
(e) Defaults. The Issuer shall not take or omit to take any action,
--------
which act or omission would constitute a default under any material agreement,
contract, lease, license, mortgage, deed of trust or instrument to which it is a
party or by which it or any of its Properties or assets is bound, which default
or event of default (after the expiration of any applicable grace period) is
reasonably likely to have a Material Adverse Effect.
(f) Other Activities of Issuer. The Issuer shall not (x) make any
--------------------------
capital expenditures that create, in the aggregate and at any one time, an
Outstanding Indebtedness of the Issuer in excess of $10,000, (y) without the
prior written consent of its Independent Director, (1) commence any case,
proceeding or other action under any existing or future bankruptcy, insolvency
or similar law seeking to have an order for relief entered with respect to it,
or seeking reorganization,
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<PAGE>
arrangement, adjustment, wind-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, (2) seek appointment of a receiver,
trustee, custodian or other similar official for it or any part of its assets,
(3) make a general assignment for the benefit of creditors, or (4) take any
action in furtherance of, or consenting or acquiescing in, any of the foregoing
or (z) guarantee (directly or indirectly), endorse the obligations of (except in
the ordinary course of business), or own or purchase any stock, obligations or
securities of or any other interest in, or make any capital contribution to, any
other Person, or engage in any other action that bears on whether the separate
legal identity of the Issuer shall be respected, including, without limitation
(i) holding itself out as being liable for the debts of any other party or (ii)
acting other than in its corporate name and through its duly authorized officers
or agents.
(g) No Advances. The Issuer shall not make any advances, loans,
-----------
extensions of credit, acquisitions or investments other than Eligible
Investments and acquisitions of the Mortgage Loans.
(h) Existence. The Issuer shall not dissolve or terminate its
---------
existence as a Delaware corporation.
(i) Other Transactions. The Issuer shall not engage in any business
------------------
or activity other than in connection with, or relating to, this Indenture, the
Notes, the other Documents, the specific transactions contemplated thereby or
its Articles of Organization.
(j) Validity of Liens and Documents. The Issuer shall not permit the
-------------------------------
validity or effectiveness of this Indenture or any Security Interest set forth
herein to be impaired, or permit the Lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any Person to be
released by Issuer or its Affiliates from any covenants or obligations under any
of the Documents, except as may be expressly permitted hereby or by the
Servicing Agreement.
(k) Extensions. The Issuer shall not at any time insist upon, plead,
----------
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law or other law that would prohibit or forgive the Issuer from
paying all or any portion of the Monthly Principal, Overdue Principal, Monthly
Interest or Overdue Interest on the Notes as contemplated herein or in the
Notes, wherever enacted, now or at any time hereafter in force, or that may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Issuer hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee or the Bank, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
(l) ERISA. The Issuer shall not permit any Plan to which it or any
-----
ERISA Affiliate is party to engage in a prohibited transaction within the
meaning of section 406 of ERISA or section 4975 of the Code, except in those
cases for which there is a statutory or administrative exemption available under
section 408 of ERISA or section 4975(d) of the Code where such action could not
reasonably be expected to have a Material Adverse Effect, or permit to exist
with respect to any Plan any accumulated funding deficiency within the meaning
of section 412 of the Code, or incur any liability (other than for required
insurance premiums) where such action could reasonably be expected to have a
Material Adverse Effect.
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<PAGE>
(m) No Modifications of Instruments. Without the prior written
-------------------------------
consent of the Trustee and the Bank (which consents shall not be unreasonably
withheld) and except with respect to Upgrades and Wraparound Mortgages and as
permitted in the Servicing Agreement, Issuer will not cancel or materially
modify, or consent to or acquiesce in any material modification (including any
change in the Mortgage Loan Coupon Rate or the amount, frequency or number of
payments of principal or interest on any Instrument) to, or solicit the
prepayment of, any Instrument which constitutes part of the Collateral other
than as expressly set forth in the Documents; waive the timely performance of
the obligations of the Mortgagor under any such Instrument or its security; or
release the security for any such Instrument. Issuer will not pay or advance
directly or indirectly for the account of any Originator or the Parent any sum
requested to be deposited, or owing, by any Mortgagor under any Instrument
(whether or not an Eligible Instrument) which constitutes part of the
Collateral.
(n) No Modification of Mortgage Documents. The Issuer will not,
-------------------------------------
without the prior written consent of Trustee and the Bank (which consents shall
not be unreasonably withheld), cancel, amend, or materially modify, waive or
permit or acquiesce in the cancellation or material modification of any
underlying Mortgage Document relating to an Instrument other than as expressly
permitted pursuant to the terms of the Documents.
(o) No Distributions. Except for payments made with respect to the
----------------
Notes, Issuer will not make any distribution (inclusive of dividends, stock
repurchases and redemptions, the repayment of loans from, and the making of
loans to or investments in the distributees) unless at the time of the
distribution and after giving effect thereto, there exists neither an Indenture
Event of Default nor any Incipient Default.
(p) Securities Law. Neither the Issuer, directly or indirectly, nor
--------------
anyone acting on its behalf (including, without limitation, the Placement Agent)
will offer the Notes or any part thereof or any similar securities for issue or
sale to, or will solicit any offer to acquire any of the same from, anyone so as
to bring the issuance and sale of the Notes within the provisions of Section 5
of the Securities Act of 1933, as amended. Issuer will not conduct its
activities in such a manner that would make it subject to the provisions of the
Investment Company Act.
(q) Additional Insurance. Issuer will not obtain or carry insurance
--------------------
relating to the Instruments separate from that required by any Document, unless
the Trustee shall have the same rights with respect thereto as it has with
respect to the insurance required by such Document.
(r) No Petition. Issuer hereby agrees and covenants that it will not
-----------
commence or join in any action or proceeding against the Parent or itself under
any liquidation, conservatorship, bankruptcy, reorganization, rearrangement, or
other insolvency law now or hereafter existing.
(s) Notification of Originators. The Trustee may notify Mortgagors
---------------------------
and Originators of the existence of the Trustee's interest as assignee in the
Collateral and reasonably request from such Mortgagors or Originators any
information relating to the Collateral but, with respect to the Mortgagors,
solely for the purpose of monitoring, administering or verifying the Collateral.
Issuer will not act to prevent reasonable delivery of such notice of the Trustee
under Issuer's letterhead if so requested by Trustee.
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<PAGE>
(t) No Collateral Encumbrances. The Issuer will not sell, transfer,
--------------------------
exchange or otherwise dispose of or pledge, lien or encumber any of the
Collateral, except in connection with a sale pursuant to Section 817 hereof or
as otherwise permitted by this Indenture or the Servicing Agreement.
(u) No Claims on Notes and Noteholders. The Issuer will not claim any
----------------------------------
credit or make any deduction from any principal, premium, if any, or interest
payable in respect of the Notes (other than amounts properly withheld from such
payments under the Code or any applicable state law) or assert any claim against
any present or former Noteholder by reason of the payment of any taxes levied or
assessed upon any of the Collateral. The Issuer shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law or other law that would prohibit or forgive the
Issuer from paying all or any portion of any Monthly Principal, Overdue
Principal, Monthly Interest or Overdue Interest on the Notes as contemplated
herein or in the Notes, wherever enacted, now or at any time hereafter in force,
or that may affect the covenants or the performance of this Indenture; and (to
the extent that it may lawfully do so) the Issuer hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
Section 604. Representations and Warranties of Prospective
---------------------------------------------
Noteholders. Each prospective initial Noteholder acquiring Notes, each
- -----------
prospective transferee acquiring the Notes, and each prospective owner (or
transferee thereof) of a beneficial interest in Notes shall be deemed, by such
purchase, to have made the representation in Section 205(h) to the Issuer, the
Trustee, the Servicer and any successor Servicer.
Section 605. Consolidation and Merger. The Issuer shall not
------------------------
consolidate with or merge with or into any other Person without obtaining the
prior written consent of the Bank and the Class A Majority and the Class B
Majority.
Section 606. Other Agreements. The Issuer will not after the date of
----------------
the issuance of the Notes enter into or become a party to any agreements or
instruments other than this Indenture, the Servicing Agreement, the Note
Purchase Agreement, the Reimbursement Agreement or any other agreement(s)
contemplated by this Indenture, the Reimbursement Agreement or the Servicing
Agreement, including, without limitation, any agreement(s) for disposition of
the Collateral permitted by Section 804 hereof. In addition, the Issuer will
not (i) amend, modify or waive any provision of the Servicing Agreement or
either Transfer Agreement or (ii) give any approval or consent or permission
provided for therein without the prior written consent of the Bank, the Rating
Agency, the Class A Majority and the Class B Majority.
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<PAGE>
ARTICLE VII
DISCHARGE OF INDENTURE
Section 701. Full Discharge. (a) Following payment in full of (i)
--------------
the Notes, (ii) the fees, expenses and charges of the Trustee, the Back-Up
Servicer, the Custodian and any Servicer, (iii) all other Obligations of the
Issuer under this Indenture, including, but not limited to, all amounts owing to
the Bank under the Reimbursement Agreement and the Letter of Credit, including
advance payment of the Letter of Credit Fee to be made with regard to the Post
Maturity Period, and (iv) all obligations of the Issuer under the Documents, and
the release by the Trustee of the Collateral in accordance with Section 701(b),
this Indenture shall be discharged.
(b) Upon payment in full of the amounts referred to in clauses (i)
through (iv) of Section 701(a), the Issuer may submit to the Trustee an
Officer's Certificate requesting the release to the Issuer or its designee of
all or a stated amount of the funds on deposit in the Lockbox Account,
Collection Account, Reserve Account and all or any portion of the other
Collateral (collectively, the "Withdrawn Collateral"). Promptly after receipt
--------------------
of such Officer's Certificate, the Trustee shall release the Withdrawn
Collateral from the lien of this Indenture and the lien of the Bank, and deliver
the Withdrawn Collateral to the Issuer or its designee. The Issuer shall be
entitled to deliver more than one such Officer's Certificate from time to time
until the entire Collateral is released and delivered to the Issuer or its
designee.
(c) In connection with the discharge of this Indenture and the release
of the Collateral, the Trustee shall, within two Business Days after request
therefor by the Issuer, execute and deliver to the Issuer instruments
substantially in the form of Exhibit D hereto, together with assignments of
Mortgage, UCC financing statements and such other documents relating thereto as
may be reasonably requested by Issuer, appropriately and effectively evidencing
such discharge and release.
Section 702. Optional Prepayment of Notes. (a) On any Payment Date
----------------------------
succeeding a Collection Period at the end of which the aggregate Note Balance of
all classes of Notes (after giving effect to the payment of Monthly Principal
and any Overdue Principal on such Payment Date), is less than twenty percent
(20%) of the aggregate Note Balance of all classes of Notes on the Closing Date,
the Issuer shall have the option to direct the Trustee to prepay without
premium, and the Trustee shall so prepay, on such Payment Date, the aggregate
Note Balance of all classes of Notes, plus all accrued Monthly Interest and, if
any, all Overdue Interest, together with all unpaid Letter of Credit Drawings
and interest thereon. To exercise such option, the Issuer shall notify the
Trustee, the Rating Agency and the Bank of such election not later than thirty
(30) days preceding such Payment Date (such date a "Notice Date") and shall
-----------
deposit into the Collection Account on or before the Business Day prior to the
related Payment Date an amount which, when combined with the amounts already on
deposit in the Collection Account, shall be sufficient to pay the amounts
referred to in Section 701(a) hereof as of such Payment Date on which such
prepayment will occur. Upon payment of such amounts to the Trustee and the Bank
and payment in full to the party entitled thereto of any other amounts set forth
in Section 701(a) hereof, the Trustee shall, in accordance with the provisions
of Section 701(b) and (c) hereof, release its Security Interest in the
Collateral and
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disburse amounts then on deposit in the Lockbox Account, Collection Account and
the Reserve Account to the Issuer or as it shall direct in writing.
(b) Notice of any prepayment pursuant to this Section 702 shall be
given by the Trustee to Noteholders not later than the 25th day immediately
preceding such final Payment Date specifying (i) the Payment Date upon which
final payment of the Notes will be made and (ii) the amount of any such final
payment. Failure to give notice of prepayment to any Noteholder shall not
impair or affect the validity of the prepayment.
(c) In the event that any amount due to any Noteholder remains
unclaimed, the Issuer shall cause to be published once, in the eastern edition
of The Wall Street Journal, notice that such money remains unclaimed. Any such
unclaimed amounts shall not be invested by the Trustee (notwithstanding the
provisions of Section 305 hereof) and no additional interest shall accrue on the
related Note subsequent to the date on which such funds were available for
distribution to such Noteholder. If, within two years after the date of such
publication, such amount remains unclaimed, the Issuer or its successor shall be
entitled to all unclaimed funds and other assets which remain subject hereto and
the Trustee upon transfer of such funds shall be discharged of any
responsibility for such funds and the Noteholders shall look to the Issuer or
its successor for payment.
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ARTICLE VIII
DEFAULT PROVISIONS AND REMEDIES
Section 801. Event of Default. "Indenture Event of Default",
---------------- --------------------------
wherever used herein, means any one of the following events (whatever the reason
for such Indenture Event of Default and 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
Governmental Authority):
(a) if any payment or prepayment of all or any part of the principal
of or interest on any Note and/or any other amounts payable by the Issuer
hereunder (after the expiration of any applicable grace period expressly set
forth therein or herein), whether at the Stated Maturity Date or at any date
fixed for payment by acceleration, by notice of prepayment or otherwise shall
not be paid on the date as and when due;
(b) any representation or warranty of the Issuer contained herein, in
the Servicing Agreement or in the Reimbursement Agreement, shall prove to be, in
any material respect, false or misleading as of the date deemed made and has a
Material Adverse Effect;
(c) a default in the Performance of any of the Obligations of the
Issuer under Section 603(r) hereof;
(d) breach by the Issuer in the Performance of any of Section 603 (c),
(d), (e), (f), (g), (h), (i), (j), (k), (l), (n), (o), (p), (q), (s), (u),
Section 605 or Section 606 hereof, which breach continues unremedied for a
period of twenty (20) Business Days;
(e) a default in the Performance of any Obligations by the Issuer or a
violation by Issuer of any term, covenant or provision of the Documents (other
than another Indenture Event of Default referred to elsewhere in this section)
which continues unremedied (i) for a period of thirty (30) Business Days after
the earlier of Knowledge by Issuer or notice to Issuer of either, (A) a default
under Section 603(a) hereof or (B) any other default or violation which can be
cured by the payment of money alone or (ii) in the case of any other default or
violation, for a period of thirty (30) Business Days after the earlier of
Knowledge of such default or violation by Issuer or notice to such Issuer of
such default or violation, plus only if such default or violation cannot be
cured by Issuer within thirty (30) Business Days and Issuer has been, in the
good faith and reasonable commercial judgment of the Trustee and the Bank, as
determined by the Trustee (acting at the direction of a Majority of the
Noteholders) and the Bank in their sole discretion, diligent in attempting to
effect cure, such additional period not to exceed an additional ten (10)
Business Days as may be required by Issuer proceeding diligently to effect cure,
provided that if any grace period expressly set forth and relating to such
specific covenant pursuant to the terms of the Documents applies, such grace
period shall be the only applicable grace period for the purposes of this
paragraph;
(f) any final, non-appealable judgment or decree for money damages or
for a fine or penalty against Issuer which is not paid and discharged or stayed
within thirty (30) days thereafter and when aggregated with all other judgments
or decree(s) that have remained unpaid and undischarged or stayed for such
period is in excess of $600,000;
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<PAGE>
(g) Issuer shall (i) generally not be paying its debts as they become
due, (ii) file or consent by answer or otherwise to the filing against it of a
petition for relief or reorganization, arrangement or liquidation or any other
petition in bankruptcy or insolvency or the appointment of a custodian under the
laws of any jurisdiction, (iii) or any other commencement by such Person of a
voluntary case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization, or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree or order for relief in respect of it in an involuntary
case or proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, (iv) make an assignment for the
benefit of its creditors, (v) consent to the appointment of a custodian,
receiver, trustee or other officer with similar powers for itself or any
substantial part of its property, (vi) be adjudicated insolvent, (vii) dissolve
or commence to wind-up its affairs, (viii) take any action for purposes of any
of the foregoing; or a petition for relief or reorganization, arrangement or
liquidation or any other petition in bankruptcy or insolvency or the appointment
of a custodian under the laws of any jurisdiction is filed against it or a
custodian is appointed for the Issuer, the Collateral or any material part of
its properties and such proceeding is not dismissed and appointment vacated
within sixty (60) days thereafter or (ix) a final judgment, fine or other order
for the payment of money shall be rendered by any Governmental Authority against
Issuer and the Issuer shall not discharge the same or provide for its discharge
in accordance with its terms, or obtain an adequate bond with respect thereto,
or procure a stay of execution thereof within thirty (30) days from the date of
its entry and such final judgment, fine or order is likely to have a Material
Adverse Effect; or
(h) any Servicer Event of Default has occurred and is continuing.
Section 802. Acceleration of Stated Maturity; Rescission and
-----------------------------------------------
Annulment.
- ---------
(a) If an Indenture Event of Default occurs and is continuing, then
and in every such case the Trustee (acting solely at the direction of 66 2/3% of
the Voting Rights), on behalf of the Noteholders and the Bank, shall declare all
unpaid principal of, and interest accrued to the date of payment on, all the
Notes, and all other sums owing by Issuer under the Notes, this Indenture or the
Documents, to be due and payable immediately, without presentment, demand or
protest and upon any such declaration such principal, all unpaid accrued
interest and other sums shall become immediately due and payable, and thereupon,
the remedies provided for in Section 804(b) shall be carried out without the
need for additional direction from the Noteholders. The Trustee shall give
prompt written notice to Issuer, all Holders and the Bank, that any such remedy
has been effected.
(b) At any time after such a declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter in this Article provided, the Majority of Holders,
by written notice to the Issuer, the Bank and the Trustee, may rescind and annul
such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Trustee a sum
sufficient to pay:
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<PAGE>
(A) all of the installments of Overdue Interest on and
Overdue Principal of the Notes which were overdue prior to the
date of such acceleration;
(B) all of the installments of Monthly Interest on and
Monthly Principal of the Notes which were not paid on any Payment
Dates subsequent to the date of such acceleration (without giving
effect to acceleration);
(C) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, out-of-pocket expenses,
disbursements and advances of the Trustee, its agents and counsel
incurred in connection with the enforcement of this Indenture;
and
(D) all draws made on the Letter of Credit that were due
and payable prior to and on such Payment Date; and
(ii) all Indenture Events of Default, other than the nonpayment
of the Monthly Principal of or Monthly Interest on Notes which have
become due solely by such declaration of acceleration, have been cured
or waived as provided in Section 813 hereof.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 803. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.
- -------
(a) The Issuer covenants that, if pursuant to Section 803 hereof an
acceleration has been declared and has not been rescinded, the Issuer will, upon
demand of the Trustee, pay to the Trustee, for the benefit of the Holders and
the Bank, the whole amount of all draws made on the Letter of Credit, Overdue
Principal, Monthly Principal, Overdue Interest and Monthly Interest then due and
payable on such Notes, with interest upon the Overdue Principal, at the rate
borne by the Notes; and, in addition thereto, such further amount as shall be
sufficient to pay any other outstanding amounts due with respect to the
Obligations and to cover the costs and out-of-pocket expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel incurred in connection with the enforcement
of this Indenture.
(b) If the Issuer fails to pay forthwith such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, may,
but shall not be obligated to, institute a judicial Proceeding for the
collection of the sums so due and unpaid and may prosecute such Proceeding to
judgment or final decree and may enforce the same, subject to the requirements
of this Indenture, against the Collateral pledged by the Issuer and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the Collateral and any other assets of the Issuer.
(c) If an Indenture Event of Default occurs and is continuing, the
Trustee may in its discretion proceed to protect and enforce its rights and the
rights of the Holders and the Bank by
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such other appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce, subject to the requirements of this Indenture,
any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
Section 804. Remedies.
--------
At any time after an Indenture Event of Default has occurred and while
it is continuing, the Trustee, acting at the direction of 66 2/3% of the Voting
Rights, on behalf of the Noteholders and the Bank may, but without obligation,
in addition to the rights and powers granted elsewhere in the Documents and not
in limitation thereof, do any one or more of the following:
(a) exercise any and all of its rights under Section 802(a) of this
Indenture;
(b) first, withdraw all amounts in the Reserve Account, and then draw
the entire LOC Amount available (to the extent of any Overdue Interest, Monthly
Interest, Overdue Principal and Monthly Principal and at the Stated Maturity
Date only, Ultimate Principal of the Notes);
(c) with respect to the Collateral, (i) foreclose on its Security
Interest in the Collateral or any part thereof and sell or otherwise dispose of
such Collateral, in lots or in its entirety, receive and retain any proceeds
from the other items of Collateral, (ii) institute collection, foreclosure and
other enforcement actions against Mortgagors and other persons obligated on the
Mortgage Loans as permitted by the terms thereof, (iii) enter into modification
agreements and make extension agreements with respect to payments and other
performances, (iv) release Persons liable for performance, (v) settle and
compromise disputes with respect to payments and performances claimed due, all
without notice to Issuer, without being called to account for such actions by
Issuer and without relieving Issuer from Performance of the Obligations, and
(vi) receive, collect, open and read all mail of Issuer for the purpose of
obtaining all items pertaining to the Collateral;
(d) proceed to protect and enforce its rights and remedies under the
Documents and any other documents or instruments related thereto, and/or to
exercise any other rights and remedies available to it at law, in equity or by
statute; and
(e) exercise all other rights and remedies of a secured party under
the Uniform Commercial Code of the relevant jurisdiction and all other rights
and remedies accorded to a secured party in equity or at law. Any notice of sale
or other disposition of the Collateral given not less than ten (10) Business
Days prior to such proposed action in connection with the exercise of the
Trustee's remedies shall constitute reasonable and fair notice of such action.
The Trustee may postpone or adjourn any such sale from time to time by
announcement at the time and place of such sale stated on the notice of sale or
by announcement of any adjourned sale, without being required to give a further
notice of sale. Any such sale may be for cash or, unless prohibited by
applicable law, upon such credit or installment as the Trustee may determine.
Issuer shall be credited with the net proceeds of such sale only when such
proceeds are actually received by the Trustee in good current funds. Despite the
consummation of any such sale, Issuer shall remain liable, for any deficiency on
the Obligations which remains outstanding following such sale. All net proceeds
recovered pursuant to a sale shall be applied in the same priorities as set
forth in Section 301 hereof as if a Restricting
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<PAGE>
Event had occurred until all amounts due and owing to all of the Noteholders,
the Trustee, the Servicer and the Bank have been paid in full.
Section 805. Trustee May Enforce Claims Without Possession of Notes.
------------------------------------------------------
(a) In all Proceedings brought by the Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Trustee shall be a party), the Trustee shall be held to represent all
of the Holders of the Notes and, as the Bank may elect, the Bank. The parties
hereto agree, and each Noteholder, by virtue of its acceptance of each Note,
agrees, that it shall not be necessary to make any Holders of the Notes (and the
Bank, to the extent it elects to be represented by the Trustee) a party to any
such Proceedings.
(b) All rights of action 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 Proceeding instituted by the Trustee shall be brought in its own name as
trustee, and any recovery whether by judgment, settlement or otherwise shall,
after provision for the payment of the reasonable compensation of, expenses, and
disbursements incurred and advances made, by the Trustee, its agents and
counsel, be for the Bank and the ratable benefit of the Holders of the Notes.
Section 806. Power of Attorney; Allocation of Money Collected.
------------------------------------------------
(a) The Trustee may, acting at the direction of 66 2/3% of the Voting
Rights in the name of the Issuer, or in its own name, make and execute all
conveyances, assignments and transfers of the Collateral sold in connection with
the exercise of the Trustee's remedies; and for this purpose the Trustee shall
be appointed in the Indenture as attorney-in-fact for Issuer.
(b) Upon written request of the Trustee when an Indenture Event of
Default exists, the Issuer shall assemble the Collateral not already in the
Trustee's possession and make it available to the Trustee at a time and place
designated by the Trustee.
(c) While an Indenture Event of Default exists, any cash received and
retained by Trustee in connection with the Collateral shall be applied to
payment of the Obligations under the Notes and this Indenture in the manner
provided for in Section 301 hereof until all amounts due and owing to all of the
Noteholders, the Trustee, the Servicer and the Bank have been paid in full.
Section 807. Limitation on Suits.
-------------------
(a) No Holder of any Note 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:
(i) such Holder has previously given written notice to the
Trustee of a continuing Indenture Event of Default;
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(ii) the Holders of more than 25% in principal amount of the
Outstanding Notes (with the consent of the Bank) 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;
(iii) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request (the unsecured indemnity of a
Rated Institutional Noteholder being deemed satisfactory for such
purpose);
(iv) the Trustee has, for thirty (30) days after its receipt of
such notice, request and offer of security or indemnity, failed to
institute any such Proceeding; and
(v) no direction inconsistent with such written request has
been given to the Trustee during such thirty (30) day period by the
Majority of Holders;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes, or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all the Holders.
(b) In the event the Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than 66-2/3% in principal amount of the Holders of the
outstanding Notes, the Trustee in its sole discretion may determine what action,
if any, shall be taken, notwithstanding any other provision of this Indenture.
In the event that any single Holder representing more than 66-2/3% in principal
amount of Outstanding Notes submits a request and indemnity (the unsecured
indemnity of a Rated Institutional Noteholder being deemed satisfactory for such
purpose), the Trustee shall follow the direction set forth in such request.
Section 808. Unconditional Right of Holders to Receive Principal and
-------------------------------------------------------
Interest.
- --------
Notwithstanding any other provision of this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the Monthly Principal, Overdue Principal of and Monthly Interest and
Overdue Interest on such Note as such principal and interest becomes due and
payable and to institute any Proceeding for the enforcement of such payment, and
such rights shall not be impaired without the consent of such Holder.
Section 809. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder 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 Holder, then and in every such case, subject to any
determination in such Proceeding, the Issuer, the Trustee and the Holders shall
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be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such Proceeding had been instituted.
Section 810. Rights and Remedies Cumulative.
------------------------------
No right or remedy herein conferred upon or reserved to the Trustee,
the Bank or to the Holders 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 811. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee, the Bank or of any Holder of any
Note to exercise any right or remedy accruing upon any Indenture Event of
Default shall impair any such right or remedy or constitute a waiver of any such
Indenture Event of Default or an acquiescence therein. Every right and remedy
given by this Article or by law to the Trustee, the Bank or to the Holders may
be exercised from time to time, and as often as may be deemed expedient, by the
Trustee, the Bank or by the Holders, as the case may be.
Section 812. Control by Holders.
------------------
Except as otherwise expressly provided herein, the Majority of Holders
shall have the right to direct the time, method and place of conducting any
Proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, provided that (i) such direction shall not be in
conflict with any rule of law or with this Indenture, including Section 804
hereof, (ii) such Noteholders have offered to the Trustee reasonable indemnity
against costs, expenses and liabilities which it might incur in connection
therewith as provided in Section 902(iii) hereof, (the unsecured indemnity of a
Rated Institutional Noteholder being deemed satisfactory for such purpose),
(iii) 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 901 hereof, the Trustee need not take any action which it determines
might involve it in personal liability or be unjustly prejudicial to the
Noteholders not consenting, and (iv) if the conditions to retention of the
Collateral set forth in Section 816 hereof have been satisfied and the Trustee
elects to retain the Collateral pursuant to such Section, then any direction to
the Trustee by the Holders of the Notes to undertake a sale of the Collateral
shall be of no force and effect.
Section 813. Waiver of Past Defaults.
-----------------------
(a) The Majority of Holders, may on behalf of the Holders of all the
Notes waive any past Indenture Event of Default hereunder and its consequences,
except an Indenture Event of Default
(i) in the payment of the principal of or interest on any Note,
or
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(ii) in respect of a covenant or provision hereof which cannot be
modified or amended without the consent of all the Noteholders.
(b) Upon any such waiver, such Indenture Event of Default shall cease
to exist and shall be deemed to have been cured and not to have occurred for
every purpose of this Indenture; provided, however, that no such waiver shall
extend to any subsequent or other Event of Default or impair any right
consequent thereon.
Section 814. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Note by
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 for any action taken,
suffered or omitted by it as Trustee, 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; provided,
however that the provisions of this Section shall not apply to any suit
instituted by the Trustee or the Bank, to any suit instituted by any Holder, or
group of Holders, holding in the aggregate more than 10% in principal amount of
the Outstanding Notes, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of or interest on any Note on or
after the stated maturity date of such Note.
Section 815. Waiver of Stay or Extension Laws.
--------------------------------
The Issuer covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
Section 816. Optional Preservation of Collateral.
-----------------------------------
If the Notes have been declared to be due and payable under Section
802 hereof following an Event of Default and such declaration and its
consequences have not been rescinded and annulled, the Trustee may take
possession of the Collateral and shall, provided that such Collateral continues
to provide sufficient funds for the payment of principal of and interest on the
Notes as they would have become due if there had not been such a declaration,
retain the Collateral intact for the benefit of the Noteholders and apply all
distributions received on the Collateral to the payment of principal and
interest on the Notes as if there had not been such a declaration. In
determining whether to so elect, the Trustee shall, at the sole expense of the
Issuer, obtain and may rely upon an opinion of an independent investment banking
firm and/or accountants as to the feasibility of such proposed action and as to
the sufficiency of the Collateral for such purpose, which opinion shall be
conclusive evidence as to such sufficiency. The Trustee shall promptly notify
each
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of the Rating Agency, the Bank and each Noteholder of an election to retain the
Collateral pursuant to this Section 816.
Section 817. Sale of Collateral.
------------------
(a) The power to effect any sale of any portion of the Collateral (a
"Sale") pursuant to Section 804 hereof shall not be exhausted by any one or more
----
Sales as to any portion of the Collateral remaining unsold, but shall continue
unimpaired until the entire Collateral shall have been sold or all amounts
payable on the Notes, the Reimbursement Agreement, under this Indenture and any
other Document 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.
(b) Upon any Sale, whether made under the power of sale hereby given
or under judgment, order or decree in any Proceeding for the foreclosure or
involving the enforcement of this Indenture: (i) the Bank or the Trustee on
behalf of all Noteholders may bid for and purchase the property being sold, and
upon compliance with the terms of such Sale may hold, retain and possess and
dispose of such property in its own absolute right without further
accountability; and (ii) the receipt of the Trustee or of any officer thereof
making such sale shall be a sufficient discharge to the purchaser or purchasers
at such sale for its or their purchase money, and such purchaser or purchasers,
and its or their assigns or personal representatives, shall not, after paying
such purchase money and receiving such receipt of the Trustee or of such officer
therefor, be obliged to see to the application of such purchase money or be in
any way answerable for any loss, misappropriation or non-application thereof.
(c) The Trustee shall execute and deliver an appropriate instrument
of conveyance transferring its interest in any portion of the Collateral in
connection with (1) a Sale thereof or (2) a prepayment or repurchase of a
Mortgage Loan as contemplated in Section 405 hereof. In addition, the Trustee is
hereby irrevocably appointed the agent and attorney-in-fact of the Issuer to
transfer and convey its interest in any portion of the Collateral 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 818. 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
Issuer or by the levy of any execution under such judgment upon any portion of
the Collateral or upon any of the assets of the Issuer.
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ARTICLE IX
CONCERNING THE INDENTURE TRUSTEE
Section 901. Duties of Trustee. (a) The Trustee, prior to the
-----------------
occurrence of an Indenture Event of Default or after the curing of any Indenture
Event of Default which may have occurred, undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture. If an
Indenture Event of Default 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 such Person's own
affairs.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provisions of this Indenture, shall determine whether they are in the form
required by this Indenture; provided, however, that the Trustee shall not be
responsible for the accuracy or content of any such resolution, certificate,
statement, opinion, report, document, order or other instrument furnished
pursuant to this Indenture.
(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; provided, however, that:
(i) prior to the occurrence of an Indenture Event of Default and
after the curing of such Indenture Event of Default, the duties and
obligations of the Trustee shall be determined solely by the express
provisions of this Indenture, the Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee and, in the absence of bad
faith or negligence on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates, statements, reports,
documents, orders, opinions or other instruments furnished to the Trustee
and conforming to the requirements of this Indenture;
(ii) the Trustee shall not be liable for an error of judgment made in
good faith by a Responsible Officer or Responsible Officers of the Trustee,
unless it shall be proved that the Trustee was negligent in ascertaining
the pertinent facts; and
(iii) the Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Majority of Holders and the Bank
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture.
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(d) No provisions of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance 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 (the unsecured indemnity of a Rated Institutional Noteholder being
deemed satisfactory for such purpose).
(e) 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 901, except in its capacity as a successor Servicer.
Section 902. Certain Matters Affecting the Trustee. Except as
-------------------------------------
otherwise provided in Section 901 hereof:
(i) The Trustee may rely and shall be protected in acting or
refraining from acting upon any Opinion of Counsel from counsel chosen with
due care, certificate of a Servicing Officer, certificate of auditors or
any other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(ii) The Trustee may consult with counsel and any advice of such
counsel, to the extent such counsel is chosen with due care, shall be full
and complete authorization and protection in respect of any action taken or
suffered or omitted by it hereunder in good faith and in accordance with
such Opinion of Counsel;
(iii) The Trustee shall be under no obligation to institute, conduct
or defend any litigation or proceeding hereunder or in relation hereto at
the request, order or direction of any of the Noteholders, pursuant to the
provisions of this Indenture, unless such Noteholders shall have offered to
the Trustee reasonable security or indemnity against the costs, expenses
and liabilities which may be incurred therein or thereby (the unsecured
indemnity of a Rated Institutional Noteholder being deemed satisfactory for
such purpose);
(iv) The Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture;
(v) 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, consent, order, approval,
bond or other paper or document, unless requested in writing to do so by
the Majority of Holders or the Bank; provided, however, that the Trustee
may require reasonable indemnity against any cost, expense or liability
likely to be incurred in making such investigation as a condition to so
proceeding (the unsecured indemnity of a Rated Institutional Noteholder
being deemed satisfactory for such purpose). The reasonable expense of any
such examination shall be paid, on a pro rata basis, by the Noteholders or,
if the Bank solely requests such an examination, by the Bank or, if paid by
the Trustee, shall be reimbursed by such Noteholders or the Bank upon
demand; and
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(vi) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through its agents or
attorneys, provided that the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed by
it with due care hereunder.
The provisions of this Section 902 shall be applicable to the Trustee
in its capacity as Trustee under this Indenture. If the Trustee, in accordance
with Section 501 hereof, shall have succeeded to the obligations of the
Servicer, the provisions of the Servicing Agreement shall govern the actions of
the Trustee, in accordance with Section 501 hereof, as successor Servicer.
Section 903. Trustee Not Liable. (a) The recitals contained herein
------------------
(other than the representations and warranties contained in Section 911 hereof)
and in the Notes (other than the certificate of authentication on the Notes),
shall be taken as the statements of the Issuer, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture, the Notes, the Collateral or
of any related document other than with respect to the representations and
warranties of Section 911 hereof. The Trustee shall not be accountable for the
use or application by the Issuer of any of the Notes or of the proceeds thereof,
or for the use or application of any funds paid to the Issuer or the Servicer
(if the Servicer is a Person other than the Trustee) in respect of the
Collateral.
(b) The Trustee shall have no responsibility or liability, other than
with respect to any liability arising from the Trustee's own negligence or
willful misconduct, for or with respect to the existence or validity of any
Instrument or any other item of the related 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 Collateral to the Trustee or of
any intervening assignment, the performance or enforcement of any Instrument,
the compliance by any Originator, the Issuer or the Servicer or any successor
Servicer thereto (other than the Trustee acting as successor Servicer pursuant
to the terms of this Indenture) with any covenant or the breach by the Issuer,
any Originator or the Servicer or any successor Servicer of any warranty or
representation made hereunder or in any related document or the accuracy of such
warranty or representation, any investment of monies in the Collection Account
or the Reserve Account or any loss resulting therefrom, the acts or omissions of
any Originator, the Issuer, the Servicer (other than the Trustee acting as
Servicer) or any successor Servicer or any Mortgagor or any action of the
Servicer taken in the name of the Trustee.
(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 Issuer, the Servicer (other than as successor Servicer
pursuant to the terms of this Indenture) or any Originator 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 904. Trustee May Own Notes. The Trustee in its individual
---------------------
or any other capacity may become the owner or pledgee of Notes with the same
rights it would have if it were not
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Trustee provided that such transaction shall not result in the disqualification
of the Trustee for purposes of Rule 3a-7 under the Investment Company Act of
1940.
Section 905. Lien for Trustee's Fees and Expenses. The Issuer shall
------------------------------------
be obligated to pay the reasonable fees and expenses of the Trustee, including,
without limitation, indemnification for loss, liability or expense incurred
without negligence or willful misconduct on its part, arising out of performance
of its duties hereunder, from the Collection Account in accordance with the
priorities and limitations set forth in Section 301 hereof. In addition, the
Issuer shall indemnify the Trustee for, and hold it harmless against, any loss,
liability or expense incurred without negligence or willful misconduct on the
Trustee's part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself both individually and in its representative capacity against any claim or
liability in connection with the exercise or performance of any of its power or
duties hereunder. Upon the occurrence of an Indenture Event of Default resulting
in an acceleration of maturity of the Notes that has not been rescinded and
annulled, the Trustee shall have, as security for the performance of the Issuer
under this Section 905, a lien ranking senior to the lien of the Notes with
respect to which any claim of the Trustee under this Section 905 arose upon all
property and funds held or collected as part of the Collateral by the Trustee in
its capacity as such. The Trustee shall not institute any Proceeding seeking the
enforcement of such lien against the Collateral unless such Proceeding is in
connection with a proceeding in accordance with Article VIII hereof for
enforcement of the lien of this Indenture for the benefit of the Holders of the
Notes secured by the Collateral after the occurrence of an Indenture Event of
Default (other than an Indenture Event of Default arising solely from a breach
of this Section 905) and a resulting declaration of acceleration of maturity of
such Notes that has not been rescinded and annulled.
Section 906. Eligibility Requirements for Trustee. The Trustee
------------------------------------
hereunder shall at all times be a national banking association or a bank or
trust company, organized and doing business under the laws of the United States
of America or any State, authorized under such laws to exercise corporate trust
powers. In addition, the Trustee or its parent corporation shall at all times
(i) have a combined capital and surplus of at least $150,000,000 and (ii) be
subject to supervision or examination by Federal or state authority. If such
entity publishes reports of condition at least annually, pursuant to law or to
the requirements of such supervising or examining authority, then, for the
purposes of this Section, the combined capital and surplus of such entity shall
be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In addition, the Trustee hereunder shall at
all times qualify for purposes of Rule 3a-7 as an "independent trustee" under
the Investment Company Act of 1940. In case at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, the Trustee
shall resign immediately in the manner and with the effect specified in Section
907 hereof.
Section 907. Resignation and Removal of Trustee. (a) The Trustee
----------------------------------
may not at any time resign without first (i) appointing a successor Trustee that
has accepted such appointment and that has been approved, in writing, by the
Class A Majority, the Class B Majority, the Bank, the Rating Agency, and if no
Indenture Event of Default or Incipient Default has occurred and is continuing,
the Issuer and (ii) delivering to the Bank and the Noteholders an Opinion of
Counsel stating that the Trustee cannot legally perform its duties as Trustee
under the Documents. If no successor Trustee shall have been so appointed and
have accepted appointment within 60 days after
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the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(b) The Trustee may be removed at any time at the direction of the
Majority of Holders and the Bank upon written notice delivered to the Trustee
and the Issuer. The Issuer, with the consent of the Bank and the Majority of
Holders, may remove the Trustee if: (1) the Trustee fails to comply with Section
906 hereof; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or
other public officer takes charge of the Trustee or its property or affairs; or
(4) the Trustee becomes incapable of acting.
(c) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 906 hereof or this Section 907 and
shall fail to resign after written request therefor by the Bank, the Rating
Agency and the Majority of Holders (or the Issuer with the consent of the Bank
and the Majority of Holders), then the Issuer may, and shall at the direction of
the Bank, remove the Trustee and appoint a successor Trustee reasonably
acceptable to the Majority of Holders and the Bank by written instrument, in
duplicate, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor Trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee as
provided in Section 908 hereof.
Section 908. Successor Trustee. (a) Any successor Trustee appointed
-----------------
as provided in Section 907 hereof shall execute, acknowledge and deliver to the
Issuer and to its predecessor Trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee herein. The predecessor Trustee shall, at the direction of the
Class A Majority and the Class B Majority with the consent of the Bank, cause
the Custodian to deliver to the successor Trustee the Mortgage Loans and
Mortgage Loan Files, if any, delivered to it, together with any amounts
remaining in the Collection Account, the Letter of Credit Account and/or the
Reserve Account. In addition, the predecessor Trustee and, upon request of the
successor Trustee, the Issuer shall execute and deliver such instruments and do
such other things as may reasonably be required for more fully and certainly
vesting and confirming in the successor Trustee all such rights, powers, duties
and obligations.
(b) No successor Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 906 hereof and shall be reasonably
acceptable to the Bank.
(c) Upon acceptance of appointment by a successor Trustee as provided
in this Section, the Issuer shall mail notice of the succession of such Trustee
hereunder to the Bank, the Rating Agency and to all Noteholders at their
addresses as shown in the registration books maintained by the Trustee. If the
Issuer fails to mail such notice within 10 days after acceptance of appointment
by the successor Trustee, the successor Trustee shall cause such notice to be
mailed at the expense of the Issuer.
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Section 909. Merger or Consolidation of Trustee. Any entity into
----------------------------------
which the Trustee may be merged or converted or with which it may be
consolidated, or any entity resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided such entity shall be eligible under the provisions of
Section 906 hereof, without the execution or filing of any paper or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 910. Separate Trustees, Co-Trustees and Custodians. (a) The
---------------------------------------------
Trustee or the Majority of Holders, in each case with the consent of the Bank
and, provided neither an Incipient Default nor an Indenture Event of Default has
occurred, the Issuer, which consents shall not be unreasonably withheld or
delayed, shall each have the power from time to time to appoint one or more
persons or corporations to act either as co-trustees jointly with the Trustee,
or as separate trustees, or as custodians, for the purpose of holding title to,
foreclosing or otherwise taking action with respect to any of the Collateral,
where such separate trustee or co-trustee is necessary or advisable (or the
Trustee is advised by counsel that such separate trustee or co-trustee is
necessary or advisable) under any applicable laws or for the purpose of
otherwise conforming to any legal requirement, restriction or condition in any
applicable jurisdiction. The separate trustees, co-trustees, or custodians so
appointed shall be trustees, co-trustees, or custodians for the benefit of all
Noteholders and shall have such powers, rights and remedies as shall be
specified in the instrument of appointment; provided, however, that no such
appointment shall, or shall be deemed to, constitute the appointee an agent of
the Trustee.
(b) Every separate trustee, co-trustee and custodian shall, to the
extent permitted by law, be appointed and act subject to the following
provisions and conditions:
(i) all powers, duties, obligations and rights conferred upon the
Trustee in respect of the receipt, custody and payment of moneys shall be
exercised solely by the Trustee;
(ii) all other rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and exercised
or performed by the Trustee and such separate trustee, co-trustee, or
custodian jointly, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Servicer hereunder)
the Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations (including
the holding of title to the Collateral or any portion thereof in any such
jurisdiction) shall be exercised and performed by such separate trustee,
co-trustee or custodian;
(iii) no trustee or custodian hereunder shall be personally liable by
reason of any act or omission of any other trustee or custodian hereunder;
and
(iv) the Trustee or the Majority of Holders (in each case, with the
consent of the Bank) may at any time accept the resignation of or remove
any separate trustee, co-trustee or custodian so appointed by it or them if
such resignation or removal does not violate the other terms of this
Indenture.
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(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee, co-trustee, or custodian shall refer to this Indenture and the
conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Trustee or
separately, as may be provided therein, subject to all the provisions of this
Indenture, specifically including every provision of this Indenture relating to
the conduct of, affecting the liability of, or affording protection to, the
Trustee. Every such instrument shall be furnished to the Trustee.
(d) Any separate trustee, co-trustees, or custodian may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Indenture on its behalf and in its name. If any separate
trustee, co-trustee, or custodian shall die, become incapable of acting, resign
or be removed, all of its estates, properties, rights, remedies and trusts shall
vest in and be exercised by the Trustee, to the extent permitted by law, without
the appointment of a new or successor trustee or custodian.
(e) No separate trustee, co-trustee or custodian hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
906 hereof and no notice to Noteholders of the appointment thereof shall be
required under Section 908 hereof.
(f) The Trustee agrees to instruct the co-trustees, if any, to the
extent necessary to fulfill the Trustee's obligations hereunder.
Section 911. Representations and Warranties. The Trustee hereby
------------------------------
represents and warrants that:
(a) Organization and Good Standing. The Trustee is a national banking
------------------------------
association duly organized, validly existing and in good standing under the laws
of the United States of America, and has the power to own its assets and to
transact the business in which it is presently engaged;
(b) Authorization. The Trustee has the power, authority and legal
-------------
right to execute, deliver and perform this Indenture and to authenticate the
Notes, and the execution, delivery and performance of this Indenture and the
authentication of the Notes has been duly authorized by the Trustee by all
necessary corporate action;
(c) Binding Obligations. This Indenture, assuming due authorization,
-------------------
execution and delivery by all other parties hereto, constitute the legal, valid
and binding obligations of the Trustee, enforceable against the Trustee in
accordance with their terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
(whether statutory, regulatory or decisional) now or hereafter in effect
relating to creditors' rights generally and the rights of trust companies in
particular and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to certain equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought,
whether a proceeding at law or in equity.
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(d) No Violation. The performance by the Trustee of its obligations
------------
under this Indenture will not conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice, lapse of time or
both) a default under, the charter documents or bylaws of the Trustee;
(e) No Proceedings. There are no proceedings or investigations to
--------------
which the Trustee is a party pending, or, to the knowledge of the Trustee,
threatened, before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality (A) asserting the invalidity of this
Indenture or the Notes, (B) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by this Indenture or (C)
seeking any determination or ruling that would materially and adversely affect
the performance by the Trustee of its obligations under, or the validity or
enforceability of, this Indenture or the Notes; and
(f) Approvals. Neither the execution or delivery by the Trustee of
---------
this Indenture nor the consummation of the transactions by the Trustee
contemplated hereby and thereby requires the consent or approval of, the giving
of notice to, the registration with or the taking of any other action with
respect to any governmental authority or agency under any existing federal or
State of Minnesota or State of Maryland law governing the banking or trust
powers of the Trustee.
Section 912. Trustee Offices. The Trustee shall maintain in
---------------
Minneapolis, Minnesota an office or offices or agency or agencies where Notes
may be surrendered for registration of transfer or exchange, which office shall
initially be located at Sixth Street and Marquette Avenue, Minneapolis,
Minnesota 55479-0070 and shall promptly notify the Issuer, the Servicer, the
Noteholders and the Bank of any change of such location.
Section 913. Notice of Event of Default. If the Trustee shall have
--------------------------
actual Knowledge of an Indenture Event of Default, the Trustee shall give prompt
written notice thereof to the Bank, the Rating Agency and the Noteholders. For
all purposes of this Indenture, in the absence of Knowledge by a corporate trust
officer of the Trustee, the Trustee shall not be deemed to have actual knowledge
of any Indenture Event of Default unless notified in writing thereof by the
Issuer, any Noteholder or the Bank, and such notice references the Notes
generally, the Issuer or this Indenture.
Section 914. Back-Up Servicer and Securities Intermediary. Except
--------------------------------------------
as provided under Section 902 hereof with respect to the Trustee succeeding to
the obligations of Servicer, the Back-Up Servicer and the Securities
Intermediary shall have the same rights and protections as the Trustee in
performing their obligation under the Indenture and the related Documents.
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ARTICLE X
SUPPLEMENTAL INDENTURES
Section 1001. Supplemental Indentures without Consent of Holders.
---------------------------------------------------
Without the consent of any Noteholder, but with the consent of the
Bank, the Issuer and the Trustee may enter into one or more supplements to this
Indenture ("Supplements") for any of the following purposes: (i) to add to the
-----------
covenants of the Issuer for the benefit of the Noteholders and the Bank, or to
surrender any right or power herein conferred upon the Issuer; (ii) to correct
any manifest error, or 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 this Indenture, or to subject additional property to the lien of this
Indenture; (iii) 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, or additional conditions, limitations and
restrictions thereafter to be observed by the Issuer; (iv) to convey, transfer,
assign, mortgage or pledge any additional property to or with the Trustee; or
(v) to evidence the succession of the Trustee.
Section 1002. Supplemental Indentures with Consent of Holders.
------------------------------------------------
With the consent of the Class A Majority, the Class B Majority and the
Bank, and upon prior notice to the Rating Agency, the Issuer and the Trustee may
enter into a Supplement for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Noteholders under this Indenture;
provided, however, that no such Supplement shall, without the consent of the
Noteholder of each outstanding Note affected thereby and the Bank: (i) reduce
the principal amount of any Note or the rate of interest thereon, or change the
date on which, or the 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 on or after the stated maturity
date thereof; (ii) reduce the percentage in principal amount of the outstanding
Notes, the consent of whose Noteholders is required for any such Supplement, or
the consent of whose Noteholders is required for any waiver of compliance with
certain provisions of this Indenture or certain Indenture Events of Default and
their consequences provided for in this Indenture or the consent of which is
required to waive any payment default on the Notes; (iii) modify the provisions
of this paragraph except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived without
the consent of the Bank and the Noteholder of each outstanding Note affected
thereby; (iv) modify or alter the definition of the term "Outstanding"; (v)
impair or adversely affect the Collateral except as otherwise permitted herein;
(vi) 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 the Collateral or terminate
the Lien of this Indenture on any Collateral (except as otherwise expressly
permitted herein) or deprive the Bank or any Noteholder of the security afforded
by the Lien of this Indenture; or (vii) modify any of the provisions of this
Indenture in such a manner as to affect the amount of any payments of interest
or principal due on any Note on any Payment Date or at the Stated Maturity Date.
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Section 1003. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, a
Supplement permitted by this Article or the modification thereby of the trusts
created by this Indenture, the Trustee shall be entitled to receive, and shall
be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such Supplement is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such Supplement which
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
Section 1004. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any Supplement under this Article, this
Indenture shall be modified in accordance therewith, and such Supplement 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 1005. Reference in Notes to Supplemental Indentures.
----------------------------------------------
Notes authenticated and delivered after the execution of any
Supplement pursuant to this Article may, and shall if required by the Issuer,
bear a notation in form approved by the Trustee as to any matter provided for in
such Supplement. If the Issuer shall so determine, new Notes so modified as to
conform, in the opinion of the Trustee, may be prepared and executed by the
Issuer and authenticated and delivered by the Trustee in exchange for
Outstanding Notes.
Section 1006. Notice of Supplemental Indentures.
----------------------------------
Promptly, but in no event later than ten (10) days after the execution
by the Issuer and the Trustee of any Supplement, the Issuer shall mail to the
Noteholders, the Trustee, the Bank and the Rating Agency, a true copy of such
Supplement. Any failure of the Issuer to mail such copy of the Supplement, or
any defect therein, shall not, however, in any way impair or affect the validity
of any such Supplement.
Section 1007. Bank to Approve Amendments.
--------------------------
The parties hereto, and the Holders from time to time of the Notes,
grant to the Bank the right of prior approval of amendments or supplements to
the Documents (other than Mortgage Documents).
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ARTICLE XI
HOLDERS LISTS
Section 1101. Issuer to Furnish Trustee Names and Addresses of
------------------------------------------------
Holders.
-------
The Issuer will furnish or cause to be furnished to the Trustee and
the Bank (i) not more than ten (10) days after each Record Date with respect to
the Notes, a list, in such form as the Trustee or the Bank may reasonably
require, of the names and addresses and tax identification numbers of the
Holders of Notes as of such Record Date, and (ii) at such other times as the
Trustee or the Bank may request in writing, within thirty (30) days after the
receipt by the Issuer of any such request, a list of similar form and content as
of a date not more than fifteen (15) days prior to the time such list is
furnished; provided, however, that so long as the Trustee maintains the Note
Register, no such lists shall be required.
Section 1102. Preservation of Information; Communications to Holders.
------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 1101 and the names and
addresses of Holders received by the Trustee in its capacity as note registrar.
The Trustee may destroy any list furnished to it as provided in Section 1101
upon receipt of a new list so furnished.
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<PAGE>
ARTICLE XII
REPURCHASE AND SUBSTITUTION
Section 1201. Optional Purchase or Substitution by Issuer or Servicer
-------------------------------------------------------
(a) In addition to the other circumstances under the Documents
permitting purchase or substitution of Instruments, the Issuer and the Servicer
shall have the right (but not the obligation), at any time either to purchase
for the applicable Mortgage Purchase Price, or to substitute one or more
Substitute Mortgage Loans for other, Mortgage Loans then subject to the Lien of
this Indenture (each a "Predecessor Mortgage Loans") if,
--------------------------
(1) (i) the Predecessor Mortgage Loan is either a Mortgage Loan in
imminent default or a Defaulted Mortgage Loan as of the most recent
Determination Date, or a bankruptcy petition has been filed by or against
the Mortgagor; and
(ii) the Aggregate Instrument Principal Balance of (A) all
Predecessor Mortgage Loans for which substitution or purchase has been or
is being made pursuant to subsection 1201(a)(1)(i) above and (B) all
Mortgage Loans modified pursuant to clause (x) of Section 3.06 of the
Servicing Agreement does not exceed fifteen percent (15%) of the Initial
Aggregate Instrument Principal Balance; or
(2) (i) the Predecessor Mortgage Loan became either an Upgrade or a
Wraparound Mortgage; and
(ii) the Aggregate Instrument Principal Balance of all Predecessor
Mortgage Loans for which a Substitute Mortgage Loan is delivered under this
subsection 1201(a)(2) does not exceed fifteen percent (15%) of the Initial
Aggregate Instrument Principal Balance.
(b) The Issuer shall either give written notice or cause the
Servicer in the Servicer Report to specify to the Trustee, the Bank and the
Rating Agency each substitution of Instruments pursuant to subsection 1201(a)(1)
hereof or subsection 1201(a)(2) hereof or any mandatory substitution or purchase
during the preceding Collection Period. Such Servicer Report or other written
notice shall (i) specify the amount of each Scheduled Payment under the
Predecessor Mortgage Loan and the amount of each Scheduled Payment under each
Substitute Mortgage Loan, (ii) specify the Instrument Principal Balance of the
Predecessor Mortgage Loans, the Instrument Principal Balance of the Substitute
Mortgage Loans and any amounts to be deposited in the Collection Account in
connection with such Substitute Mortgage Loans and (iii) with respect to a
substitution pursuant to subsection 1201(a)(1) hereof or subsection 1201(a)(2)
hereof above, be accompanied by an Officer's Certificate of Issuer or Servicer,
certifying as to compliance with the provisions of the applicable paragraph.
Section 1202. Release of Predecessor Mortgage Loan. Upon any
------------------------------------
substitution of Instruments in accordance with the provisions of Section 1201(a)
above or any mandatory substitution or purchase, the Predecessor Mortgage Loan
and all related Collateral shall be released from the Lien of this Indenture and
the Originator's, the Issuer's and the Servicer's obligations under
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<PAGE>
the Documents with respect to such Predecessor Mortgage Loan shall cease (except
for any indemnities with respect to such Predecessor Mortgage Loan), but the
related Originator, the Issuer and the Servicer shall each thereafter have the
same obligations with respect to the Substitute Mortgage Loan as each of them
have with respect to all other Mortgage Loans subject to the terms of the
Documents.
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<PAGE>
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 1301. Compliance Certificates and Opinions.
------------------------------------
(a) Upon any application or request by the Issuer to the Trustee to
take any action under any provision of this Indenture, the Issuer shall furnish
to the Trustee a certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and, if deemed reasonably necessary by the Trustee or if required
pursuant to the terms of this Indenture, an Opinion of Counsel stating that in
the opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
(b) Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether such covenant
or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1302. Form of Documents Delivered to Trustee.
--------------------------------------
(a) In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
(b) Any certificate or opinion may be based, insofar as it relates to
legal matters, upon a certificate or opinion of, or representations by, counsel,
unless such officer knows that the
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<PAGE>
certificate or opinion or representations with respect to the matters upon which
his certificate or opinion is based are erroneous.
(c) Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1303. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be (i) embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing, (ii) evidenced by (A) the record of one or more Holders
voting in favor thereof at any meeting of Holders or (B) the written consent or
direction of the Majority of Holders or the Holders of a specified percentage of
the principal amount of the Notes, as the case may be, or (iii) evidenced by a
combination of such instrument or instruments and any such record of such a
meeting; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments and record are delivered to
the Trustee and, where it is hereby expressly required, to the Issuer. 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 conclusive in favor of the
Trustee and the Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgements of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other 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 Act of the Holder of any Note shall bind every future Holder of
the same Note and 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 Issuer in
reliance thereon, whether or not notation of such action is made upon such Note.
Section 1304. Reserved.
Section 1305. Limitation of Rights. Except as expressly set forth in
--------------------
this Indenture, this Indenture shall be binding upon the Issuer, the Trustee,
the Noteholders and their respective successors and permitted assigns and shall
not inure to the benefit of any Person other than the parties hereto, the
Noteholders and the Servicer as provided herein. Notwithstanding the previous
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sentence, the parties hereto, the Transferor and the Servicer acknowledge that
the Bank is an express third-party beneficiary hereof entitled to enforce its
rights hereunder as if actually a party hereto.
Section 1306. Severability. (a) If any provision of this Indenture
------------
is held to be in conflict with any applicable statute or rule of law or is
otherwise held to be unenforceable for any reason whatsoever, such circumstances
shall not have the effect of rendering the provision in question inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provision or provisions herein contained invalid, inoperative, or unenforceable
to any extent whatsoever.
(b) The invalidity of any one or more phrases, sentences, clauses or
Sections of this Indenture contained, shall not affect the remaining portions of
this Indenture, or any part thereof.
Section 1307. Notices. All demands, notices and communications
-------
hereunder shall be in writing, personally delivered, sent by an overnight
express mail or delivery service or by fax, and shall be deemed to have been
duly given upon receipt (a) in the case of the Trustee, at the following
address: Norwest Bank Minnesota, National Association, Sixth Street and
Marquette Avenue, Minneapolis, Minnesota, 55479-0070, Telecopy: (612) 667-3539,
Telephone: (612) 667-7683, Attention: Corporate Trust Services -- Asset-Backed
Administration, with a copy to 11000 Broken Land Parkway, Columbia, Maryland
21044, Attention: Corporate Trust Department, Telecopy: (410) 884-2372,
Telephone: (410) 884-2152, (b) in the case of the Servicer, at the following
address: VCH Portfolio Services, Inc., 8801 Vistana Centre Drive, Orlando,
Florida 32821, Attention: Chief Financial Officer, Telephone: (407) 239-3100,
Telecopy: (407) 239-3222, with a copy to VCH Portfolio Services, Inc., 701
Brickell Avenue, Suite 2100, Miami, Florida 33131, Attention: Susan Werth, Esq.,
Telephone: (305) 577-3150, Telecopy: (305) 374-7159, (c) in the case of the
Issuer, at the following address: Vistana 1998-A Timeshare Mortgage Corp., 8801
Vistana Centre Drive, Orlando, Florida 32821, Attention: Chief Financial
Officer, Telephone: (407) 239-3100, Telecopy: (407) 239-3222, with a copy to
Vistana 1998-A Timeshare Mortgage Corp., 701 Brickell Avenue, Suite 2100, Miami,
Florida 33131, Attention: Susan Werth, Esq., Telephone: (305) 577-3150,
Telecopy: (305) 374-7159, (d) in the case of VDI, at the following address:
Vistana Development, Inc., 8801 Vistana Centre Drive, Orlando, Florida 32821,
Attention: Chief Financial Officer, Telephone: (407) 239-3100, Telecopy: (407)
239-3222, with a copy to Vistana Development, Inc., 701 Brickell Avenue, Suite
2100, Miami, Florida 33131, Attention: Susan Werth, Esq., Telephone: (305) 577-
3150, Telecopy: (305) 374-7159, (e) in the case of Points, at the following
address: Points of Colorado, Inc., 8801 Vistana Centre Drive, Orlando, Florida
32821, and 701 Brickell Avenue, Suite 2100, Miami, Florida 33131, Attention:
Susan Werth, Esq., Telephone: (305) 577-3150, Telecopy: (305) 374-7149, (f) in
the case of the Rating Agency, at the following address: Duff & Phelps Credit
Rating Co., 17 State Street, New York, New York 10004, Attention: ABS/Timeshare
Group and (g) in the case of the Bank, at the following address: 75 Wall Street,
New York, New York 10005-2889, Attention: Asset-Backed Finance, Telephone: (212)
429-2552, Telecopy: (212) 429-2780 or at other such address as shall be
designated by such party in a written notice to the other parties. Any notice
required or permitted to be given to a Noteholder shall be sent to the address
of such Holder as shown in the Note Register or to the telephone and fax number
furnished by such Noteholder to the Note Registrar.
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<PAGE>
Section 1308. Captions. The captions or headings in this Indenture
--------
are for convenience only and in no way define, limit or describe the scope or
intent of any provisions or sections of this Indenture.
Section 1309. Governing Law. This Indenture shall be governed by and
-------------
interpreted in accordance with the laws of the State of New York, without giving
effect to the principles of conflicts of law.
Section 1310. No Petition. The Trustee, on its own behalf, hereby
-----------
covenants and agrees, and each Noteholder by its acquisition of a Note shall be
deemed to covenant and agree, that it will not institute against the Issuer any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any federal or state bankruptcy or similar law, at
any time other than on a date which is at least 135 days after the last date on
which any such Note was outstanding.
Section 1311. General Interpretive Principles. For purposes of this
-------------------------------
Indenture except as otherwise expressly provided or unless the context otherwise
requires:
(a) the defined terms in this Indenture shall include the plural as
well as the singular, and the use of any gender herein shall be deemed to
include any other gender;
(b) accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date hereof;
(c) references herein to "Articles", "Sections", "Subsections",
"paragraphs", and other subdivisions without reference to a document are to
designated Articles, Sections, Subsections, paragraphs and other subdivisions of
this Indenture;
(d) a reference to a Subsection without further reference to a Section
is a reference to such Subsection as contained in the same Section in which the
reference appears, and this rule shall also apply to paragraphs and other
subdivisions;
(e) the words "herein", "hereof", "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
provision; and
(f) the term "include" or "including" shall mean without limitation by
reason of enumeration.
Section 1312. Third Party Beneficiaries. The Trustee and the Issuer
-------------------------
hereby agree that the Bank shall be a third party beneficiary with respect to
the rights, duties and obligations of the various parties to this Indenture.
Section 1313. Bank Consent and Direction Rights. The Bank's rights
---------------------------------
hereunder shall terminate at such time as no amount owed to the Bank hereunder
or under the Reimbursement Agreement remains unpaid, and the Bank shall have
received an Opinion of Counsel to the effect
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<PAGE>
that no monies paid under the Notes are subject to recapture as preferences
under Section 547 of the Bankruptcy Code.
Section 1314. Effective Date of Transaction. Notwithstanding that
-----------------------------
this Indenture is dated as of July 31, 1998, the various transfers, conveyances
and transactions set forth in this Indenture, including, without limitation, the
security interests granted pursuant to Sections 309 and 401 hereof, shall not be
effective until the Closing Date.
Section 1315. Confidentiality. Each Noteholder, by acceptance of its
---------------
Note, agrees and covenants to abide by the provisions of Sections 205(j) and
602(k) hereof.
<PAGE>
IN WITNESS WHEREOF, the Issuer, the Securities Intermediary, the Back-
Up Servicer and the Trustee have caused this Indenture to be duly executed and
delivered 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.
VISTANA 1998-A TIMESHARE MORTGAGE CORP.
By: /s/ Susan Werth
-----------------------------------
Name: Susan Werth
Title: Senior Vice President - Law
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee, as Securities
Intermediary and as Back-up Servicer
By: /s/ Amy Wahl
-----------------------------------
Name: Amy Wahl
Title: Assistant Vice President
<PAGE>
Exhibit A
---------
Instrument Schedule
<PAGE>
EXHIBIT B
TRANSFER CERTIFICATE
(Transfers pursuant to Rule 144A)
FOR VALUE RECEIVED the undersigned registered Holder hereby sell(s),
assign(s) and transfer(s) unto ______________________________________
______________________________________________________________________________
______________ (please print or typewrite name, Taxpayer Identification No. and
address including postal zip code of assignee) ____________________________
_________________________________________________ the accompanying ___%
Timeshare Mortgage-Backed Notes, Series 1998-A, Class A [and] [___% Timeshare
Mortgage-Backed Notes, Series 1998-A, Class B ] bearing number ___________ (the
"Note") and all rights thereunder, hereby irrevocably constituting and
----
appointing _____________ attorney to transfer said Note on the books of the
Issuer with full power of substitution in the premises. Capitalized terms not
defined herein shall have the meaning set forth in the Indenture, dated as of
July 31, 1998, by and between Vistana 1998-A Timeshare Mortgage Corp., as Issuer
and Norwest Bank National Association, as Trustee.
In connection with any transfer of the Note, the undersigned confirms
that, without utilizing any general solicitation or general advertising, the
Note is being transferred by the undersigned to a "Qualified Institutional
Buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act")) pursuant to the exemption from registration under the
--------------
Securities Act provided by Rule 144A thereunder, in a transaction which
satisfies the requirements of such Rule 144A.
The undersigned (the "Seller") has informed the assignee of the Note
------
(the "Purchaser"), and such assignee understands, that the Note will bear a
---------
legend to the following effect:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY
NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED, UNLESS SUCH
TRANSFER IS MADE TO A PERSON REASONABLY BELIEVED TO BE A QUALIFIED
INSTITUTIONAL BUYER ("QIB") UNDER RULE 144A, AS AMENDED ("RULE 144A") OR TO
AN ACCREDITED INVESTOR UNDER SECTION 501(a)(1), (2), (3) AND (7) OF THE
SECURITIES ACT ("ACCREDITED INSTITUTIONAL INVESTOR") IN A TRANSACTION WHICH
DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND PURSUANT TO AN
EFFECTIVE REGISTRATION OR QUALIFICATION UNDER ANY STATE SECURITIES OR "BLUE
SKY" LAWS, OR IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR
QUALIFICATION. IN ADDITION, SUCH TRANSACTION MUST COMPLY WITH THE
PROVISIONS SET FORTH IN SECTION 205 OF THE INDENTURE. BECAUSE OF THE
PROVISIONS FOR THE PAYMENT OF PRINCIPAL CONTAINED HEREIN, THE OUTSTANDING
PRINCIPAL AMOUNT OF THIS NOTE MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF.
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<PAGE>
ANYONE PURCHASING THIS NOTE MAY ASCERTAIN THE OUTSTANDING PRINCIPAL AMOUNT
HEREOF BY INQUIRY OF THE TRUSTEE.
Dated: ____________
[SELLER]
By:_________________________________________
Name:____________________
Title:___________________
NOTICE: The signature of the registered Holder to
this assignment must correspond with the name as
written upon the face of the within instrument in
every particular, without alteration or
enlargement or any change whatsoever.
TO BE COMPLETED BY PURCHASER:
By execution hereof Purchaser agrees to be bound, as Noteholder, by
all of the terms, covenants and conditions of the Indenture and the Note and
from and after the date hereof Purchaser assumes all of Seller's obligations as
Noteholder thereunder.
The undersigned represents and warrants to the Seller, the Issuer, the
Trustee, the Bank, the Servicer and any subservicer that (A) it is a "Qualified
Institutional Buyer" as defined in Rule 144A under the Securities Act and
acknowledges that it has received such information regarding the Issuer as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the registered Holder is relying upon
the undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A and (B) the Investor understands and
acknowledges that the acquisition of Notes by an employee benefit plan subject
to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or
-----
the provisions of Section 4975 of the Code (a "Plan"), could result in a
----
prohibited transaction under ERISA or Section 4975 of the Code, unless such
acquisition is subject to a statutory or administrative exemption.
Dated: __________________
By: _____________________________
Name: ___________________________
Title: __________________________
NOTICE: To be executed by an authorized officer.
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<PAGE>
EXHIBIT C
TRANSFER CERTIFICATE
(Transfers other than pursuant to Rule 144A to Accredited Institutional
Investors)
VCM Portfolio Services, Inc.
8801 Vistana Centre Drive
Orlando, Florida 32821
Attn: Chief Financial Officer
Vistana 1998-A Timeshare Mortgage Corp.
8801 Vistana Centre Drive
Orlando, Florida 32821
Attn: Chief Financial Officer
Re: ___% Timeshare Mortgage-Backed Notes, Series 1998-A, Class A
[and] [___% Timeshare Mortgage-Backed Notes, Series 1998-A,
Class B] (the "Note"), issued by Vistana 1998-A Timeshare
Mortgage Corp. (the "Issuer")
Dear Sir or Madam:
FOR VALUE RECEIVED the undersigned registered Holder hereby sell(s),
assign(s) and transfer(s) unto
___________________________________________________
_______________________________________________________________________________
(please print or typewrite name, Taxpayer Identification No. and address
including postal zip code of assignee) ____________________________
_________________________________________________ the accompanying ___%
Timeshare Mortgage-Backed Notes, Series 1998-A, Class A [and] [___% Timeshare
Mortgage-Backed Notes, Series 1998-A, Class B ] bearing number ___________ (the
"Note") and all rights thereunder, hereby irrevocably constituting and
----
appointing _____________ attorney to transfer said Note on the books of the
Issuer with full power of substitution in the premises. Capitalized terms not
defined herein shall have the meaning set forth in the Indenture, defined below.
1. In connection with such transfer and in accordance with Section
205 of the Indenture, dated as of July 31, 1998 (the "Indenture"), between
Norwest Bank Minnesota, National Association (the "Trustee") and the Issuer, the
Seller hereby certifies the following facts: Neither the Seller nor anyone
acting on its behalf has offered, transferred, pledged, sold or otherwise
disposed of the Note, any interest in the Note or any other similar security to,
or solicited any offer to buy or accept a transfer, pledge or other disposition
of the Note, any interest in the Note or any other similar security with, any
person in any manner, or made any general solicitation by means of general
advertising or in any other manner, or taken any other action which would
constitute a distribution of the Note under the Securities Act of 1933, as
amended (the "Securities Act"), or
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<PAGE>
which would render the disposition of the Note a violation of Section 5 of the
Securities Act or require registration pursuant thereto.
2. The Purchaser warrants and represents to, and covenants with, the
Seller, the Trustee, the Bank, the Issuer and the Servicer pursuant to Section
205 of the Indenture as follows:
a. The Purchaser understands that the Note has not been and will
not be registered under the Securities Act or the securities laws of any
state and, if the Notes are not then registered under applicable federal
and state securities law (which registration the Issuer is not obligated to
effect), it will not offer to sell, transfer or otherwise dispose of the
Notes except in a transaction which is exempt from such registration.
b. The Purchaser is acquiring the Note for investment for its
own account only and not with a view to the distribution thereof, and the
Purchaser agrees not to dispose of any Note in violation of the
registration requirements of the Securities Act of 1933, as amended, or any
other requirement of law.
c. The Purchaser is either a Qualified Institutional Buyer under
Rule 144A under the Securities Act or an "Accredited Investor" under Rule
501(a)(1), (2), (3) and (7) of the Securities Act.
d. The Purchaser has been furnished with all information
regarding the Note that it has requested from the Issuer, the Trustee or
the Servicer.
e. Neither the Purchaser nor anyone acting on its behalf has
offered, transferred, pledged, sold or otherwise disposed of the Note, any
interest in the Note or any other similar security to, or solicited any
offer to buy or accept a transfer, pledge or other disposition of the Note,
any interest in the Note or any other similar security from, or otherwise
approached or negotiated with respect to the Note, any interest in the Note
or any other similar security with, any person in any manner, or made any
general solicitation by means of general advertising or in any other
manner, or taken any other action, that would constitute a distribution of
the Note under the Securities Act or that would render the disposition of
the Note a violation of Section 5 of the Securities Act or require
registration pursuant thereto, nor will it act, nor has it authorized or
will it authorize any person to act, in such manner with respect to the
Note.
f. The Purchaser understands and acknowledges that the
acquisition of Notes by an employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or the
provisions of Section 4975 of the Code (a "Plan"), could result in a
prohibited transaction under ERISA or Section 4975 of the Code, unless such
acquisition is subject to a statutory or administrative exemption.
3. The Purchaser has conducted an independent investigation of the
risks involved in holding the Notes and understands those risks. The Purchaser
has been provided with all information concerning the Notes, the Issuer, the
Bank, the Servicer, the Originators and the Mortgage Loans that it has
requested.
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<PAGE>
4. By execution hereof Purchaser agrees to be bound, as Noteholder,
by all of the terms, covenants and conditions of the Indenture and the Note and
from and after the date hereof Purchaser assumes all of Seller's obligations as
Noteholder thereunder.
5. This document may be executed in one or more counterparts and by
the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same document.
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<PAGE>
IN WITNESS WHEREOF, each of the parties have caused this document to
be executed by their duly authorized officers as of the date set forth below.
_______________________________ _____________________________
Seller Purchaser
By:____________________________ By:__________________________
Name: Name:
Title: Title:
Taxpayer Identification Taxpayer Identification
No._________________________ No._______________________
Date:__________________________ Date:________________________
<PAGE>
EXHIBIT D
FORM OF NON-RECOURSE RELEASE
Trustee's Certificate
pursuant to Section 405 of the Indenture
----------------------------------------
Norwest Bank Minnesota, National Association, as indenture trustee
(the "Trustee") pursuant to the Indenture, dated as of July 31, 1998, between
Vistana 1998-A Timeshare Mortgage Corp. (the "Issuer") and the Trustee (the
"Indenture"), does hereby release and sell, transfer, assign, deliver and
otherwise convey to ______________ (the "Purchaser"), without recourse,
representation or warranty, all of the Trustee's right, title and interest in
and to all of the assets identified in the attached certificate and all income
thereon and proceeds thereof (collectively, the "Assets") and all security and
documents relating thereto.
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of
____________.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By: ___________________________
Title: ________________________
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<PAGE>
Exhibit E
---------
FORM OF ASSIGNMENT OF MORTGAGE
KNOW ALL MEN BY THESE PRESENTS:
That VISTANA 1998-A TIMESHARE MORTGAGE CORP., a Delaware corporation,
("Assignor"), as owner and holder of the mortgages as more particularly
described on Exhibit "A" of that certain Assignment of Mortgages by Vistana
Timeshare Mortgage Corp. in favor of VTM Corp., dated September ____, 1998 and
recorded September ____, 1998 under Clerk's Number __________, in Official
Records Book _____, Page ____, Public Records of Orange County, Florida, said
mortgages having been further assigned to Vistana Development, Inc. by that
certain Assignment of Mortgages by VTM Corp., in favor of Vistana Development,
Inc., dated September ____, 1998 and recorded September ____, 1998, under
Clerk's Number __________ in Official Records Book _____, Page ____, Public
Records of Orange County, Florida, and said mortgages having been further
assigned to Assignor by that certain Assignment of Mortgages by Vistana
Development, Inc., in favor of Assignor dated September ____, 1998, and recorded
September ____, 1998, under Clerk's Number __________ in Official Records Book
_____, Page ____, Public Records of Orange County, Florida, and by this
reference incorporated herein, said mortgages encumbering timeshare interests in
the timeshare condominium projects more particularly described on Exhibit "A"
attached hereto, for and in consideration of the payment of the "Mortgage
Purchase Price" as set forth in that certain Cross-Receipt and Application of
Proceeds entered into by and between Assignor and Assignee and others dated
September ____, 1998, and other valuable consideration to it in hand paid by
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, AS TRUSTEE, ("Assignee"), the
receipt whereof is hereby acknowledged, does by these presents grant, bargain,
sell, assign, transfer and set over unto Assignee all right, title and interest
of Assignor in and to such mortgage(s);
TOGETHER WITH the promissory note(s) and other obligations therein
described of the mortgagor(s), all moneys due and to become due thereunder, and
all interest thereon, and all rights arising therefrom.
IN WITNESS WHEREOF, the Assignor has caused these presents to be executed
this __ day of September, 1998.
WITNESSES: VISTANA DEVELOPMENT, INC.,
a Florida corporation
__________________________ By:________________________________
Name:_____________________ Name:______________________________
__________________________ Its:_______________________________
Name:_____________________
(CORPORATE SEAL)
Address: 8801 Vistana Centre Drive
Orlando, Florida 32821
Assignor
STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing instrument was acknowledged before me this ____ day of
September, 1998, by _________________ as ___________________ of VISTANA
DEVELOPMENT, INC., a Florida corporation, on behalf of the corporation. He/She
is personally known to me or has produced ___________________________ as
identification.
___________________________________
(SEAL) Notary Public, State of Florida
Name:______________________________
Commission No.:____________________
My Commission Expires:_____________
<PAGE>
APPENDIX A
DEFINITIONS
-----------
"Accredited Institutional Investor" has the meaning set forth in the
---------------------------------
preamble of the form of Note set forth in Section 202 of the Indenture.
"Actual Payments" has the meaning set forth in Section 304(b)(v) of
---------------
the Indenture.
"Account Property" means, with respect to any account established and
----------------
maintained pursuant to the Indenture or any Supplement, all amounts, deposits,
investments and any other property held from time to time in such account;
including, but not limited to, deposits, book-entry securities, uncertificated
securities, security entitlements, investment property, accounts and all
proceeds of the foregoing.
"Affiliate" means any entity other than the entity in question that
---------
(i) owns beneficially, directly or indirectly, 10% or more of the outstanding
shares of common stock of such entity in question or (ii) of which 10% or more
of the outstanding shares of its common stock is owned beneficially, directly or
indirectly, by the entity in question, or (iii) which is "controlled," as
defined in Section 230.405 of the Rules and Regulations of the Securities and
Exchange Commission, 17 C.F.R. Section 230.405, by an entity described in clause
(i) above. Notwithstanding the foregoing, no Person owning 20% or less of the
common stock of Vistana shall be deemed an Affiliate.
"Aggregate Instrument Principal Balance" means, as of any date of
--------------------------------------
determination, the sum of the Instrument Principal Balances of all Instruments
(unless otherwise specified).
"Annualized Default Rate" for any Collection Period means (i) the
-----------------------
ratio, expressed as a percentage, of the Aggregate Instrument Principal Balance
of all Instruments that became Defaulted Instruments (provided that, for the
purposes of this definition only, the Instrument Principal Balance of each such
Defaulted Instrument shall not be deemed to be zero as set forth in the
definition of "Instrument Principal Balance" herein) during such Collection
Period over the Aggregate Instrument Principal Balance of all Instruments on the
first day of such period, multiplied by (ii) 12.
"Articles of Organization" means the charter, certificate of
------------------------
incorporation, certificate of trust, trust agreement, articles, operating
agreement, partnership agreement, by-laws and any other written documents
evidencing the formation, organization and continuing existence of the entity
related thereto.
"Assignment of Mortgage" means a written assignment of one or more
----------------------
specific Mortgages relating to one or more Instruments in recordable form,
sufficient under the laws of the jurisdiction wherein the related Unit is
located to give record notice of a transfer of a Mortgage and its proceeds,
delivered by Issuer to Trustee in the form of Exhibit E to the Indenture.
<PAGE>
"Association" or "Timeshare Association" means the not-for-profit
----------- ---------------------
corporation related to a particular Timeshare Interest responsible for operating
and maintaining a particular Timeshare Project.
"Available Amounts" means, as of any Payment Date, all those amounts
-----------------
deposited in the Collection Account, with respect to the related Collection
Period, whether as payments under the Mortgage Loans (including Scheduled
Payments, Prepayments, casualty insurance payments and any other unscheduled
payments of principal or interest on the Mortgage Loans), recoveries with
respect to Defaulted Instruments, Servicer Advances, investment income from the
Reserve Account and Collection Account or repurchases of Defaulted Mortgage
Loans, but without giving effect to any amounts drawn by the Trustee from either
the Reserve Account (other than such investment income) or the Letter of Credit.
"Back-up Servicer" has the meaning set forth in Section 501(d) of the
----------------
Indenture.
"Back-up Servicing Fee" means, with respect to any Payment Date, an
---------------------
amount equal to the product of (x) one-twelfth (1/12), (y) .0002 and (z) the
Aggregate Instrument Principal Balance on the opening of business on the first
day of the related Collection Period, provided, however, that the Back-up
Servicing Fee on the Payment Date occurring on October 20, 1998 shall be
calculated based on the Initial Aggregate Instrument Principal Balance.
"Bank" means Dresdner Bank AG, New York Branch.
"Bank Rate" means the sum of LIBOR plus two percent (2%).
---------
"Bankruptcy Code" means the Bankruptcy Code of 1978, as amended, as
---------------
codified under Title 11 of the United States Code, and the Bankruptcy Rules
promulgated thereunder, as the same may be in effect from time to time.
"Borrower" means Vistana Timeshare Mortgage Corp., a Delaware
--------
corporation.
"Business Day" means any day other than a Saturday, Sunday or a day on
------------
which banks in New York, New York, the State of Florida, the State of Maryland
or the state in which the Trustee's Corporate Trust Office is located (and, with
respect to the calculation of LIBOR, London, England) are required or permitted
to close or any date on which the New York Stock Exchange is scheduled to close.
"Class A Majority" means as of the date of determination, Holders
----------------
having more than fifty percent (50%) of the then-outstanding Voting Rights of
all of the Class A Noteholders.
"Class A Monthly Interest" means, with respect to any Payment Date, an
------------------------
amount, in dollars, equal to the product of (i) one-twelfth, (ii) 5.891% and
(iii) the Class A Note Balance on the immediately preceding Payment Date after
giving effect to the
2
<PAGE>
payments of Monthly Principal and Overdue Principal made on such immediately
preceding Payment Date, provided, however, that the Class A Monthly Interest on
the initial Payment Date of October 20, 1998 shall be twenty (20) days' interest
calculated based on the Class A Note Balance on the Closing Date.
"Class A Monthly Principal" means, with respect to any Payment Date,
-------------------------
an amount equal to the product of (a) the Class A Percentage and (b) Monthly
Principal; provided, however, that (A) in no event shall the Class A Monthly
Principal exceed the Class A Note Balance as of such Payment Date, (B) on the
Stated Maturity Date the Class A Monthly Principal will be the Class A Note
Balance, and (C) on such earlier date on which the entire principal balance of
the Notes shall be due and payable, if the Trustee forecloses on the Collateral
pursuant to the terms of the Indenture and either (i) disposes of all or
substantially all of the Mortgage Loans or (ii) if the Holders of a majority of
the Outstanding principal amount of each Class of Notes, or the Bank, has
advised the Trustee in writing that the Collateral has deteriorated and that
there is a reasonable likelihood that all Monthly Principal, Overdue Principal
(if any), Monthly Interest and Overdue Interest (if any) on the Notes and Letter
of Credit Drawings will not be paid in full, then (except with respect to Letter
of Credit Drawings) the Class A Monthly Principal will be the Class A Note
Balance.
"Class A Note Balance" means, as of the Closing Date, $31,973,000.00,
--------------------
and thereafter shall equal the Class A Note Balance as of the Closing Date
reduced by all subsequent and unrevoked principal payments on the Class A Notes.
"Class A Noteholder" means, at any time, any Person in whose name a
------------------
Class A Note is registered in the Note Register.
"Class A Notes" means any Class A Notes authorized by, authenticated
-------------
and delivered under the Indenture.
"Class A Overdue Interest" means, with respect to any Payment Date, an
------------------------
amount equal to the excess, if any, of (a) the aggregate amount of Monthly
Interest due on the Class A Notes as of all preceding Payment Dates over (b) the
aggregate amount of Monthly Interest actually paid to the Class A Noteholders
with respect to the Class A Notes on all preceding Payment Dates.
"Class A Overdue Principal" means, as of any Payment Date, an amount
-------------------------
equal to the excess, if any, of (a) the aggregate amount of all Class A Monthly
Principal due on the Class A Notes as of all preceding Payment Dates over (b)
the aggregate amount of principal payments (from whatever source) actually paid
to the Class A Noteholders with respect to the Class A Notes on all preceding
Payment Dates.
"Class A Percentage" means 48.33147%, provided, however, that if a
------------------
draw on the Letter of Credit has occurred and any part of such draw remains
unreimbursed, "Class A Percentage" shall be a fraction, expressed as a
percentage, in which the numerator shall be the Class A Note Balance and the
denominator shall be the
3
<PAGE>
sum of the Class A Note Balance, the Class B Note Balance and the outstanding
unreimbursed amount of all draws on the Letter of Credit on such Determination
Date.
"Class A Voting Rights" means the Voting Rights of all Class A
---------------------
Noteholders.
"Class B Majority" means, as of the date of determination, Holders
----------------
having more than fifty percent (50%) of the then-outstanding Voting Rights of
all of the Class B Noteholders.
"Class B Monthly Interest" means, with respect to any Payment Date, an
------------------------
amount, in dollars, equal to the product of (i) one-twelfth, (ii) 6.282% and
(iii) the Class B Note Balance on the immediately preceding Payment Date after
giving effect to the payments of Monthly Principal and Overdue Principal made on
such immediately preceding Payment Date, provided, however, that the Class B
Monthly Interest on the initial Payment Date of October 20, 1998 shall be twenty
(20) days' interest calculated based on the Class B Note Balance on the Closing
Date.
"Class B Monthly Principal" means, with respect to any Payment Date,
-------------------------
an amount equal to the product of (a) the Class B Percentage and (b) Monthly
Principal; provided, however, that (A) in no event shall the Class B Monthly
Principal exceed the Class B Note Balance as of such Payment Date, (B) on the
Stated Maturity Date the Class B Monthly Principal will be the Class B Note
Balance, and (C) on such earlier date on which the entire principal balance of
the Notes shall be due and payable, if the Trustee forecloses on the Collateral
pursuant to the terms of the Indenture and either (i) disposes of all or
substantially all of the Mortgage Loans or (ii) if the Holders of a majority of
the Outstanding principal amount of each Class of Notes, or the Bank, has
advised the Trustee in writing that the Collateral has deteriorated and that
there is a reasonable likelihood that all Monthly Principal, Overdue Principal
(if any), Monthly Interest and Overdue Interest (if any) on the Notes and Letter
of Credit Drawings will not be paid in full, then (except with respect to the
Letter of Credit Drawings) the Class B Monthly Principal will be the Class B
Note Balance.
"Class B Note Balance" means, as of the Closing Date, $34,180,583.90,
--------------------
and thereafter shall equal the Class B Note Balance as of the Closing Date
reduced by all subsequent and unrevoked principal payments on the Class B Notes.
"Class B Notes" means any Class B Notes authorized by, authenticated
-------------
and delivered under the Indenture.
"Class B Overdue Interest" means, with respect to any Payment Date, an
------------------------
amount equal to the excess, if any, of (a) the aggregate amount of Monthly
Interest due on the Class B Notes as of all preceding Payment Dates over (b) the
aggregate amount of Monthly Interest actually paid to the Class B Noteholders
with respect to the Class B Notes on all preceding Payment Dates.
"Class B Overdue Principal" means, as of any Payment Date, the excess,
-------------------------
if any, of (a) the aggregate amount of Class B Monthly Principal due on the
Class B
4
<PAGE>
Notes as of all preceding Payment Dates over (b) the aggregate amount of
principal payments (from whatever source) actually paid to the Class B
Noteholders with respect to the Class B Notes on all preceding Payment Dates.
"Class B Percentage" means 51.66853%, provided, however, that if a
------------------
draw on the Letter of Credit has occurred and any part of such draw remains
unreimbursed, "Class B Percentage" shall be a fraction, expressed as a
percentage, in which the numerator shall be the Class B Note Balance and the
denominator shall be the sum of the Class A Note Balance, the Class B Note
Balance and the outstanding unreimbursed amount of the draw on the Letter of
Credit on such Determination Date.
"Closing Date" means September 29, 1998.
"Code" means the Internal Revenue Code of 1986, as the same may be
----
amended, restated or defined.
"Collateral" has the meaning set forth in Section 401 of the
----------
Indenture.
"Collateral Liquidation" shall have the meaning set forth in the
----------------------
Letter of Credit.
"Collection Account" means a segregated trust account established by
------------------
the Trustee pursuant to Section 304 of the Indenture.
"Collection Period" means, with respect to the Payment Date related
-----------------
thereto, the entire calendar month immediately preceding such Payment Date,
provided, however, that with respect to the initial Payment Date, the Collection
Period shall be deemed to commence on the opening of business on August 1, 1998
and terminate at the close of business on September 30, 1998.
"Confidential Information" means information obtained by any Holder
------------------------
including, without limitation, the Documents, that is proprietary in nature and
that was clearly marked or labeled or otherwise adequately identified when
received by the Holder as being confidential information of any Vistana
Transaction Entity or Vistana, provided that such term does not include
information that (a) was publicly known or otherwise known to the Holder prior
to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by such Holder or any Person acting on its behalf, (c)
otherwise becomes known to the Holder other than through disclosure by any
Vistana Transaction Entity or Vistana, (d) constitutes financial statements
delivered to the Holder that are otherwise publicly available, or (e) any other
public disclosure authorized by any Vistana Transaction Entity or Vistana.
"Control" means the possession, directly or indirectly, of the power
-------
to direct or cause the direction of management, policies or activities of a
person or entity, whether through ownership of voting securities, by contract or
otherwise.
"Corporate Trust Office" means, as of the Closing Date, the principal
----------------------
corporate trust office of the Trustee located at Sixth Street and Marquette
Avenue,
5
<PAGE>
Minneapolis, Minnesota 55479, and thereafter at such other address as the
Trustee may designate from time to time by notice to the Noteholders and the
Issuer.
"Custodial Agreement" means the Custodial Agreement, dated as of the
-------------------
Closing Date, by and between the Custodian, the Issuer and the Trustee, as the
same may be amended, restated and modified from time to time, and any subsequent
custodial agreement entered into with a successor Custodian.
"Custodian" means initially, First Union National Bank, a national
---------
banking association, and thereafter, any custodian of the Instruments acting on
behalf of the Issuer, the Trustee and the Bank pursuant to the Documents.
"Cut-off Date" means, with respect to each Instrument transferred by
------------
an Originator to the Issuer on the Closing Date, July 31, 1998 and, with respect
to any other Transfer Date, the last day of the calendar month immediately
preceding such Transfer Date.
"DCR"or the "Rating Agency" means Duff & Phelps Credit Rating Co.
--- -------------
"Defaulted Instrument" means an Instrument that, as of any
--------------------
Determination Date occurring after the Transfer Date related to such Instrument,
has (a) either (i) been determined, by the Servicer, in its sole discretion, in
accordance with the Servicing Standards, to not be collectible or (ii) had all
or part of a Scheduled Payment thereunder more than 180 days delinquent as of
the end of the immediately preceding Collection Period or (b) ceased to have the
benefit of the related Mortgage.
"Defaulted Mortgage Loan" means a Mortgage Loan that is evidenced by a
-----------------------
Defaulted Instrument.
"Delinquent Instrument" means, as of any Determination Date, any
---------------------
Instrument (other than an Instrument which became a Defaulted Instrument prior
to such Determination Date) with respect to which the Mortgagor has not paid all
Scheduled Payments due as of the end of the immediately preceding Collection
Period. The delinquency of an Instrument shall be measured based on the
Scheduled Payments required to be made during the term of such Instrument as of
the date such Instrument became part of the Collateral without giving effect to
any modifications, waivers or extensions subsequently granted by the Servicer
unless permitted in the Servicing Agreement.
"Determination Date" means with respect to a Payment Date, the date
------------------
which is the fifteenth (15th) day of the calendar month in which such Payment
Date occurs or, if such fifteenth day is not a Business Day, the next
immediately succeeding Business Day, provided, however, that if such immediately
succeeding Business Day is later than the third Business Day prior to such
Payment Date, then the Determination Date shall be the Business Day immediately
preceding the fifteenth (15th) day of the calendar month.
6
<PAGE>
"Documents" means each of the Notes, the Mortgage Documents, the
---------
Indenture, the Lockbox Agreement, each Transfer Agreement, the Custodial
Agreement, the Servicing Agreement, the Letter of Credit, the Reimbursement
Agreement, the Note Purchase Agreement, the Securities Account Control
Agreement, each Assignment of Mortgage (as each is defined in each Transfer
Agreement) and all other documents executed in connection therewith, as they may
be from time to time renewed, amended, modified, supplemented, restated or
replaced.
"Due Date" means as to any Scheduled Payment, the date upon which such
--------
payment is required to be made pursuant to the related Instrument, without
giving effect to any grace period permitted by such Instrument or the related
Mortgage.
"Eligible Instrument" means an Instrument which, on the Transfer Date
-------------------
related thereto, evidences an Eligible Mortgage Loan.
"Eligible Investments" means, at any time, any and all of the
--------------------
following which shall, in any case, unless otherwise provided for pursuant to
the terms and conditions of Article III of the Indenture, mature not later than
the next succeeding Determination Date:
(i) direct obligations of, and obligations fully guaranteed for
timely payment by, the United States of America, the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association, the
Federal Home Loan Banks or any agency or instrumentality of the United
States of America which has a short term unsecured debt rating of at
least "D-1+" by the Rating Agency, "A-1+" by S&P, "P-1" by Moody's or
"F-1+" by Fitch for short-term investments, at the time of such
investment the obligations of which are backed by the full faith and
credit of the United States of America;
(ii) (A) demand and time deposits in, certificates of deposit of,
banker's acceptances issued by or federal funds sold by any depository
institution or trust company (including the Trustee or its agent
acting in their respective commercial capacities) incorporated under
the laws of the United States of America or any State thereof and
subject to supervision and examination by federal and/or state
authorities, so long as at the time of such investment or contractual
commitment providing for such investment, such depository institution
or trust company has a short term unsecured debt rating in the highest
available rating category of either the Rating Agency, S&P, Moody's or
Fitch and provided that each such investment has an original maturity
of no more than 365 days, and (B) any other demand or time deposit or
deposit which is fully insured by the Federal Deposit Insurance
Corporation;
(iii) repurchase obligations with a term not to exceed 30 days
with respect to any security described in clause (i) above and entered
into with a depository institution or trust company (acting as a
principal) that
7
<PAGE>
has a short-term unsecured debt rating in the highest available rating
category of either the Rating Agency, S&P, Moody's or Fitch; provided,
however, that collateral transferred pursuant to such repurchase
obligation must (A) be valued weekly at current market price plus
accrued interest, (B) pursuant to such valuation, equal, at all times,
105% of the cash transferred by the Trustee in exchange for such
collateral and (C) be delivered to the Trustee or, if the Trustee is
supplying the collateral, an agent for the Trustee, in such a manner
as to accomplish perfection of a security interest in the collateral
by possession of certificated securities;
(iv) securities bearing interest or sold at a discount issued by
any corporation incorporated under the laws of the United States of
America or any State thereof which has a long term unsecured debt
rating in the highest available rating category of the Rating Agency
at the time of such investment;
(v) commercial paper having an original maturity of less than
365 days and issued by an institution having a short term unsecured
debt rating in the highest available rating category of either the
Rating Agency, S&P, Moody's or Fitch at the time of such investment;
(vi) a guaranteed investment contract approved in writing by the
Rating Agency and issued by an insurance company or other corporation
having a short-term unsecured debt rating in the highest available
rating category of either the Rating Agency, S&P, Moody's or Fitch at
the time of such investment; and
(vii) money market funds having short-term unsecured debt
ratings in the highest available category of either the Rating Agency,
S&P, Moody's or Fitch at the time of such investment; any such money
market funds which provide for demand withdrawals being conclusively
deemed to satisfy any maturity requirements for Eligible Investments
set forth in the Indenture.
"Eligible Mortgage Loan" means a Mortgage Loan conforming to each of
----------------------
the representations and warranties contained in Section 2.03 of the Transfer
Agreement related to it.
"Entitlement Orders" has the meaning set forth in Section Three of the
------------------
Securities Account Control Agreement.
"Environmental Laws" means all foreign, federal, state or local laws,
------------------
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and land use
matters, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Clean Air Act,
8
<PAGE>
the Federal Water Pollution Control Act of 1972, the Solid Waste Disposal Act,
the Federal Resource Conservation and Recovery Act, the Toxic Substances Control
Act and the Emergency Planning and Community Right-to-Know Act.
"ERISA" means the Employee Retirement Income Security Act of 1974,
-----
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"ERISA Affiliate" means any Person under common control with the
---------------
Issuer or either Originator within the meaning of Section 414(c) of the Code or
Section 4001(b) of ERISA.
"Exchange Act" means the Securities Exchange Act of 1934, and as the
------------
same may be amended from time to time.
"Financial Asset" shall have the meaning set forth in Section 8-
---------------
102(a)(9) of the UCC.
"Fitch" means Fitch IBCA, Inc.
"Foreign Mortgagor" means a Mortgagor that is not a resident of the
-----------------
United States (which United States includes the District of Columbia, Puerto
Rico, the U.S. Virgin Islands and Guam).
"GAAP" means generally accepted accounting principles set forth from
----
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar function of comparable stature and authority within the accounting
profession), or in such other statements by such other entity as may be in
general use by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.
"Governmental Authority" means (a) any federal, state, county,
----------------------
municipal or foreign government, or political subdivision, (b) any governmental
or quasi-governmental agency, authority, board, bureau, commission, department,
instrumentality or public body, (c) any court or administrative tribunal or (d)
with respect to any Person, any arbitration tribunal or other non-governmental
authority to whose jurisdiction that Person has consented.
"Grant" means grant, bargain, sell, convey, assign, transfer,
-----
mortgage, pledge, create and perfect a Security Interest in and right of set-off
against, deposit, set over and continue.
"Holder" means a Noteholder.
------
9
<PAGE>
"Incipient Default" means an event which, with either Knowledge,
-----------------
notice or the passing of time, would be reasonably likely to become an Indenture
Event of Default.
"Indebtedness" means, as to any Person, (a) all indebtedness of such
------------
Person for borrowed money, (b) all leases of equipment of such Person, including
all capital leases of such Person, (c) any obligation of such Person for the
deferred purchase price of property or services (other than trade or other
accounts payable in the ordinary course of business which, in the case of the
Issuer, are not past due, and which, in the case of any other Person, are not
more than ninety (90) days past due), (d) any obligation of such Person that is
secured by a Lien on assets of such Person, whether or not that Person has
assumed such obligation or whether or not such obligation is non-recourse to the
credit of such Person, (e) obligations of such Person arising under acceptance
facilities or under facilities for the discount of accounts receivable of such
Person and (f) any obligation of such Person to reimburse the issuer of any
letter of credit issued for the account of such Person upon which a draw has
been made.
"Indenture" means the Indenture, dated as of July 31, 1998 (as amended
---------
or supplemented from time to time as permitted hereby, the "Indenture"), between
the Issuer and the Trustee.
"Indenture Event of Default" means any one or more of the events of
--------------------------
default described in Section 801 of the Indenture.
"Independent Director" means a director who is not at the time of
--------------------
initial appointment and has not been at any time during the preceding five (5)
years and has not been at any time while serving as Independent Director: (a) a
stockholder, director or beneficial holder of the stock of Vistana or the
Issuer, an officer or employee of the Issuer or any direct or ultimate parent of
the Issuer or Vistana, or any Affiliate thereof; (b) a customer, supplier or
other Person who derives more than 10% of its purchases or revenues from its
activities with the Issuer, Vistana, any Originator or any Affiliate of any
thereof; (c) a Person or other entity controlling or under common control with
any such stockholder, director, officer, employee, customer, supplier or other
Person; or (d) a member of the immediate family of any such stockholder,
director, officer, employee, customer, supplier or other person; provided,
however, that such independent director may serve in similar capacities for
other "special purpose corporations" formed by Vistana or its Affiliates.
"Initial Aggregate Instrument Principal Balance" means the Aggregate
----------------------------------------------
Instrument Principal Balance as of the Cut-off Date.
"Insolvency Law" means any Federal or State bankruptcy, insolvency or
--------------
other similar law now or hereafter in effect.
"Instrument" means a promissory note which has been endorsed by Issuer
----------
to the Trustee and which, as of the Transfer Date related thereto (without any
representation being made at any time thereafter), (a) satisfies each of the
representations
10
<PAGE>
made with respect to it under Section 2.03 of the applicable Transfer Agreement,
(b) does not otherwise cause a breach of any other representation or warranty
set forth in such Section 2.03, (c) is not 180 days or more past due, (d) did
not otherwise cause a breach of any other representation or warranty set forth
in Section 601 of the Indenture, (e) was not 60 days or more past due as of the
applicable Cut-off Date, (f) has not been released, reassigned or satisfied from
the Lien of the Indenture and (g) is not related to a Defaulted Mortgage Loan,
provided that, notwithstanding the failure of a promissory note to fulfill any
of the foregoing requirements, a promissory note which has been transferred to
the Issuer shall constitute an Instrument until it has been repurchased or
substituted therefor in accordance with the applicable Documents.
"Instrument Maturity Date" means, with respect to any Mortgage Loan,
------------------------
the Due Date of the last Scheduled Payment in respect of such Mortgage Loan, as
shown on the Instrument Schedule (after giving effect to the receipt of any
partial prepayments in respect of such Mortgage Loan).
"Instrument Payment" means a payment from a Mortgagor made pursuant to
------------------
the terms of an Instrument or related to the foreclosure of the Timeshare
Interest related to it.
"Instrument Principal Balance" means, as of any date of determination,
----------------------------
with respect to any Mortgage Loan, the amount set forth as the instrument
principal balance of such Mortgage Loan on the Instrument Schedule, and
thereafter as reduced by the amount of principal payments made by the related
Mortgagor prior to such date of determination, provided, however, that the
Instrument Principal Balance of any Defaulted Instrument shall be deemed to be
zero as of the date that such Instrument becomes a Defaulted Instrument, other
than with respect to calculations of (i) the Annualized Default Rate, (ii) the
Reserve Account Required Amount, (iii) the Mortgage Purchase Price of any
Mortgage Loan or (iv) the LOC Amount.
"Instrument Schedule" means the schedule appearing as an exhibit to
-------------------
the Indenture identifying each Instrument and as the same may be amended from
time to time.
"Investment Company Act" means the Investment Company Act of 1940, as
----------------------
amended.
"Issuer" means Vistana 1998-A Timeshare Mortgage Corp., a Delaware
------
corporation.
"Issuer Documents" means in the singular, any one of, and, in the
----------------
plural, all of, the Documents to which the Issuer is a party.
"Knowledge" means (a) as to any natural Person, the actual awareness
---------
of the fact, event or circumstance at issue or proper delivery of notification
of such fact, event or circumstance at the place held out by such person as the
place for receipt of such communications and (b) as to any Person that is not a
natural Person other than the Trustee, the Securities Intermediary and the Back-
up Servicer, that (i) the fact, event or
11
<PAGE>
circumstance at issue is brought to the attention of a Responsible Officer or
(ii) notice has been delivered to such Person in accordance with the provisions
of the relevant Documents; provided, however, that each such Person that is not
a natural person shall be deemed to have Knowledge of any fact, event or
circumstance if such fact, event or circumstance should have been known or would
have been brought to the attention of a Responsible Officer if the Person had
exercised commercially reasonable due diligence. Notwithstanding the foregoing
sentence, with respect to the Trustee, the Back-up Servicer and the Securities
Intermediary only, "Knowledge" means either written notice delivered to, or
---------
actual knowledge of, a Responsible Officer.
"Late Fee" means, with respect to any Scheduled Payment, the charge
--------
(if any) paid by the related Mortgagor in accordance with the terms of the
related Instrument or other applicable Mortgage Loan Documents if such Scheduled
Payment is received by the Servicer more than the number of days specified in
the Instrument following the related Due Date.
"Letter of Credit" means the Letter of Credit, dated as of the Closing
----------------
Date, issued by the Bank in connection with the transaction described in the
Indenture and in substantially similar form as Exhibit A to the Reimbursement
Agreement, and as the same may be amended, restated and modified from time to
time.
"Letter of Credit Account" has the meaning set forth in Section 303(g)
------------------------
of the Indenture.
"Letter of Credit Drawing" has the meaning set forth in Section 303(b)
------------------------
of the Indenture.
"Letter of Credit Fee" means, as of each Payment Date, an amount equal
--------------------
to the product of (x) one-twelfth, (y) .015, and (z) the LOC Amount on the
opening of business on the first day of the immediately preceding Collection
Period; provided, however, that (i) the Letter of Credit Fee on the Payment
Date occurring on October 20, 1998 shall be calculated based on the LOC Amount
on the Closing Date and an elapsed period equal to the number of days between
the Closing Date and the end of the related Collection Period, and (ii) the
Letter of Credit Fee for the Post Maturity Period shall be calculated with
regard to the LOC Amount at the beginning of the Post Maturity Period and paid
in advance for the number of days in such Post Maturity Period.
"LIBOR" has the meaning set forth in the Reimbursement Agreement.
-----
"LIBOR Determination Date" means the second (2nd) Business Day prior
------------------------
to the Determination Date of each month.
"Lien" means any mortgage, pledge, hypothecation, assignment for
----
security, security interest, encumbrance, levy, lien or charge upon any and,
whether voluntarily incurred or arising by operation of law or otherwise,
affecting any property, including any agreement to grant any of the foregoing,
any conditional sale or other title retention agreement, any lease in the nature
of a security interest, and the filing of or agreement to file or deliver any
financing statement (other than a precautionary financing
12
<PAGE>
statement with respect to a lease that is not in the nature of a security
interest) under the UCC or comparable law of any jurisdiction.
"Loan and Security Agreement" means the Loan and Security Agreement,
---------------------------
dated as of November 1, 1997, by and between the Issuer and Dresdner Bank AG,
New York and Grand Cayman Branches, and as the same may be amended, restated and
modified from time to time.
"LOC Amount" means the stated amount of $8,535,946.31 as reduced and
----------
reinstated as provided for in the Letter of Credit.
"Lockbox Account" means the account designated as such, established
---------------
and maintained pursuant to the Lockbox Agreement.
"Lockbox Agreement" means the Lockbox Agreement, dated as of the
-----------------
Closing Date, among the Issuer, the Servicer and the Lockbox Bank, as the same
may be amended, restated or modified, and any subsequent lockbox agreement
entered into with a successor Lockbox Bank.
"Lockbox Bank" means, initially, First Union National Bank, and
------------
thereafter, as of any date, the bank or trust company at which the Lock-Box
Account is established and maintained as of such date.
"Majority of Holders" means, for as long as any Class A Notes are
-------------------
outstanding, Holders of the Class A Notes having more than fifty percent of the
Voting Rights of the Class A Noteholders; and thereafter, Holders of the Class B
Notes having more than fifty percent of the Voting Rights of the Class B
Noteholders.
"Management Agreement" means each of the management agreements,
--------------------
between a Manager and an Association and pertaining to the Timeshare Projects as
the same may be amended or assigned.
"Manager" means a Person with whom an Association enters into a
-------
Management Agreement. As of the Closing Date, such Managers were Points of
Colorado, Inc., with respect to Eagle Pointe and Falcon Pointe, Resort Advisory
Group, Inc., with respect to Christie Lodge and Vistana Management, Inc. with
respect to the other Timeshare Projects.
"Material Adverse Effect" means any set of circumstances or events
-----------------------
which (a) has, or would reasonably be expected to have, any material adverse
effect whatsoever upon the validity or enforceability of any Document (other
than any Mortgage Document related to one or more (but less than a material
number of) individual Mortgage Loans), including the Notes, against either
Originator, the Issuer or the Servicer; (b) materially impairs, or could
reasonably be expected to materially impair, the ability of any Vistana
Transaction Entity or (in any event) the Servicer to perform any of its
obligations under any of the Documents, an undischarged matured liability (other
than the Notes) against a Vistana Transaction Entity of greater than $600,000
being deemed to have such a material and adverse effect; (c) materially and
adversely affects any Timeshare Project in
13
<PAGE>
which Timeshare Interests securing more than 10% of the Aggregate Instrument
Principal Balance are located which is not fully covered by insurance (after
giving effect to reasonable deductibles under the circumstances); (d) materially
impairs the ability of the Custodian, Trustee, Bank or any Noteholder to enforce
any of the remedies set forth in, or any interest under, any of the Documents
such that the Documents do not contain adequate provisions for the practical
realization of the rights and benefits afforded thereby; (e) materially and
adversely affects the interests of the Custodian, Trustee, Bank or any
Noteholder in the Collateral including the Grant of the Security Interest to the
Trustee in the Collateral or the overall value thereof, or (f) when used with
respect to any single Mortgage Loan or the related Mortgage Documents,
materially and adversely affects or impairs any of the following: (i) the
enforceability, legality or binding nature of any document in the related
Mortgage Loan File; (ii) the repayment of either principal or interest of the
related Instrument; (iii) the Mortgage Loan Coupon Rate applicable to the
related Instrument; (iv) the Trustee's interests under, security interest in, or
ability to enforce its rights under, any related Mortgage Document; (v) the
enforceability, legality or validity of any related Mortgage Document; and, when
used with reference to the Collateral, or the property sold, transferred,
conveyed and assigned by any Originator, means the effects and impairments
described in the foregoing subclauses (i) through (v) but only when applied to a
material number of Mortgage Loans that constitute Collateral. To the extent that
the definition of Material Adverse Effect makes a direct or indirect reference
to a particular Instrument, Mortgage Loan, Mortgage Loan File, Timeshare
Interest, Unit or Timeshare Project, then no Material Adverse Effect shall be
deemed to have occurred if the Issuer causes the Instruments related to the
foregoing to be replaced or repaid by the end of the calendar month following
the month in which the Issuer obtains Knowledge of such occurrence.
"Miscellaneous Amounts" means, with respect to any Mortgage Loan, any
---------------------
amounts received from or on behalf of the related Mortgagor representing
assessments and payments relating to real property taxes, insurance premiums and
Association fees.
"Misdirected Payments" means payments erroneously made to the Lockbox
--------------------
Account that are not related to the Collateral.
"Monthly Interest" means, as of any Payment Date, the sum of the Class
----------------
A Monthly Interest then due and the Class B Monthly Interest then due.
"Monthly Principal" means, with regard to any Payment Date, the
-----------------
product of (i) ninety-three percent, provided, however, that in the event that a
draw on the Letter of Credit has been made and any part of such draw remains
unreimbursed, the percentage shall be one hundred percent and (ii) the
reduction, if any, in the Aggregate Instrument Principal Balance as set forth on
each Servicer Report related thereto between the commencement of and the
termination of the related Collection Period.
"Moody's" means Moody's Investors Service, Inc.
-------
14
<PAGE>
"Mortgage" means the purchase money mortgage or deed of trust given to
--------
secure an Instrument, which shall in each case constitute a first priority,
perfected security interest in a Timeshare Interest granted by the Purchaser
thereof.
"Mortgage Document(s)" means, with respect to any Mortgage Loan, (a)
--------------------
the original Instrument and any amendments or modifications thereto; (b) each of
the executed, original Assignment of Mortgage (as said term is defined in this
Appendix A), which may relate to more than one Mortgage; (c) the original
Mortgage and any amendments or modifications thereto; (d) the Title Policy
(Mortgage) or a commitment that such Title Policy (Mortgage) will be delivered
prior to the 60th day following the Transfer Date related thereto and (e) each
Timeshare Declaration, Timeshare Program Consumer Documents and Timeshare
Program Governing Documents related to the Timeshare Interest provided that, for
the purposes of any delivery requirements to the Custodian pursuant to the
Documents, the documents, in their most current form, referenced in clause (e)
hereof need (A) not be so delivered if previously received by the required
recipient and (B) notwithstanding the provisions of any other Document, shall be
delivered to the Trustee.
"Mortgage Loan" means, as of any date of determination, each loan
-------------
referenced on the Instrument Schedule (and the related Mortgage Loan Documents)
which has been sold, transferred and assigned by the Originator to the Issuer
pursuant to the related Transfer Agreement or has been substituted therefor
pursuant to such Transfer Agreement, the Servicing Agreement or the Indenture
and, in any case, has not theretofore been released from the Security Interest
Granted to the Trustee pursuant to the terms of the Indenture.
"Mortgage Loan Coupon Rate" means, with respect to any Mortgage Loan
-------------------------
and Collection Period, the per annum rate of interest applicable to the interest
payment due on such Mortgage Loan in the applicable Collection Period, which
shall be equal to the rate specified on the Instrument Schedule.
"Mortgage Loan Documents" means, with respect to each Mortgage Loan
-----------------------
and each Mortgagor, (i) the related Mortgage Documents, (ii) the original
related credit application and (iii) the original related truth-in-lending
disclosure statement executed by such Mortgagor.
"Mortgage Loan Files" means the Mortgage Loan Documents (other than
-------------------
the Mortgage Documents) and all papers and computerized records customarily
maintained by the Servicer in servicing mortgage loans comparable to the
Mortgage Loans in accordance with the Servicing Standards and the provisions of
Section 3.02 of the Servicing Agreement.
"Mortgage Loan Transfer Form" means any Mortgage Loan Transfer Form
---------------------------
substantially in the form of Exhibit A in the Transfer Agreement and executed by
the Originator.
15
<PAGE>
"Mortgage Purchase Price" means, for any Mortgage Loan, as of any date
-----------------------
of purchase thereof, one hundred percent (100%) of the Instrument Principal
Balance of the Mortgage Loan as of the end of the Collection Period immediately
preceding the relevant date of purchase (after giving effect to any Prepayments
during such Collection Period), together with all accrued and unpaid interest
thereon at the Mortgage Loan Coupon Rate through the related Due Date in the
Collection Period in which the relevant date of purchase occurs provided that,
for the purposes of this definition, the Instrument Principal Balance of a
Defaulted Mortgage Loan shall not be deemed to be zero.
"Mortgagor" means the Person obligated to make payments due under an
---------
Instrument in accordance with the terms and conditions related to such
Instrument, including any guarantor.
"Nonrecoverable Advances": Servicer Advances that the Servicer, in its
-----------------------
good faith and reasonable commercial judgment, believes are not likely to be
recovered from the Mortgagor.
"Note Balance" means, on the Closing Date, with respect to the Class A
------------
Notes, $31,973,000.00 for the Class A Notes and, with respect to the Class B
Notes, $34,180,583.90 for the Class B Notes, and thereafter, when used with
respect to a single class of Notes, shall equal the Note Balance for such class
reduced by all principal payments on such class of Notes and, when used with
reference to both of the Class A Notes and the Class B Notes, or to the "Notes"
without reference to either class, shall equal the sum of the Note Balances at
the time for both the Class A Notes and the Class B Notes.
"Note Purchase Agreement" means, the Note Purchase Agreement, dated
-----------------------
the Closing Date, by and between the Issuer and the purchasers thereunder, and
relating to the issuance and purchase of the Notes as the same may be amended,
modified or restated, from time to time.
"Note Register" has the meaning set forth in Section 205(a) of the
-------------
Indenture.
"Note Registrar" has the meaning set forth in Section 205(a) of the
--------------
Indenture.
"Noteholders" means the holders of any Notes.
-----------
"Notes" means the Class A Notes and the Class B Notes, as they may
-----
from time to time be renewed, amended, restated or replaced.
"Notice Date" has the meaning set forth in Section 702(a) of the
-----------
Indenture.
"Notice of Sole Control" has the meaning set forth in Section 9 of the
----------------------
Securities Account Control Agreement.
16
<PAGE>
"Obligations" has the meaning set forth in Section 402 of the
-----------
Indenture.
"Officer's Certificate" means a certificate of a Responsible Officer
---------------------
signed by the Chairman, the President, a Vice President, the Treasurer, an
Assistant Treasurer, the Secretary, or an Assistant Secretary of the relevant
entity.
"Opinion of Counsel" means a written opinion of counsel reasonably
------------------
acceptable in form and substance to the Trustee and the Bank (who may, unless
otherwise provided herein, be counsel to an Originator, the Issuer or the
Servicer).
"Originator" means in the singular, either one of Points or VDI, and,
----------
in the plural, both of them.
"Outstanding" means, as of the date of determination, either any
-----------
obligation that has yet to be fully performed or amount that has yet to be paid
fully, as the case may be.
"Outstanding Principal Balance" means, as of any date of
-----------------------------
determination, with respect to any Mortgage Loan, the amount set forth as the
Outstanding Principal Balance of such Mortgage Loan on the Instrument Schedule,
and thereafter as reduced by the amount of principal payments made by the
related Mortgagor prior to such date of determination.
"Overdue Interest" means, for any Payment Date, the sum of (i) the
----------------
Class A Overdue Interest and (ii) the Class B Overdue Interest.
"Overdue Principal" means, for any Payment Date, the sum of (i) the
-----------------
Class A Overdue Principal and (ii) the Class B Overdue Principal.
"Parent" means Vistana Acceptance Corp., a Delaware corporation.
------
"Partial GAAP" means GAAP with the exception that such financial
------------
statements shall not contain consolidating and eliminating entries, disclosure
or footnotes.
"Payment Date" means the twentieth (20th) day of each month or, if
------------
such 20th day is not a Business Day, the next succeeding Business Day
thereafter, commencing October 20, 1998, and continuing to and including the
Stated Maturity Date or earlier prepayment in full of all of the Notes.
"Performance" or "Perform" means full, timely and faithful
----------- -------
performance.
"Permitted Mortgage Encumbrances" means with respect to a Mortgage the
-------------------------------
following liens and encumbrances against a Timeshare Interest: (i) the interest
therein of the Mortgagor, (ii) the lien of unbilled and unpaid assessments
payable to the Association, (iii) the lien of unpaid real property taxes and
assessments which are not yet delinquent, (iv) covenants, conditions and
restrictions, rights of way, easements and other matters of public record, such
exceptions appearing of record being matters to which properties of the same
type as such Timeshare Interest are commonly subject and which
17
<PAGE>
do not materially interfere with the benefits of the security intended to be
provided by such Mortgage or being matters specifically disclosed in the
applicable land sales registrations filed with the applicable regulatory
agencies, and (v) other matters to which timeshare interests are commonly
subject and which do not materially interfere with the benefits of the security
intended to be provided by such Mortgage.
"Person" means any individual, sole proprietorship, partnership, joint
------
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, firm, estate,
entity, joint stock company, or Governmental Authority.
"Placement Agent" means Dresdner Bank AG, New York Branch, doing
---------------
business as Dresdner Kleinwort Benson.
"Plan" means plans described in Section 4975(e)(l) of the Code,
----
including individual retirement accounts, or under Section 3(3) of ERISA and
Persons treated under applicable law as using assets of such plans.
"Points" means Points of Colorado, a Colorado corporation having its
------
chief executive office at 101 University, #450, Denver, Colorado 80206.
"Post-Maturity Period" has the meaning set forth in the Letter of
--------------------
Credit.
"Predecessor Instrument" means, with respect to any Substitute
----------------------
Instrument acquired by substitution, the Instrument or Instruments for which
such Substitute Instrument or any intervening Substitute Instrument has been
substituted.
"Predecessor Mortgage Loan" has the meaning set forth in Section 1201
-------------------------
of the Indenture.
"Prepayment(s)" means, with respect to any Mortgage Loan, any of the
-------------
following: (i) payment by the Mortgagor of the Outstanding Principal Balance
plus all accrued interest with respect to such Mortgage Loan in advance of its
Instrument Maturity Date, (ii) payment by or on behalf of the Originator of the
Mortgage Purchase Price of such Mortgage Loan in connection with the mandatory
repurchase of such Mortgage Loan pursuant to Section 2.06 of the applicable
Transfer Agreement, (iii) payment by on or behalf of Issuer or Servicer of the
Mortgage Loan Purchase Price of such Mortgage Loan in connection with the
optional repurchase of such Mortgage Loan pursuant to Section 1201 of the
Indenture, (iv) any partial prepayment of principal received from the relevant
Mortgagor, (v) any payments of cash contemplated by clause (b) of the definition
of Substitute Mortgage Loan and (vi) any Insurance Proceeds received by the
Servicer and deposited in the Lockbox Account pursuant to Section 3.03(a) of the
Servicing Agreement.
"Private Placement Memorandum" means the confidential private
----------------------------
placement memorandum, dated the Closing Date, circulated by the Placement Agent
and describing the transactions contemplated by the Documents.
18
<PAGE>
"Proceeding" means any suit in equity, action at law or other judicial
----------
or administrative proceeding.
"Property" means any interest in any kind of property or asset,
--------
whether real, personal or mixed, whether tangible or intangible.
"Prospective Owner" means each prospective owner (or transferee
-----------------
thereof) of a beneficial interest in Notes.
"Purchaser" means a purchaser of a Timeshare Interest from a Timeshare
---------
Developer.
"QIB" has the meaning set forth in the form of Note set forth in the
---
Indenture.
"Rated Institutional Noteholder" means a Noteholder that has been
------------------------------
assigned a credit or claims paying rating of BBB- or better by a nationally-
recognized rating agency.
"Rating Agency" means Duff & Phelps Credit Rating Co.
-------------
"Record Date" means, with respect to any date upon which the Trustee
-----------
must identify Noteholders of record, the last day of the Collection Period
immediately preceding such date.
"Regulations" means Section 2510.3-101 of regulations issued by the
-----------
United States Department of Labor.
"Reimbursement Agreement" means the Letter of Credit and Reimbursement
-----------------------
Agreement, dated as of July 31, 1998, by and between the Issuer and the Bank,
with regard to the Letter of Credit as the same may be amended, restated or
modified from time to time.
"Reportable Event" means a Reportable Event as defined in section
----------------
4043(b) or 4063(a) of ERISA or the regulations promulgated thereunder, except
for those Reportable Events for which the PBGC has waived notice.
"Required Payments" means each and all of the payments required
-----------------
pursuant to Section 301, clauses (i) through (xii) of the Indenture.
"Reserve Account" means the segregated trust account that was
---------------
established by the Trustee prior to the Closing Date in accordance with the
terms and conditions of the Indenture.
"Reserve Account Deposit Amount" means, on any Payment Date, an amount
------------------------------
equal to the excess of (A) the Reserve Account Required Amount over (B) the
amount on deposit in the Reserve Account (after giving effect to any Reserve
Account draws on such Payment Date).
19
<PAGE>
"Reserve Account Payment" has the meaning set forth in Section 302(a)
-----------------------
of the Indenture.
"Reserve Account Property" has the meaning set forth in Section 302(c)
------------------------
of the Indenture.
"Reserve Account Required Amount" means, with respect to each Payment
-------------------------------
Date, the greater of either (1) the product of (a) 5% and (b) the Aggregate
Instrument Principal Balance as of the end of the related Collection Period or
(2) the lesser of (a) $711,328.82 or (b) the Aggregate Instrument Principal
Balance as of the end of the related Collection Period; provided, however, that
if a Restricting Event has occurred and is then continuing, then notwithstanding
the foregoing, no Reserve Account Withdrawals shall be paid to the Issuer or its
designee.
"Reserve Account Withdrawal" has the meaning set forth in Section
--------------------------
302(d) of the Indenture.
"Responsible Officer" means the chairman of the board, the president,
-------------------
any executive vice president, any vice president, the chief financial officer,
the treasurer, any assistant treasurer, the secretary, any assistant secretary,
the controller or any assistant controller if the entity of determination is a
corporation; if the entity is a national association, any corporate trust
officer of such entity; if such entity is a partnership, any one of the
foregoing corporate officers of any general partner thereof, if such entity is a
trust, any one of the foregoing corporate officers of any trustee thereof, if
such entity is a limited liability company, any one of the foregoing corporate
officers thereof or of the managing member thereof and if such entity is the
Trustee, any person responsible for managing the Trustee's obligations and
duties contemplated under the Documents.
"Restricting Event" means the condition that exists on any Payment
-----------------
Date if any one of the following conditions has occurred and is continuing at
any time: (i) a Trigger Event exists on such Payment Date or existed on any of
the two (2) immediately preceding Payment Dates or (ii) an Indenture Event of
Default has occurred and is then continuing.
"Rule 144A" means Rule 144A promulgated under the Securities Act of
---------
1933.
"S&P" means Standard & Poor's Ratings Services.
"Sale" has the meaning set forth in Section 817 of the Indenture.
----
"Scheduled Payments" means, with respect to an Instrument, when used
------------------
in the singular, the periodic payment, including but not limited to principal
and interest scheduled to be paid by a Mortgagor pursuant to the terms and
conditions of an Instrument, due from the Mortgagor during the related
Collection Period; and when used in the plural, all such payments under all such
Instruments (exclusive of any amounts in respect of insurance or taxes and
reflecting any adjustment for any partial prepayment
20
<PAGE>
and further reflecting the effect of any modification to such Instrument
permitted pursuant to the Servicing Agreement).
"Securities Account Control Agreement" means that certain Securities
------------------------------------
Account Control Agreement, dated as of July 31, 1998, by and between the
Securities Intermediary, the Trustee as Secured Party thereunder and the Issuer
as the same may be amended, modified or supplemented.
"Securities Accounts" means, when used in the singular, any one of and
-------------------
when used in the plural, all of the Collection Account, the Reserve Account and
the Letter of Credit Account.
"Securities Act", "1933 Act" or the "Securities Act of 1933" means
-------------- -------- ----------------------
the Securities Act of 1933, as amended.
"Securities Intermediary" means initially, Norwest Bank Minnesota,
-----------------------
National Association, a national banking association, as securities intermediary
(as such term is defined under UCC Section 8-102(a)(14)) with respect to the
Securities Accounts and, thereafter, any successors-in-interest.
"Security Entitlements" shall have the meaning set forth in Article 8-
---------------------
102(17) of the UCC.
"Security Interest" means a perfected, direct, first priority and
-----------------
(with respect to any property constituting Collateral, subject only to the
Permitted Encumbrances applicable thereto) exclusive security interest in and
charge upon the property intended to be covered by it.
"Seller" has the meaning set forth in Exhibit B to the Indenture.
------
"Servicer" means initially VCH Portfolio Services, Inc., a Florida
--------
corporation and thereafter, such entity that may be appointed as successor
Servicer pursuant to the Documents.
"Servicer Advances" means the monthly advances on each Payment Date
-----------------
the Servicer is required to make to the Trustee for delinquent Scheduled
Payments that the Servicer reasonably deems to be recoverable.
"Servicer Event of Default" means an "Event of Default" as set forth
-------------------------
in Section 7.01 of the Servicing Agreement, as the same may be amended, restated
or modified from time to time.
"Servicer Report" means the written report required to be delivered by
---------------
the Servicer to the Trustee, the Bank and the Rating Agency, to be delivered on
each Determination Date in substantially similar form as set forth in Exhibit A
to the Servicing Agreement, and setting forth such other information reasonably
requested by the Bank, the Trustee or the Rating Agency.
21
<PAGE>
"Servicer Termination Event Notice" has the meaning set forth in
---------------------------------
Section 502 of the Indenture.
"Servicing" means the responsibility of the Servicer for servicing,
---------
managing, and making collections on the Mortgage Loans pursuant to the
requirements set forth in the Documents.
"Servicing Agreement" means that certain Servicing Agreement, dated as
-------------------
of July 31, 1998, by and between the Issuer, as Issuer, and VCH Portfolio
Services, Inc., as Servicer, as the same may be amended, modified or restated
from time to time.
"Servicing Fee" means the monthly fee payable on each Payment Date of
-------------
an amount equal to the product of (x) one-twelfth, (y) 1.2% and (z) the
Aggregate Instrument Principal Balance on the opening of business on the first
day of the related Collection Period, provided, however, that the Servicer Fee
on the Payment Date occurring on October 20, 1998 shall be calculated based on
the Initial Aggregate Instrument Principal Balance.
"Servicing Standards" means the customary standards of prudent
-------------------
servicers of loans secured by fee simple timeshare interests similar to the
Timeshare Interests, and, to the extent not inconsistent with the foregoing,
those standards employed by the Servicer when servicing such loans for its own
account and third parties, but, in any case, without regard for:
(i) any relationship that the Servicer or any Affiliate of the
Servicer may have with the related Mortgagor or any Originator;
(ii) the Servicer's right to receive compensation for its
services under the Servicing Agreement or with respect to any
particular transaction; or
(iii) the fact that the Servicer or any Affiliate of the
Servicer may be a Noteholder;
and, in any case, shall include the following servicing activities:
(a) perform standard accounting services and general
recordkeeping services with respect to the Mortgage Loans;
(b) respond to any telephone and written inquiries of
Mortgagors concerning the Mortgage Loans;
(c) keep Mortgagors informed of the proper place and method
for making payments with respect to the Mortgage Loans;
(d) contact Mortgagors to effect collection and to encourage
prompt payment of Mortgage Loans, doing so by lawful means in
accordance with industry standards;
22
<PAGE>
(e) report tax information to Mortgagors as required by law;
and
(f) take such other action as may be necessary or appropriate
in the reasonable judgment of the Servicer for the purpose of
collecting and transferring to the Collection Account or the Lockbox
Account, as required, all payments received in respect of Instruments
(except as otherwise expressly provided in the Documents), and to
carry out the duties and obligations imposed upon the Servicer.
"Significant Noteholder" or "Significant Holder" means both (i) each
---------------------- ---- ------------------
Person who held a Note as of the Closing Date and (ii) any other Noteholder who,
as of the date of determination, holds a Note or Notes with an aggregate unpaid
principal balance of at least seven and one-half percent (7.5%) of the then-
Outstanding aggregate Note Balance;
"66 2/3% of the Voting Rights" means for so long as any Class A Notes
----------------------------
are outstanding, Holders of the Class A Notes having more than 66 2/3% of the
Voting Rights of the Class A Noteholders; and thereafter, Holders of Class B
Notes having more than more than 66 2/3% of the Voting Rights of the Class B
Noteholders;
"Solvent" means, as to any Person at any time, that (a) the fair value
-------
of the property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code; (b) the present fair saleable value of the
property in an orderly liquidation of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its debts
as they become absolute and matured; (c) such Person is able to realize upon its
property and pay its debts and other liabilities (including disputed, contingent
and unliquidated liabilities) as they mature in the normal course of business;
(d) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's property would constitute unreasonably small capital.
"Special Purpose Entity" means, as applicable, a corporation, limited
----------------------
partnership, owner trust arrangement, business trust or limited liability
company which at all times since its formation and at all times thereafter shall
have complied with each of the following:
(i) Affiliate Securities. Such entity has not acquired and will not
acquire obligations or securities of its partners, members or shareholders.
(ii) Allocations. Such entity has allocated and will allocate fairly
and reasonably any overhead for shared office space and uses and will use
separate stationery, invoices and checks.
23
<PAGE>
(iii) Arm's length Transactions. Such entity has not entered into
and will not enter into, nor has it been or will it be a party to, any
transaction with its partners, members, shareholders or Affiliates except
(i) for the Documents and (ii) in the ordinary course of its business (as
contemplated by the Documents) and on terms which are intrinsically fair
and are no less favorable to it than would be obtained in a comparable
arm's-length transaction with an unrelated third party.
(iv) Bankruptcy Filing. Such entity, without the unanimous consent
of all of the general partners, directors, trustees or members, as
applicable, has never filed and will never file a bankruptcy or insolvency
petition or otherwise instituted insolvency proceedings with respect to
itself or to any other entity in which it has or had a direct or indirect
legal or beneficial ownership interest, and has not dissolved, liquidated,
consolidated, merged, or sold and will not dissolve, liquidate,
consolidate, merge, or sell all or substantially all of its assets or any
other entity in which it has or had a direct or indirect legal or
beneficial ownership interest, has not engaged and will not engage in any
other business activity, or has not amended and will not amend its
organizational documents, all of the foregoing cases, without the prior
written consent of the Independent Director.
(v) Commingling. Such entity has never commingled and will never
commingle its funds or assets with those of any other entity, and has held
its assets in its own name.
(vi) Divisions. Such entity has never identified and will not
identify its partners, members or shareholders, or any affiliates of either
of them as a division or part of it.
(vii) Formalities. Such entity has always observed and will always
observe all partnership, corporate trust or limited liability company
formalities, as applicable.
(viii) Guarantees. Such entity has not assumed or guaranteed or
become obligated for the debts of, and will not become so obligated, or so
assume or guarantee any other entity and has not held out, and will not
hold out its credit as being available to satisfy the obligations of any
other entity for liabilities permitted to be guaranteed by its Articles of
Organization.
(ix) Identification. Such entity has always held and identified
itself and will always hold and identify itself as a separate and distinct
entity under its own name and not as a division or part of any other person
or entity.
(x) Independent Director. If such entity is a corporation, it has
covenanted always and will continue to so covenant to have at least one
director that is an Independent Director.
(xi) Loans. Such entity has not made, and will not make, loans to
any Person.
24
<PAGE>
(xii) No Dissolution. Such entity has not engaged in, sought, or
consented to, and will not so engage, seek or consent to, any dissolution,
winding up, liquidation, consolidation, merger, asset sale, transfer of
partnership or membership interest, or amendment of its limited partnership
agreement, articles of incorporation, articles of organization, certificate
of formation or operating agreement, as applicable, without the prior
written consent of the Independent Director.
(xiii) No Other Assets. Such entity has not had, and will not have,
any assets other than those related to the Collateral.
(xiv) No Other Business. As of the Closing Date, such entity has not
engaged in and will not engage in any business unrelated to the ownership
of its assets.
(xv) No Other Indebtedness. As of the Closing Date, such entity has
no Indebtedness other than, and after the Closing Date will have no other
Indebtedness other than with respect to the Issuer only, the Indebtedness
evidenced by the Notes and existing under the Indenture and the
Reimbursement Agreement, and liabilities in the ordinary course of business
relating to the ownership and operation of its assets.
(xvi) Own Liabilities. Such entity has paid and will continue to pay
its own liabilities out of its own funds and assets.
(xvii) Own Name. Such entity has conducted and will continue to
conduct its business in its own name and not in the name of any other
Person.
(xviii) Pledges. Such entity has not pledged and will not pledge its
assets for the benefit of any other Person other than pursuant to the
Documents.
(xix) Purpose. Such entity was organized solely for the purpose of
owning the Collateral and entering into the Documents, and, with respect to
the Issuer, issuing the Notes.
(xx) Separate Accounts. Such entity has maintained and will
continue to maintain its accounts, books and records separate from any
other Person and in accordance with Partial GAAP.
(xxi) Separate Records. Such entity has maintained its accounting
records and other entity documents separate from any other Person.
(xxii) Unanimous Consent. Such entity has not caused or allowed, and
will not cause or allow, the board of directors of such entity to take any
action requiring the unanimous affirmative vote of 100% of the members of
the board of directors unless an Independent Director shall have
participated in such vote.
"Stated Maturity Date" means February 22, 2010.
--------------------
25
<PAGE>
"Subsidiary" means any corporation, association, partnership, limited
----------
liability company, joint venture or other business entity of which more than
fifty percent (50.0%) of the voting stock or other equity interests (in the case
of Persons other than corporations) is owned or controlled directly or
indirectly by another Person, or one or more of the Subsidiaries of such Person,
or a combination thereof.
"Substitute Mortgage Loan" means one or more Mortgage Loans
------------------------
(including, without limitation, Upgrade and Wraparound Mortgages) transferred on
a date other than the Closing Date for which the transferor thereof shall have
delivered an accurate and complete Mortgage Loan Transfer Form and each of
which, on the related Cut-Off Date, (i) is an Eligible Mortgage Loan; provided,
however, that the requirement set forth in Section 2.03(cc) of the applicable
Transfer Agreement that a minimum of one (1) scheduled monthly payment shall
have been made prior to the Transfer Date related to the applicable Mortgage
Loan shall not be necessary with regard to Upgrades and Wraparound Mortgages so
long as the Mortgagor's equity in related Timeshare Interest(s) is 15% or more
of the original principal balance of the related Instrument; (ii) had an
Instrument Principal Balance, including any additional cash delivered by the
Servicer or the Issuer into the Collection Account in connection therewith, not
less than the Instrument Principal Balance of the related Predecessor Mortgage
Loan(s); (iii) would not cause, by virtue of its substitution, the remaining
weighted average life of the Instruments constituting Collateral (as calculated
based upon the Scheduled Payments on all Instruments which comprise the
Aggregate Instrument Principal Balance) to be materially altered, (iv) the final
payment due thereunder will not mature later than eighteen months before the
Stated Maturity Date, (v) the then-remaining weighted average life of the
Instruments constituting Collateral as of such Transfer Date will not, after
inclusion of such Substitute Mortgage Loan(s) into the Collateral, be more than
80 months, (vi) the weighted average coupon of the Instruments then-constituting
Collateral, after inclusion of such Substitute Mortgage Loan into the
Collateral, will not be less than 14%, (vii) the addition of such Substitute
Mortgage Loan shall not cause the Aggregate Instrument Principal Balance arising
from Foreign Mortgagors to be more than twenty-three percent (23%) of the
Aggregate Instrumental Principal Balance of all Instruments, or, if such balance
is greater than twenty-three percent (23%) then the Predecessor Mortgage Loan
related thereto had a Mortgagor that was also a Foreign Mortgagor and the
addition of such Mortgage Loan will not increase the Aggregate Instrument
Principal Balance arising from Foreign Mortgagors above that existing at the
beginning of the Collection Period for which the substitution is being made;
(viii) the weighted average seasoning of all Instruments that constitute
Collateral as of such Transfer Date will not be less than 13 months); (ix) was
originated, serviced and maintained in accordance with standard credit
evaluation policies of the Originator related to such Predecessor Mortgage Loan,
be of equal or better credit quality than the Mortgage Loan being replaced; and
(x) provided that, (1) for purposes of determining compliance with clause (ii)
above, if more than one Substitute Mortgage Loan is being provided on any date,
(a) the Aggregate Instrument Principal Balance of the Substitute Mortgage
Loan(s) and of the Predecessor Mortgage Loan(s) related thereto shall be
determined on an aggregate basis and (b) any amounts deposited into the
Collection Account (which amounts shall be deemed to be Available Amounts) with
respect thereto shall equal the excess of the Aggregate Instrument Principal
Balance of the Predecessor Mortgage Loans over the Aggregate
26
<PAGE>
Instrument Principal Balance of the Substitute Mortgage Loans related thereto
and (2) notwithstanding the failure of a Mortgage Loan to fulfill any of the
foregoing requirements, a Mortgage Loan which has been transferred to the Issuer
in substitution for another Mortgage Loan shall constitute a Substitute Mortgage
Loan until it has been repurchased or substituted for in accordance with the
applicable Documents.
"Supplements" has the meaning set forth in Section 1001 of the
-----------
Indenture.
"Tax Counsel" means Weil, Gotshal & Manges LLP.
-----------
"Termination Date" means the date upon which the Letter of Credit
----------------
terminates pursuant to the terms thereof.
"Timeshare Declaration" means the declaration or other document
---------------------
recorded or to be recorded in the real estate records where the pertinent
Timeshare Project is located for the purpose of creating and governing the
rights of owners of Timeshare Interests related thereto, as it may be in effect
from time to time.
"Timeshare Developer(s)" means, unless otherwise set forth in the
----------------------
applicable Transfer Agreement, the Originators that offer and solicit offers to
purchase Timeshare Interests related to the Collateral.
"Timeshare Interest" means an undivided 1/52 fee simple interest in a
------------------
Unit on a fixed or floating basis in perpetuity for seven (7) consecutive days
each calendar year or every other calendar year, as the case may be, together
with an appurtenant undivided fractional interest in the common elements of the
Timeshare Project and the non-exclusive right to use such common elements during
such seven (7) day period including rights as members of the Association related
thereto, all in accordance with, and subject to, the related Timeshare Program
Governing Documents.
"Timeshare Program" means the program under which (i) Purchasers have
-----------------
purchased fee simple Timeshare Interests and (ii) owners of Timeshare Interests
share the expenses associated with the operation and management of such program.
"Timeshare Program Consumer Documents" means the purchase contract,
------------------------------------
Instrument, Mortgage, credit application, credit disclosures, rescission right
notices, final subdivision public reports/prospectuses/public offering
statements, Timeshare Project exchange affiliation agreement, and other
documents used or to be used by an Originator in connection with the sale of
Timeshare Interests.
"Timeshare Program Governing Documents" means for each Timeshare
-------------------------------------
Project, the related Articles of Organization of the Association, the rules and
regulations of the Association, the Timeshare Declaration, the Management
Agreement, and any subsidy agreement by which an Originator is obligated to
subsidize shortfalls in the budget of a Timeshare Program in lieu of paying
assessments, as they may be from time to time in effect and all amendments,
modifications and restatements of any of the foregoing.
27
<PAGE>
"Timeshare Projects" mean, collectively, Christie Lodge, Eagle County,
------------------
CO; Eagle Pointe, Eagle County, CO; Falcon Pointe (also known as Falcon Point),
Eagle County, CO; Lakeside Terrace (also known as Falcon Point II), Eagle
County, CO; Vistana's Beach Club, St. Lucie County, FL; Vistana Lakes, Orange
County, FL; Vistana Condominium, Orange County, FL; Vistana Falls, Orange
County, FL; Vistana Fountains, Orange County, FL; Vistana Cascades, Orange
County, FL; Vistana Fountains II, Orange County, FL; Vistana Spa, Orange County,
FL; and Vistana Springs, Orange County, FL; and "Timeshare Project" means any
one of them.
"Title Insurer (Mortgage)" means any of First American Title Insurance
------------------------
Company, Chicago Title Insurance Company, Ticor Title Insurance Company, Old
Republic, Lawyer's Title Insurance Company or another title company which the
Bank has approved of in writing to the Issuer and issues a Title Policy
(Mortgage).
"Title Policy (Mortgage)" means the original lender's policy of title
-----------------------
insurance insuring that the Mortgage securing an Instrument is a perfected,
direct, first and exclusive lien on the Timeshare Interest encumbered thereby,
subject only to any Permitted Encumbrances, issued by a Title Insurer (Mortgage)
and in form and substance acceptable to the Trustee, and all amendments,
restatements and modifications thereto.
"Transfer Agreement" means when used in the singular, either of, and,
------------------
when used in the plural, both of, the Transfer Agreements, dated as of July 31,
1998, between an Originator and the Issuer, as the same may be amended, modified
or restated as permitted under the Documents.
"Transfer Date" means the Closing Date and, with respect to each
-------------
Substitute Mortgage Loan, the date upon which such Substitute Mortgage Loan is
sold, transferred, conveyed and assigned by the related Originator to the
Issuer, and pledged by the Issuer to the Trustee.
"Transition Costs" means the necessary or prudent reasonable fees,
----------------
expenses, disbursements and costs incurred by the Trustee in connection with the
transfer of the Servicer's duties under the Servicing Agreement and assuming the
role of successor Servicer pursuant to the terms of Article V of the Indenture
and the Servicing Agreement.
"Trigger Event" means, and shall be deemed to have occurred if, any
-------------
one of the following events occur: (1) the average over each of the three
months immediately preceding the date of determination (provided that such date
of determination occurs at least three months after the Closing Date),
expressed as a percent, of the Aggregate Instrument Principal Balance of
Delinquent Instruments that are more than 60 days past due divided by the
Aggregate Instrument Principal Balance of all Instruments is greater than 10%;
(2) the average Annualized Default Rate for the immediately preceding successive
three month period (provided that such three month period occurs at least three
months after the Closing Date) is greater than 12%; (3) an order or decree has
been entered by any Governmental Authority of competent jurisdiction enjoining
the intended use for timeshare purposes of any Timeshare Project or Timeshare
Projects that relate to
28
<PAGE>
Mortgage Loans having an Aggregate Instrument Principal Balance of more than
$1,000,000 at the time of such decree and such order or decree is not vacated,
or such Mortgage Loans are not repurchased or replaced, within one hundred and
twenty (120) days of entry thereof; (4) the policies of hazard insurance or
business interruption insurance in effect on the Closing Date shall have lapsed
for any Timeshare Project or Timeshare Projects that relate to Mortgage Loans
having an Aggregate Instrument Principal Balance of more than $1,000,000 at the
time of such lapse and such policies have not been replaced, or such Mortgage
Loans are not repurchased or replaced, within thirty (30) days after such lapse;
or (5) a Manager that is an Affiliate of Vistana is duly terminated for cause by
the Association for any Timeshare Project or Timeshare Projects that relate to
Mortgage Loans having an Aggregate Instrument Principal Balance of more than
$1,000,000 at the time of such termination, and such Mortgage Loans are not
repurchased or replaced within sixty (60) days after such termination.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as the
-------------------
same may be amended from time to time.
"Trustee" means initially, Norwest Bank Minnesota, National
-------
Association and thereafter, any then-current (as of the date of determination)
successor Trustee appointed pursuant to the terms and conditions of the
Indenture.
"Trustee Fee" means, as of each Payment Date, the product of (i) one-
-----------
twelfth, (ii) .0002 and (iii) the Aggregate Instrument Principal Balance on the
opening of business on the first day of the related Collection Period, provided,
however, that the Trustee Fee on the Payment Date occurring on October 20, 1998
shall be calculated based on the Initial Aggregate Instrument Principal Balance.
The Trustee Fee shall also include certain investment income, which shall be
non-recourse, from amounts held in the Collection Account as provided in Section
301(i) of the Indenture.
"UCC" means the Uniform Commercial Code in effect in any applicable
---
jurisdiction as of the date hereof, and as the same may be amended.
"Ultimate Principal" means the remaining Note Balance, if any, on the
------------------
Stated Maturity Date.
"Unit" means a dwelling unit in a Timeshare Project.
----
"Upgrade" means a Mortgage Loan that has replaced a Predecessor
-------
Mortgage Loan which had the same Mortgagor and, with regard to which, such
Mortgagor freely and voluntarily without inducement from an Originator or any
affiliate or agent thereof except in the ordinary course of business of such
Originator, affiliate or agent chose to reconvey its original Timeshare Interest
and cancel its Predecessor Mortgage Loan in exchange for, and perhaps with
additional consideration for, a new Timeshare Interest evidenced by a new
Mortgage Loan with an Outstanding Instrument Principal Balance including any
cash delivered into the Collection Account in connection therewith, not less
than the Outstanding Instrument Principal Balance of the Predecessor Mortgage
Loan.
29
<PAGE>
"VDI" means Vistana Development, Inc., a Florida corporation doing
---
business as Vistana Development, Ltd., and having its chief executive office and
principal place of business at 8801 Vistana Centre Drive, Orlando, Florida
32821.
"Vistana" means Vistana, Inc., a Florida corporation having its chief
-------
executive office and principal place of business at 8801 Vistana Centre Drive,
Orlando, Florida, 32821.
"Vistana Transaction Entity" means, when used in the singular, any of,
and when used in the plural, all of the following Persons: the Servicer, each
Originator and the Issuer.
"Voting Rights" means, for so long as any Notes remain outstanding,
-------------
100% of the rights to vote with regard to determinations to be made by
Noteholders under the Documents and which shall be exercisable by the
Noteholders of the class or classes of Notes entitled to vote in accordance with
the provisions of the Documents pro rata in accordance with their respective
Note Balances, provided that, for the purposes of exercising any right to vote
under the Notes, Notes held by the Issuer or any Affiliate of the Issuer shall
not be deemed to be Notes for the purposes of calculating any Voting Rights
unless all of the then-Outstanding Notes are held by the Issuer or any such
Affiliate.
"Withdrawn Collateral" has the meaning set forth in Section 701(b) of
--------------------
the Indenture.
"Wraparound Mortgage" means a Mortgage Loan that has replaced a
-------------------
Predecessor Mortgage Loan and with regards to which, the Mortgagor related
thereto has freely and voluntarily, without inducement from an Originator or any
affiliate or agent thereof except in the ordinary course of business of such
Originator, affiliate or agent, combined the related Predecessor Mortgage Loan
with a mortgage loan on an additional Timeshare Interest to create one new
Substitute Mortgage Loan.
"Year 2000 Problem" shall mean any significant risk that computer
-----------------
hardware, software or equipment containing embedded microchips essential to the
business or operations of the Vistana Transaction Entities will not, in the case
of dates or time periods occurring after December 31, 1999, function at least as
effectively and reliably as in the case of times or time periods occurring
before January 1, 2000, including the making of accurate leap year calculations.
30
<PAGE>
- --------------------------------------------------------------------------------
VISTANA 1998-A TIMESHARE MORTGAGE CORP.
as Issuer
and
VCH PORTFOLIO SERVICES, INC.
as Servicer
SERVICING AGREEMENT
Dated as of July 31, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS
Section 1.01. Definitions............................................. 1
-----------
Section 1.02. Usage of Terms.......................................... 2
--------------
Section 1.03. Section References...................................... 2
------------------
ARTICLE II
REPRESENTATIONS, WARRANTIES AND
CERTAIN COVENANTS OF THE SERVICER
Section 2.01. Representations, Warranties and Certain Covenants of the
--------------------------------------------------------
Servicer................................................ 3
--------
Section 2.02. Existence; Status as Servicer; Merger................... 6
-------------------------------------
Section 2.03. Performance of Obligations.............................. 7
--------------------------
Section 2.04. Servicer Not to Resign.................................. 7
----------------------
Section 2.05. Liability of the Servicer or Issuer; Indemnities........ 8
------------------------------------------------
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.01. Appointment of the Servicer; Subservicer................ 8
----------------------------------------
Section 3.02. Servicing and Collection Responsibilities............... 10
-----------------------------------------
Section 3.03. Remittance of Funds to Lockbox Account.................. 10
--------------------------------------
Section 3.04. Foreclosure of Timeshare Interests...................... 11
----------------------------------
Section 3.05. Servicing Fee........................................... 11
-------------
Section 3.06. Modifications........................................... 12
-------------
Section 3.07. Assumptions............................................. 13
-----------
Section 3.08. Records................................................. 13
-------
Section 3.09. No Offset............................................... 13
---------
Section 3.10. Indemnification; Third Party Claims..................... 13
-----------------------------------
Section 3.11. Errors and Omissions and Fidelity Coverage.............. 14
------------------------------------------
Section 3.12. Independent Contractor.................................. 15
----------------------
ARTICLE IV
STATEMENTS AND REPORTS
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 4.01. Servicing and Collection Reports........................ 15
--------------------------------
Section 4.02. Accountant's Reports.................................... 16
--------------------
Section 4.03. Annual Summary.......................................... 17
--------------
Section 4.04. Tax Returns and Reports................................. 17
-----------------------
ARTICLE V
SERVICER ADVANCES
Section 5.01. Servicer Advances....................................... 17
-----------------
ARTICLE VI
VOLUNTARY TERMINATION AND SUBSTITUTION BY SERVICER
Section 6.01. Voluntary Termination by Servicer....................... 18
---------------------------------
Section 6.02. Voluntary Substitution or Repurchase.................... 18
------------------------------------
ARTICLE VII
DEFAULT
Section 7.01. Servicer Events of Default.............................. 18
--------------------------
Section 7.02. Rights Cumulative....................................... 21
-----------------
Section 7.03. Directions by Trustee................................... 21
---------------------
ARTICLE VIII
RESERVED
ARTICLE IX
TERMINATION
Section 9.01. Termination; Survival................................... 21
---------------------
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01. Amendment............................................... 22
---------
Section 10.02. Severability of Provisions.............................. 22
--------------------------
Section 10.03. Notice.................................................. 22
------
Section 10.04. Binding Effect; Assignees............................... 23
-------------------------
Section 10.05. Headings................................................ 23
--------
Section 10.06. Non-Waiver.............................................. 24
----------
Section 10.07. Counterparts............................................ 24
------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 10.08. Unenforceability......................................... 24
----------------
Section 10.09. Time is of the Essence................................... 24
----------------------
Section 10.10. CHOICE OF LAW: JURISDICTION: VENUE AND WAIVER
---------------------------------------------
OF JURY TRIAL............................................ 24
-------------
Section 10.11. NO LIABILITY TO PURCHASERS............................... 26
--------------------------
Section 10.12. Reliance by Issuer....................................... 26
------------------
Section 10.13. Third Party Beneficiaries................................ 26
-------------------------
Section 10.14. Equitable Relief......................................... 26
----------------
Section 10.15. Waiver of Punitive Damages............................... 26
--------------------------
Section 10.16. General Interpretive Principles.......................... 26
-------------------------------
</TABLE>
Exhibit "A" Form of Servicer Report
iii
<PAGE>
SERVICING AGREEMENT
THIS SERVICING AGREEMENT ("AGREEMENT") is made as of July 31, 1998 among
---------
VISTANA 1998-A TIMESHARE MORTGAGE CORP. ("Issuer"), a Delaware corporation, and
------
VCH PORTFOLIO SERVICES, INC. ("Servicer"), a Florida corporation, as servicer
--------
hereunder.
W I T N E S S E T H:
A. WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Issuer, as transferee, intends to enter into Transfer Agreements
with one or more Originators pursuant to which the Issuer will purchase all of
each Originator's right, title and interest in, to and under certain Mortgage
Loans, Instruments, other Mortgage Documents and any proceeds and income of the
foregoing (the "Receivables Collateral");
----------------------
B. WHEREAS, simultaneously with the execution and delivery of this
Agreement, Issuer intends to enter into an Indenture (the "Indenture") dated as
---------
of July 31, 1998 with Norwest Bank Minnesota, National Association ("Trustee")
-------
pursuant to which Issuer will pledge to Trustee, the Collateral (as defined
therein);
C. WHEREAS, the Servicer has agreed to service the Collateral;
D. WHEREAS, Issuer and the Servicer wish to prescribe the manner of the
management, servicing and control of the Collateral;
THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties hereinafter set forth, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.
-----------
Capitalized terms used herein but not otherwise defined shall have the
meanings assigned in the Indenture, or, if not defined therein, in the
respective Transfer Agreements.
"Agreement" means this Servicing Agreement, and any and all amendments,
---------
restatements or modifications hereof and any and all supplements hereto.
"Foreclosure Property" as defined in Section 3.04 hereof.
--------------------
<PAGE>
"Mortgaged Properties" means the Timeshare Interests which secure the
--------------------
Mortgage Loans.
"Points Mortgage Loans" means the Mortgage Loans conveyed by Points of
---------------------
Colorado, Inc. to Issuer.
"Servicer" means, initially, VCH in its capacity as the servicer of the
--------
Mortgage Loans under this Agreement and, thereafter, any successor servicer
pursuant to Sections 2.02(b), 2.04 or 7.01 hereof.
"Servicer Advances" as defined in Section 5.01 hereof.
-----------------
"Servicer Report" means the report provided by the Servicer to the Trustee
---------------
and the Bank on each Determination Date pursuant to Section 4.01(a) hereof and
the accompanying Officer's Certificate also described in that Section in the
form attached hereto as Exhibit "A".
"Servicing Officer": any officer of the Servicer involved in, or
-----------------
responsible for, the administration and servicing of the Mortgage Loans whose
name appears on a certified list (each such list, a "Servicing Officer List") of
----------------------
servicing officers furnished to Issuer, the Trustee and the Bank by the
Servicer, as such list may be amended or supplemented by Servicer from time to
time.
"Servicing Officer List" as defined in the definition of Servicing Officer
----------------------
above.
"VCH" means VCH Portfolio Services, Inc., a Florida corporation.
---
"VDI Mortgage Loans" means those Mortgage Loans conveyed by Vistana
------------------
Development, Inc. to Issuer.
Section 1.02. Usage of Terms.
--------------
With respect to all terms in this Agreement, words importing any gender
include the other genders; references to "writing" include printing, typing,
lithography, and other means of reproducing words in a visible form; the
singular shall include the plural and the plural shall include the singular and
the term "including" means including without limitation.
Section 1.03. Section References.
------------------
All section references, unless otherwise indicated, shall be to Sections of
this Agreement.
2
<PAGE>
ARTICLE II
REPRESENTATIONS, WARRANTIES AND
CERTAIN COVENANTS OF THE SERVICER
Section 2.01. Representations, Warranties and Certain Covenants of the
--------------------------------------------------------
Servicer.
- --------
The Servicer represents and warrants as of the Closing Date, and covenants
to Issuer, the Bank and the Trustee for the benefit of the Noteholders that:
(a) The Servicer is, and at all times during the term of this Agreement
will be, a Florida corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its organization; and is, and at
all times during the term of this Agreement will be, duly qualified to do
business as a corporation and in good standing under the laws of each
jurisdiction where the character of its property, the nature of its business or
the performance of its obligations under this Agreement makes such qualification
necessary except where the failure to be so qualified will not have a Material
Adverse Effect.
(b) The Servicer holds, and at all times during the term of this Agreement
will hold, all material licenses, approvals, certificates, franchises and
permits from all Governmental Authorities in all jurisdictions necessary for the
conduct of its business and has received no notice of and has no Knowledge of
proceedings relating to the revocation of any such license, approval,
certificate, franchise or permit, which singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect.
(c) The Servicer has, and at all times during the term of this Agreement
will have, full power and authority to own its properties, to conduct its
business, to execute and deliver this Agreement and all documents and
transactions contemplated under this Agreement and to perform all of its
obligations under this Agreement, the Lockbox Agreement and any other documents
or transactions contemplated hereunder or thereunder. Servicer shall at all
times maintain adequate staff, facilities and systems to perform Servicer's
obligations under this Agreement.
(d) This Agreement and all other documents and instruments required or
contemplated hereby to be executed and delivered by the Servicer have been duly
authorized, executed and delivered by the Servicer and, assuming the due
execution and delivery by the other party or parties hereto and thereto,
constitute legal, valid and binding agreements of the Servicer enforceable
against the Servicer in accordance with their respective terms subject, as to
the enforcement of remedies, to bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforceability of creditors'
rights generally applicable in the event of the bankruptcy, insolvency or
reorganization of the Servicer and to general principles of equity.
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(e) The execution, delivery and performance by the Servicer of this
Agreement and any other documents and transactions in connection herewith to
which the Servicer is party do not and will not (i) violate any of the
provisions of the organizational documents of the Servicer, (ii) violate any
provision of any law or any order, governmental rule or regulation of any
Governmental Authority currently in effect applicable to the Servicer or its
properties or by which the Servicer or its properties may be bound or affected,
(iii) violate any judgment, decree, writ, injunction, award, determination or
order currently in effect applicable to the Servicer or its properties or by
which the Servicer or its properties are bound or affected where such violation
would have a Material Adverse Effect, (iv) conflict with, or result in a breach
of, or constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, any of the provisions of any indenture,
mortgage, deed of trust, contract or other instrument to which the Servicer is a
party or by which it is bound which would have a Material Adverse Effect 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) No consent, approval, order or authorization by, and no filing with or
notice to, any Governmental Authority in respect of the Servicer is required in
connection with the authorization, execution, delivery or performance by the
Servicer of this Agreement or any of the other documents or transactions
contemplated hereunder.
(g) The Servicer is not in default beyond any applicable period of notice
or grace, under any agreement for borrowed money or any other agreement,
contract, instrument or indenture to which the Servicer is a party or by which
it or its properties is or are bound, or with respect to any order of any
Governmental Authority, in any of the above events, which would have a Material
Adverse Effect.
(h) There is no pending or, to Servicer's Knowledge, threatened action,
suit, proceeding or investigation before any Governmental Authority against or
affecting the Servicer or any of Servicer's Affiliates which, if decided
adversely, would materially and adversely affect (i) the condition (financial or
otherwise), business or operations of the Servicer, (ii) the ability of the
Servicer to perform its obligations under, or the validity or enforceability of,
this Agreement, any other Document, or any other documents or transactions
contemplated hereunder or thereunder, (iii) any Mortgaged Property or title of
any Mortgagor to any Mortgaged Property or (iv) the Bank's or the Trustee's
ability to foreclose or otherwise enforce the liens of the Mortgage Loans
(subject to the provisions of the Reimbursement Agreement or the Indenture, as
the case may be).
(i) With respect to any Mortgage Loan, the Servicer has neither taken nor
omitted to take, and has to its Knowledge no notice that the related
Association, the related Mortgagor or Issuer has taken (or omitted to take), any
action that would impair or invalidate the coverage provided by any hazard
insurance, title insurance or other insurance policy relating to such Mortgage
Loan or the related Mortgaged Property.
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(j) The Servicer shall cause to be taken such actions as are reasonably
necessary from time to time to preserve and protect the Trustee's and the Bank's
interest in the Mortgage Loans as directed in writing by the Bank and the
Trustee, including the making of notations on records.
(k) The Servicer's servicing of, and collection practices with respect to,
the Mortgage Loans in accordance with the Servicing Standards have been, prior
to the Closing Date with respect to the VDI Mortgage Loans, and, will be after
the Closing Date with respect to all the Mortgage Loans, in compliance with all
applicable laws in all material respects. Reference is made to the Transfer
Agreement dated the date hereof between Points of Colorado, Inc. and Issuer with
respect to the servicing of, and collection practices with respect to, the
Points Mortgage Loans prior to the Closing Date.
(l) The Servicer shall take all actions necessary and commit adequate
resources to assure that its computer-based and other systems are able to
effectively process data, including dates before, on and after January 1, 2000,
without experiencing any Year 2000 Problem that could cause a Material Adverse
Effect. At the request of either the Trustee or the Bank, the Servicer will
provide the Bank and the Trustee with assurances and substantiation (including
the results of internal or external audit reports prepared in the ordinary
course of business) reasonably acceptable to the Bank and the Trustee as to the
capability of Servicer to conduct its business and operations before, on and
after January 1, 2000 without experiencing a Year 2000 Problem causing a
Material Adverse Effect.
(m) The Servicer is not an "investment company" or a company "controlled"
by an "investment company" with the meaning of the Investment Company Act of
1940, as amended or subject to regulation under the Interstate Commerce Act.
(n) The Servicer has not dealt with any broker, investment banker, agent or
any other Person who is entitled to any commission, fee, or any other
compensation in connection with the issuance of the Notes to be issued on the
Closing Date or other transactions contemplated thereby other than the Placement
Agent and others for whom appropriate provisions have been made pursuant to the
Documents.
(o) All federal, state, local and foreign tax returns, reports and
statements required to be filed by Servicer have been filed with the appropriate
Governmental Authority except where failure to file will not have a Material
Adverse Effect, and all material charges and other impositions shown thereon to
be due and payable by Servicer have been paid prior to the date on which any
fine, penalty, interest or late charge may be added thereto for nonpayment
thereof other than those charges the Servicer is protesting in good faith and
has set aside adequate reserves therefore in accordance with GAAP.
(p) At the request of the Bank, the Trustee or any Significant Noteholder,
the Servicer will report to the Trustee and the Bank whether any real estate
taxes and assessments or
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insurance on the Units or Timeshare Projects common areas and related amenities
have been paid in full.
(q) Servicer shall present for recording within two (2) Business Days after
the Closing Date each of the Assignment of Mortgages from Vistana Timeshare
Mortgage Corp. to VTM Corp., from VTM Corp. to Vistana Development,Inc., from
Vistana Development, Inc. to Issuer, from Points of Colorado, Inc. to Issuer and
from Issuer to Trustee and each UCC Financing Statement related to each of the
foregoing and shall cause each of such Assignment of Mortgages to be recorded
and each such UCC Financing Statement to be filed within thirty (30) days after
the Closing Date. Servicer shall pay or cause to be paid all recording fees and
taxes in connection with such recordation.
Section 2.02. Existence; Status as Servicer; Merger.
-------------------------------------
(a) Except as otherwise permitted by Section 2.02(b), the Servicer shall
keep in full effect its existence, rights and franchises as a Florida
corporation or, in the case of a successor servicer, corporation, trust, banking
association, partnership, limited liability company or limited liability
partnership, as the case may be, under the laws of the state of its organization
and shall obtain and preserve its qualification to do business as a foreign
corporation or, in the case of a successor servicer, foreign corporation, trust,
banking association, partnership, limited liability company or limited liability
partnership, as the case may be, and has obtained and shall maintain any
necessary state licenses, in each case to the extent necessary to protect the
validity and enforceability of the Mortgage Loans and this Agreement and to
perform its obligations hereunder.
(b) The Servicer shall not consolidate with or merge into any other Person
or convey, transfer or lease substantially all of its assets as an entirety to
any Person unless (i) the Person formed by such consolidation or into which the
Servicer has been merged or the Person which acquires substantially all the
assets of the Servicer and is a business trust, partnership, limited liability
company, limited liability partnership or corporation organized under the laws
of a state in the United States, can lawfully perform the obligations of the
Servicer hereunder and executes and delivers to the Bank and Trustee an
agreement, in form and substance reasonably satisfactory to the Bank and the
Trustee, which contains an assumption by such successor entity of the due and
punctual performance and observance of each covenant, agreement and condition to
be performed or observed by the Servicer under this Agreement and each other
Document to which the Servicer is a party, if any, and all other documents,
instruments and certificates related thereto, (ii) Servicer furnishes to the
Bank and the Trustee an Opinion of Counsel to the effect that such Person is an
entity of the type described in the preceding clause (i) and has assumed the
obligations of Servicer thereunder pursuant to a legal and valid obligation of
such Person, subject to bankruptcy and equity exceptions, and (iii) the ratings
of the Notes will not be qualified, reduced or withdrawn (as evidenced by a
letter from the Rating Agency to the Bank and the Trustee to such effect, which
letter shall be obtained at the expense of the Servicer, without any right to
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reimbursement therefor). Servicer shall give the Rating Agency written notice
of any such merger.
Section 2.03. Performance of Obligations.
--------------------------
(a) Except as provided in this Agreement or the Indenture, neither the
Servicer nor any Affiliate thereof shall take any action or, to the extent
within the Servicer's reasonable control, permit any action to be taken by any
other Person, which would excuse any Person from any of its covenants or
obligations under any Mortgage Loan or under any other instrument or agreement
relating thereto, or which would result in the amendment, hypothecation,
subordination, termination or discharge of, or impair the validity or
effectiveness of, any Mortgage Loan or any such instrument, without the written
consent of the Bank, Trustee and Issuer and without prior notice to the Rating
Agency.
(b) Upon Servicer obtaining actual Knowledge or written notice of the
failure of the Issuer to enforce any purchase or repurchase obligations of
either Originator under the applicable Transfer Agreement, including
notification of such breach by the Bank, Servicer shall, at the request of the
Trustee or Bank, enforce any such obligation and cause to be deposited in the
Collection Account in accordance with the provisions of Section 304(b) of the
Indenture, the Mortgage Purchase Price received from, or on behalf of, the
applicable entity with respect to such purchase or repurchase obligation.
Section 2.04. Servicer Not to Resign.
----------------------
(a) The Servicer shall not resign from the duties and obligations hereby
imposed on it under this Agreement unless and until (i) a new servicer,
acceptable to the Issuer, the Trustee, the Class A Majority, the Class B
Majority and the Bank, enters into an agreement, in form and substance
satisfactory to the Trustee, the Class A Majority, the Class B Majority and the
Bank, which contains an assumption by such successor servicer of the due and
punctual performance and observance of each covenant and condition to be
performed or observed by the Servicer under this Agreement from and after the
date of assumption, (ii) the Issuer, the Trustee, the Class A Majority, the
Class B Majority and the Bank consent to the assumption of the duties,
obligations and liabilities of this Agreement by such successor Servicer, such
consent not to be unreasonably withheld, provided, that the successor Servicer
need not be acceptable to the Issuer, and the consent of the Issuer shall not be
so required pursuant to the preceding clauses (i) and (ii), if prior to such
resignation a predecessor Servicer which was a Vistana Transaction Entity or any
Affiliate thereof was removed as Servicer pursuant to Article VI, and (iii) the
ratings of the Notes will not be qualified, reduced or withdrawn (as evidenced
by a letter from the Rating Agency to the Bank and the Trustee to such effect,
which letter shall be obtained at the expense of the Servicer, without any right
to reimbursement). Upon the resignation or termination of the Servicer, the
Servicer shall deliver to the successor Servicer all documents, statements,
records, funds and accounts held by it under this Agreement and shall execute
and deliver such instruments and do such
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other things as may be reasonably required to fully transfer its rights, powers,
duties and obligations.
(b) Except as provided in subsection (a) above or elsewhere in this
Agreement, or as provided with respect to the survival of indemnifications
herein, the duties and obligations of the Servicer under this Agreement shall
continue until this Agreement shall have been terminated as provided herein. The
duties and obligations of Servicer hereunder shall survive the exercise by the
Trustee of any right or remedy under this Agreement or the enforcement by the
Trustee or the Bank or any Noteholder of any provision of this Agreement, the
Reimbursement Agreement or the Indenture, as the case may be.
Section 2.05. Liability of the Servicer or Issuer; Indemnities.
------------------------------------------------
(a) The Servicer shall be liable in accordance herewith only to the extent
of the obligations specifically undertaken by the Servicer under this Agreement.
Such obligations shall include the indemnification set forth in Section 3.10
hereof.
(b) Reference is made to Section 3.10 for Servicer's indemnification
obligations.
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.01. Appointment of the Servicer; Subservicer.
----------------------------------------
(a) The Servicer shall service and administer the Mortgage Loans on behalf
of Issuer, the Bank, the Trustee and the Noteholders in accordance with the
terms of this Agreement and the respective Mortgage Loans and, to the extent
consistent with such terms, in conformity with the Servicing Standards. To the
extent consistent with the foregoing, the Servicer shall also seek to maximize
the timely and complete recovery of principal and interest on the Instruments.
Subject only to the Servicing Standards, applicable law and the terms of the
Documents, the respective Mortgages and Instruments, the Servicer shall have
full power and authority to do or cause to be done any and all things in
connection with such servicing and administration which it may deem necessary or
desirable. Without limiting the generality of the foregoing, the Servicer is
hereby authorized and empowered by Issuer to execute and deliver on behalf of
Issuer, any and all financing statements, continuation statements and other
documents or instruments necessary to maintain or perfect the lien of the
Mortgage on each Mortgaged Property and the Indenture on each Mortgage Loan and
any other related Collateral; and any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Mortgage Loans and the Mortgaged
Properties. The Servicer shall service and administer the Mortgage Loans in
accordance with applicable law and in conformity with the Servicing
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Standards to the extent not inconsistent therewith and shall provide to the
Mortgagors any reports required to be provided to them thereby. The Issuer shall
furnish to the Servicer any powers of attorney and other documents necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties hereunder.
(b) (i) The Servicer may enter into agreements (provided such agreements
would not result in a withdrawal or a downgrading of any rating or otherwise
adversely affecting the interests of any Noteholders) with subservicers for the
servicing and administration of the Mortgage Loans and for the performance of
any and all other activities of the Servicer hereunder; provided, that each of
the Trustee, the Holders, the Bank and the Rating Agency receive prior written
notice of any such agreement and each of the Trustee and the Bank approve such
agreement in writing prior to execution thereof. Each subservicer shall be an
entity that engages in the business of servicing mortgage loans and shall be
authorized to transact business in the state in which the related Mortgaged
Properties it is to service are situated if and to the extent required by
applicable law to enable the subservicer to perform its obligations hereunder
and under any such agreement. Each subservicer shall be required to service the
Mortgage Loans in accordance with this Agreement.
(ii) Notwithstanding any provision to the contrary in any Document or
in any agreement with a subservicer, any of the provisions of this Agreement
relating to agreements or arrangements between the Servicer and a subservicer or
reference to actions taken through a subservicer or otherwise, the Servicer
shall remain obligated and primarily liable to Issuer, the Bank, Trustee and the
Holders for the servicing and administering of the Mortgage Loans in accordance
with the provisions of this Agreement without diminution of such obligation or
liability by virtue of such agreements or arrangements or by virtue of
indemnification from the subservicer and to the same extent and under the same
terms and conditions as if the Servicer alone were servicing and administering
the Mortgage Loans. No delegation by the Servicer to a subservicer shall
release the Servicer from the responsibilities or liabilities arising under this
Agreement. For purposes of this Agreement, the Servicer shall be deemed to have
received payments on Mortgage Loans when the subservicer, if any, has received
such payments. The Servicer shall be entitled to enter into any agreement with
a subservicer for indemnification of the Servicer by such subservicer and
nothing contained in this Agreement shall be deemed to limit or modify such
indemnification.
(iii) In those cases, if any, where a subservicer is servicing a
Mortgage Loan, the subservicer will be required to deposit all collections in
respect of the Mortgage Loans into the Collection Account or the Lockbox Account
in accordance with the terms and conditions of the Documents, including Section
3.03 hereof. In those cases where a subservicer is servicing Mortgage Loans, the
Servicer shall cause the subservicer to perform its duties as if it were the
Servicer hereunder with respect to the Mortgage Loans.
(iv) Any subservicing agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a subservicer
in its capacity
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as such shall be deemed to be between the subservicer and the Servicer alone,
and Issuer, the Bank, the Custodian, any Trustee and any Noteholders shall not
be deemed parties thereto and shall have no claims, right, obligations, duties
or liabilities with respect to the subservicer except as may be expressly set
forth herein. The Servicer shall be solely liable for all fees owed by it to any
subservicer, irrespective of whether the Servicer's compensation pursuant to
this Agreement is sufficient to pay such fees. Notwithstanding the foregoing,
each subservicing agreement entered into by the Servicer shall provide that a
successor Servicer shall have the option to terminate such subservicing
agreement without the payment of any fees should the original Servicer be
terminated or resign.
(c) The Servicer acknowledges that all monies (other than Miscellaneous
Amounts, Misdirected Payments or Late Fees) received with respect to, and all
Mortgage Documents pertaining to, the Mortgage Loans and the Foreclosure
Properties, which monies and documents from time to time come into the
possession of the Servicer, are part of the Collateral Granted to the Trustee by
Issuer under the Indenture, and the Servicer agrees to act as agent and bailee
of Issuer, the Bank and the Trustee in holding such monies and documents, as
well as any other items constituting a part of the Collateral which from time to
time come into the possession of the Servicer, in accordance with the provisions
of this Agreement and the Indenture. It is intended that, by the Servicer's
agreement pursuant to this Section 3.01(c), the Trustee, as a secured party,
shall be deemed to have possession of such monies, such Mortgage Documents and
such other items for purposes of Section 9-305 of the Uniform Commercial Code of
the applicable state.
Section 3.02. Servicing and Collection Responsibilities. The Servicer
-----------------------------------------
shall, on behalf of the Trustee, undertake collection of all payments due under
each Mortgage Loan in accordance with the Servicing Standards and Servicer's
obligations hereunder.
Section 3.03. Remittance of Funds to Collection Account and Lockbox
-----------------------------------------------------
Account.
- -------
(a) Subject to Section 3.03(b), on a daily basis not later than the second
Business Day following the receipt thereof, the Servicer shall cause to be
deposited (x) in the Collection Account any Mortgage Purchase Price received by
Servicer, and (y) in the Lockbox Account, the following payments and collections
received by Servicer on or after the applicable Transfer Date:
(i) all Scheduled Payments received from or on behalf of Mortgagors
(except to the extent of interest accrued prior to the Transfer Date);
(ii) any Prepayment (other than any payment of a Mortgage Purchase
Price); and
(iii) any other amounts required to be paid for deposit into the
Lockbox Account as mandated by the Documents.
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(b) The Servicer shall promptly remit to the appropriate party the portion
of such payments described in Section 3.03(a) representing Miscellaneous
Amounts, it being understood that such Miscellaneous Amounts need not be
deposited in the Lockbox Account or the Collection Account, and may be retained
by the Servicer or applied on behalf of Mortgagors, as the case may be;
provided, that the Servicer shall remit portions of Miscellaneous Amounts
constituting Association fees to the Association. To the extent that during any
Collection Period any Miscellaneous Amounts or other amounts not constituting
funds to be deposited in the Collection Account for any Payment Date have been
deposited in the Lockbox Account, the Servicer may request that Trustee withdraw
such amounts from the Lockbox Account or Collection Account in accordance with
the provisions of Section 304(c) of the Indenture, and apply such amounts in
accordance with this Section 3.03 and the Servicer's normal servicing
procedures. Servicer may retain any Late Fees.
Section 3.04. Foreclosure of Timeshare Interests. In the event that a
----------------------------------
Defaulted Mortgage Loan shall not be substituted or repurchased as permitted
pursuant to the Indenture, then Servicer shall promptly institute collection
procedures, which may include foreclosure proceedings or a deed in lieu of
foreclosure, all in accordance with the Servicing Standards and the Documents.
Upon obtaining title to a Timeshare Interest (a "Foreclosure Property"), the
--------------------
Servicer shall promptly attempt to resell such Foreclosure Property either
through a local real estate broker or an Originator. Issuer acknowledges that
an Originator may be in the best position to remarket the Foreclosure Property
in connection with such Originator's overall marketing program for the
applicable Timeshare Project. The Servicer shall select the remarketing option
reasonably anticipated to produce the highest net cash recovery, after giving
effect to the gross price obtainable, any broker's commission, foreclosure cost,
sales and marketing expenses and other factors. Upon resale of the Foreclosure
Property, the proceeds thereof, net of the foreclosure, remarketing expenses
and, during any period of ownership of the Foreclosure Property by Issuer or the
Trustee, carrying costs (including association maintenance fees and assessments
and real property taxes) incurred by the Servicer with respect to such Mortgage
Loan and/or Foreclosure Property, will be deposited in the Collection Account
and applied to the Instrument Principal Balance of the Defaulted Instrument for
further distribution in accordance with the Indenture. The Servicer covenants
to the Trustee, each Holder and the Bank that there shall be no adverse
selection by Servicer or its Affiliates in the remarketing of Foreclosure
Properties. To the extent that any foreclosure and remarketing expenses are
incurred in the remarketing of the Foreclosure Properties, such foreclosure and
remarketing expenses shall be reasonably consistent with those expenses
historically incurred by the Servicer or Affiliates of Servicer in the marketing
of Timeshare Interests.
Section 3.05. Servicing Fee.
-------------
(a) As compensation for the performance of its obligations hereunder, the
Servicer shall receive the Servicing Fee. The Servicing Fee will be disbursed by
the Trustee on the Payment Date related to the applicable Collection Period out
of funds held in the Collection
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Account for distribution by the Trustee on such Payment Date, subject to the
payment priorities set forth in Section 301 of the Indenture.
(b) The Servicing Fee is compensation to the Servicer for performing the
functions of a third party servicer of similar types of contracts, including
collecting and posting all payments, responding to inquiries of Mortgagors on
the Instruments, investigating delinquencies, sending payment coupons to
Mortgagors, reporting tax information to Mortgagors, paying costs of collection
and disposition of defaults and maintaining the Collateral. The Servicing Fee
is also compensation to the Servicer for administering the Mortgage Loans,
accounting for collections and furnishing statements to the Trustee, if any,
with respect to distributions. The Servicing Fee also reimburses the Servicer
for taxes imposed upon it by reason of its participation in the transaction,
accounting fees, outside auditor fees, data processing costs and other costs
incurred in connection with administering the Instruments.
(c) All costs of servicing (other than Servicer Advances, which are
reimbursable as provided in Section 301 of the Indenture) the Mortgage Loans in
the manner required by this Agreement shall be borne by the Servicer, but the
Servicer shall be entitled to retain, out of any amounts actually recovered with
respect to any Mortgage Loans, the Servicer's actual out-of-pocket expenses paid
to third parties reasonably incurred with respect to such Mortgage Loan. In
addition, the Servicer shall be entitled to receive on each Payment Date any
unreimbursed Nonrecoverable Advances or Servicer Advances with respect to any
Defaulted Instrument as provided in Section 301 of the Indenture.
Section 3.06. Modifications.
-------------
Notwithstanding anything to the contrary in this Agreement or in the
Indenture, none of the Originators, Issuer or the Servicer shall, without the
written consent of the Trustee (acting on the instructions of the Class A
Majority and the Class B Majority), the Bank and the Rating Agency, modify,
waive or amend the terms of any Mortgage Loan (except with respect to Upgrades
and Wraparound Mortgages) unless (x) default on such Mortgage Loan has occurred
or is imminent or (y) such modification, amendment or waiver shall not (i)
reduce the Mortgage Loan Coupon Rate on, reduce the principal amount of,
lengthen the maturity of, or lengthen the timing of payments of interest and
principal in respect of, such Mortgage Loan, (ii) materially impair the
Timeshare Interest underlying such Mortgage Loan, (iii) reduce materially the
likelihood that payments of interest and principal on such Mortgage Loan shall
be made when due, (iv) have a Material Adverse Effect or (v) cause the Mortgage
Loan to cease to be an Eligible Mortgage Loan. Mortgage Loans modified pursuant
to clause (x) above shall constitute Substitute Mortgage Loans solely for the
purposes of Section 1201(a)(1)(ii) of the Indenture.
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Section 3.07. Assumptions.
-----------
In connection with any transfer of ownership of a Mortgaged Property by a
Mortgagor to another Person, the Servicer shall not consent to the assumption by
such Person of the Mortgage Loan related to such Mortgaged Property, except (i)
in the event the withholding of such consent is not permitted under the
applicable Mortgage Documents or applicable law or governmental regulations or
(ii) in conformity with the Servicing Standards in order to prevent the imminent
default of such Mortgage Loan. In connection with any such assumption, the
Mortgage Loan Coupon Rate borne by, the maturity date of, the principal amount
of, the timing of payments of principal and interest in respect of, and all
other material terms of, the related Mortgage Loan shall not be changed.
Section 3.08. Records.
-------
The Servicer shall maintain all data (including computerized tapes or
disks) relating directly to or maintained in connection with the servicing of
the Mortgage Loans (which data and records shall be clearly marked to reflect
that the Mortgage Loans have been sold to Issuer and constitute property Granted
to the Trustee) at the address of the Servicer set forth in Section 10.03 hereof
or, upon fifteen (15) days' prior written notice to the Trustee and the Bank, at
such other place where any Servicing Officer of the Servicer is located, and
shall give the Bank, the Trustee, any Significant Noteholder or their respective
authorized agents access to all such information at all reasonable times,
provided, however, that if a Servicer Event of Default or, in the Bank's or
Trustee's good faith and reasonable business judgment, an Incipient Default,
shall have occurred and be continuing, such access shall be without prior
notice.
Section 3.09. No Offset.
---------
Prior to the termination of this Agreement, the obligations of the Servicer
under this Agreement shall not be subject to any defense, counterclaim or right
of offset which the Servicer has or may have against the Trustee or the Bank,
whether in respect of this Agreement, the Indenture or the Reimbursement
Agreement, as the case may be, any Mortgage Loan or otherwise.
Section 3.10. Indemnification; Third Party Claims.
-----------------------------------
(a) The Servicer agrees to indemnify and hold Issuer, the Bank and the
Trustee and any Noteholders harmless against any and all claims, losses,
penalties, fines, forfeitures, reasonable attorneys' fees and related costs
(including, but not limited to, any such fees and costs incurred in bankruptcy,
receivership or similar proceedings), judgments and any other costs, fees and
expenses that such Person(s) may sustain because of the (a) failure of the
Servicer or subservicer to service the Mortgage Loans or otherwise perform its
obligations and duties hereunder in compliance with the terms of this Agreement,
or because of any act
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or omission by the Servicer or subservicer in connection with its maintenance
and custody of any funds, documents and records under this Agreement or its
release thereof other than in accordance with this Agreement or (b) breach of
any representation or warranty of Servicer in this Agreement, in both cases,
except to the extent that such cost, expense, loss, claim, damage, or liability:
(i) shall be due to the willful misfeasance, bad faith, or gross negligence of
the Trustee or Bank; (ii) relates to any tax other than the taxes with respect
to which the Servicer is required to indemnify the Issuer, the Bank, the Trustee
or the Noteholders; or (iii) shall be one as to which a party other than the
Issuer is required to indemnify the Bank or the Trustee. The Servicer shall
immediately notify the Issuer, the Bank, and the Trustee in writing, if such a
claim is made by a third party with respect to the Mortgage Loans, and assume,
with the prior written consent of the Bank and Trustee, the defense of any such
claim and pay all expenses in connection therewith, including counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be entered
against the Bank, the Trustee or any Noteholder. The indemnity in this Section
shall survive the termination of this Agreement and the appointment of any
successor Servicer.
(b) Indemnification under this Section shall include reasonable fees and
expenses of counsel and expenses of litigation, and appeals therefrom
(including, but not limited to, any such fees and costs incurred in bankruptcy,
receivership or similar proceedings). If the Servicer shall have made any
indemnity payments to the Bank, the Trustee or any Noteholder pursuant to this
Section and such recipient thereafter shall collect any of such payments from
others, such recipient shall repay such amounts to the Servicer with interest to
the extent and at the rate collected (which interest shall not be an expense of
the Bank, any Trustee or any Noteholder). The indemnifications under this
Section 3.10 shall survive the termination of this Agreement and the appointment
of any successor Servicer.
Section 3.11. Errors and Omissions and Fidelity Coverage.
------------------------------------------
The Servicer shall maintain, at its own expense, a blanket fidelity bond
and an errors and omissions insurance policy, with broad form coverage with
responsible companies on all officers, employees or other persons acting on
behalf of the Servicer in any capacity with regard to funds, money, documents
and papers relating to the Collateral. Any such fidelity bond and errors and
omissions insurance shall protect and insure the Servicer against losses,
including forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts of such persons and shall be maintained in a form and amount that
would meet the requirements of prudent timeshare mortgage servicers. No
provision of this Section 3.11 requiring such fidelity bond and errors and
omissions insurance shall diminish or relieve the Servicer from its duties and
obligations as set forth in this Agreement. The Servicer shall be deemed to
have complied with this provision if one of its respective Affiliates has such
fidelity bond and errors and omissions policy coverage and, by the terms of such
fidelity bonds and errors and omission policy, the coverage afforded thereunder
extends to the Servicer. The Servicer shall cause each and every sub-servicer
for it to maintain a policy of insurance covering errors and
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omissions and a fidelity bond which would meet such requirements. Upon request
of the Trustee or the Bank, the Servicer shall cause to be delivered to the
Trustee and the Bank a certification evidencing coverage under such fidelity
bond and insurance policy. Any such fidelity bond or insurance policy shall not
be cancelled or modified in a materially adverse manner without ten days' prior
written notice to the Trustee, the Bank and the Rating Agency.
Section 3.12. Independent Contractor.
----------------------
The relationship of the Servicer and any subservicer (and of any successor
to the Servicer or any subservicer as servicer or subservicer, respectively,
under this Agreement) to Issuer under this Agreement is intended by the parties
to be that of an independent contractor and not that of a joint venturer,
partner or agent.
ARTICLE IV
STATEMENTS AND REPORTS
Section 4.01. Servicing and Collection Reports.
--------------------------------
(a) Not later than 10:00 a.m. Eastern Time on each Determination Date, the
Servicer shall deliver the Servicer Report to the Bank, the Trustee, Back-Up
Servicer and Issuer. The Servicer Report shall be completed with the
information specified therein for the related Collection Period, shall contain
updated information as to the Mortgage Loans and shall contain such other
information as may be reasonably requested by the Bank, the Trustee, the Rating
Agency or Issuer in writing at least five (5) Business Days prior to such
Determination Date. Each such Servicer Report shall be accompanied by, or shall
incorporate, an Officer's Certificate executed by a Servicing Officer certifying
(i) the accuracy of the computations reflected in such Servicer Report and (ii)
that the representations and warranties in this Agreement are true and correct
as of the date of such Servicer Report except as set forth therein. Issuer, the
Trustee or the Bank shall give the Servicer, the Custodian, Issuer, the Trustee
and the Bank prompt notice of any manifest errors appearing in the Servicer
Report of which it has Knowledge or of any failure to have timely received such
report and request that such Servicer Report be corrected or delivered, as
applicable. The failure of any such party to give any such notice shall not be
deemed to be a waiver of any of Servicer's obligations. The Servicer shall
immediately correct such errors and furnish a revised or new Servicer Report to
the Bank, the Trustee and Issuer. With respect to any Servicer Report due on a
Determination Date, the Servicer's obligation to deliver the Servicer Report in
accordance with this Section 4.01(a) shall not be discharged until it has
delivered a correct and complete Servicer Report. Issuer agrees to provide to
the Servicer such information as the Servicer reasonably requests for purposes
of preparing the
15
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Servicer Reports. The Servicer Report delivered to Back-up Servicer shall
include Servicer's monthly data tape.
(b) Within ten (10) Business Days after the written request of the
Custodian, the Trustee, any Significant Holder or the Bank, the Servicer shall
furnish to the Custodian, the Trustee and the Bank a list of all Mortgage Loans
then held as part of the Collateral, together with a reconciliation of such list
to the Instrument Schedule (as then revised, if applicable) and to each of the
Servicer Reports furnished before such request indicating any removal of
Mortgage Loans from the Collateral.
(c) Within one hundred twenty (120) days after the end of each calendar
year and/or within ten (10) Business Days after the written request of the
Trustee, the Servicer shall deliver an Officer's Certificate, executed by at
least one Servicing Officer, to Issuer, Trustee and the Bank (i) that the
Servicing Officer signing such Certificate has reviewed the relevant terms of
this Agreement and has made, or caused to be made under such Servicing Officer's
supervision, a review of the activities of the Servicer during the period
covered by the statements then being furnished, (ii) that the review has not
disclosed the existence of any Servicer Event of Default or, if the Servicer
Event of Default exists, describing its nature and what action the Servicer has
taken and is taking with respect thereto and (iii) that on the basis of such
review the Servicing Officer signing such certificate is of the opinion that
during such period the Servicer has serviced the Mortgage Loans in compliance
with the required procedures except as described in such certificate.
Section 4.02. Accountant's Reports.
--------------------
Within one hundred twenty (120) days after the end of each calendar year,
Servicer shall deliver to the Bank, the Trustee, and the Rating Agency, a
separate report, prepared by a firm of independent accountants of recognized
national standing selected by the Servicer, to the effect that (i) such
independent accountants have examined certain documents and records (including
computer records) and servicing procedures of the Servicer relating to the
Mortgage Loans, (ii) they have examined the most recent Servicer Report prepared
by the Servicer and three other Servicer Reports chosen at random by such firm
and compared such Servicer Reports with the information contained in such
documents and records, (iii) their examination included such tests and
procedures as they considered necessary in the circumstances, (iv) their
examinations and comparisons described under clauses (i) and (ii) above
disclosed no exceptions which, in their opinion, were material, or, if any such
exceptions were disclosed thereby, setting forth such exceptions which, in their
opinion, were material, (v) on the basis of such examinations and comparison,
such firm is of the opinion that the Servicer has, during the relevant period,
serviced the Mortgage Loans in compliance with this Agreement in all material
respects and that such documents and records have been maintained in accordance
with this Agreement in all material respects, except in each case for (a) such
exceptions as such firm shall believe to be immaterial and (b) such other
exceptions as shall be set forth in such written report. The report will also
indicate that such firm is
16
<PAGE>
independent of the Servicer within the meaning of the Tax Code of Professional
Ethics of the American Institute of Certified Public Accountants. In the event
such firm requires the Trustee to agree to the procedures performed by such
firm, the Servicer shall direct the Trustee in writing to so agree, it being
understood and agreed that Trustee will deliver such letter of agreement in
conclusive reliance upon the direction of the Servicer, and the Trustee shall
not make any independent inquiry or investigation as to, and shall have no
obligation or liability in respect of, the sufficiency, validity or correctness
of such procedures. Trustee's execution of such letter of agreement shall in no
way reduce or diminish Servicer's obligations hereunder.
Section 4.03. Annual Summary. Within one hundred and twenty (120) days
--------------
after the end of each calendar year, the Servicer shall furnish, at the expense
of the Servicer, to the Trustee, the Bank, the Rating Agency and each Person who
at any time during such calendar year shall have been a Noteholder, a statement
containing the information set forth in the Servicer Report, aggregated for such
calendar year or such portion thereof during which such Person was a Noteholder
and based on the relevant Servicer Reports, and such other information as the
Servicer or such Person determines (without duplication of any information
required to be provided to the Servicer and such Person pursuant to Section
4.04) is reasonably necessary for the preparation of such Person's federal,
state and local income tax return in respect of the Notes for such calendar year
or, in the event such Person shall have been a Noteholder during a portion of
such calendar year, for the applicable portion of such year.
Section 4.04. Tax Returns and Reports.
-----------------------
The Servicer shall prudently prepare and file, or cause to be prepared and
filed, all federal, state and local tax and information returns and reports as
may be required from time to time to be filed by or in respect of the Issuer.
In this regard, the Servicer shall prudently prepare and file, or cause to be
prepared and filed the Internal Revenue Service Form 1099 and any other tax
reports or information required under federal or state tax laws. The foregoing
tax statements and reports shall be prepared or reviewed by accountants
reasonably acceptable to the Trustee and the Bank.
ARTICLE V
SERVICER ADVANCES
Section 5.01. Servicer Advances. The Servicer shall make monthly advances
-----------------
on each Determination Date by deposit into the Collection Account for delinquent
Scheduled Payments that Servicer reasonably deems to be recoverable from the
Mortgagor ("Servicer Advances").
-----------------
17
<PAGE>
ARTICLE VI
VOLUNTARY TERMINATION AND SUBSTITUTION BY SERVICER
Section 6.01. Voluntary Termination by Servicer. On any Payment Date
---------------------------------
succeeding a Collection Period at the end of which the Aggregate Instrument
Principal Balance, is ten percent (10%) or less of the Initial Aggregate
Instrument Principal Balance, the Servicer may purchase all of, but not less
than all of, the Instruments comprising Collateral on such Payment Date provided
that the Servicer shall deposit in the Collection Account an amount equal to the
Mortgage Purchase Price of all Instruments constituting Collateral as of such
Payment Date. To exercise such option, the Servicer shall notify the Issuer,
Trustee, Rating Agency and Bank in writing of such election not later than
thirty (30) days preceding such Payment Date (such date, a "Notice Date") and
-----------
shall deposit such Mortgage Purchase Prices into the Collection Account on or
before the Business Day prior to the related Payment Date.
Section 6.02. Voluntary Substitution or Repurchase. Servicer shall have
------------------------------------
the right, but not the obligation, to purchase or substitute Mortgage Loans
pursuant to Section 1201 of the Indenture.
ARTICLE VII
DEFAULT
Section 7.01. Servicer Events of Default.
--------------------------
If any one of the following events ("Servicer Events of Default") shall
--------------------------
occur and be continuing:
(a) Any failure by the Servicer to deposit in or credit to the Lockbox
Account or Collection Account any amount required under this Agreement to be so
deposited or credited by the Servicer and such failure continues unremedied for
two Business Days;
(b) Any failure by the Servicer (i) to deliver a Servicer Report within
three (3) Business Days after such report is due in accordance with Section
4.01(a) hereof or (ii) to deliver a Servicer Report when due on more than three
(3) occasions in any calendar year;
(c) Any failure by the Servicer to be in compliance with (i) Section
2.01(b) hereof or (ii) any other provision of this Agreement other than as set
forth in Section 7.01(a) above, which can be cured by the payment of money, in
either case, only following the earlier of (A) ten (10) days after receipt of
written notice thereof from any of the Trustee, the Rating Agency, the Back-Up
Servicer or Bank or (B) twenty (20) days after Servicer otherwise obtains
Knowledge thereof.
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<PAGE>
(d) Any failure by the Servicer to deliver, at Servicer's expense, an
independent accountant's report in accordance with Section 4.02 hereof, which
non-delivery shall continue unremedied for ten (10) Business Days after receipt
by Servicer from either the Trustee or the Bank of written notice of such
default;
(e) Reserved.
(f) Any failure by the Servicer duly to observe or to perform in any
material respect any other covenants or agreements of the Servicer set forth in
this Agreement, other than those set forth in subparagraphs (a), (b), (c) and
(d) of this Section 7.01, or any other Document to which it is a party, which
failure shall have continued for a period of thirty (30) Business Days after the
earlier of (A) written notice thereof shall have been given to the Servicer by
the Bank or the Trustee or (B) the date Servicer otherwise obtains Knowledge
thereof, and if such default or violation cannot be cured by Servicer within
such thirty (30) Business Days and Servicer has been, in the good faith and
reasonable commercial judgment of the Trustee and the Bank, as determined by the
Trustee (acting at the direction of a Majority of Holders in their sole
discretion) and the Bank in its sole discretion, diligent in attempting to
effect cure, within such additional period not to exceed an additional ten (10)
Business Days as may be required by Servicer proceeding diligently to effect
cure;
(g) The entry of a decree or order for relief by a court or regulatory
authority having jurisdiction in respect of the Servicer in an involuntary case
under the federal bankruptcy laws, as now or hereafter in effect, or any other
present or future federal or state bankruptcy, insolvency, rehabilitation or
similar law; the appointment of a conservator, receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Servicer in
respect of any substantial part of the Servicer's property, or the entering of
an order for the winding up or liquidation of the affairs of the Servicer and
the continuance of any such decree or order unstayed and in effect for a period
of sixty (60) consecutive days, or the commencement of an involuntary case under
the federal bankruptcy laws with respect to the Servicer which within sixty (60)
days of the date of commencement shall not be contested by the Servicer in good
faith by appropriate proceedings;
(h) The commencement by the Servicer of a voluntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future
federal or state bankruptcy, insolvency, rehabilitation or similar law, or the
consent by the Servicer to the appointment of or the taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Servicer or of any substantial part of the Servicer's
property, or the making by the Servicer of an assignment for the benefit of
creditors, or the failure by the Servicer generally to pay its debts as such
debts become due or the taking of corporate action by the Servicer in
furtherance of any of the foregoing;
(i) Any representation, warranty or statement of the Servicer made in this
Agreement or any certificate, report or other writing delivered pursuant hereto
or in
19
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connection herewith shall prove to be incorrect in any material respect as of
the time when the same shall have been made, and the incorrectness of such
representation, warranty or statement has, in the judgement of the Majority of
Holders, the Bank or the Trustee, a Material Adverse Effect and within thirty
(30) days after the earlier of (A) written notice thereof shall have been given
to the Servicer by the Bank or the Trustee or (B) the Servicer otherwise obtains
Knowledge of such inaccuracy, the circumstances or condition in respect of which
such representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured (whether by substitution, repurchase or otherwise,
in the case of a particular Mortgage Loan) in all material respects; or
(j) Any Indenture Event of Default occurs and is continuing.
then, and in each and every case, so long as such Servicer Event of Default
shall not have been remedied, the Trustee, acting at the direction of the
Majority of Holders, or the Bank (with a copy to the Trustee) may by written
notice to the Servicer terminate all of the rights and obligations of the
Servicer under this Agreement and in and to the Mortgage Loans and the proceeds
thereof. On or after the receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Agreement, whether with respect
to the Mortgage Loans or otherwise, shall pass to and be vested in the Trustee
(or such other Person who shall be designated as the successor Servicer in
accordance with the provisions of Section 501 of the Indenture) pursuant to and
under this Section 7.01 and Section 501 of the Indenture; and, without
limitation, the Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate, to effect the purposes of such notice of
termination. The Servicer shall fully and promptly cooperate with the Trustee
in effecting the termination of the responsibilities and rights of the Servicer
under this Agreement, including the transfer to the Trustee or other successor
Servicer for administration by it of all cash amounts which at the time are or
would be required to be deposited by the Servicer in the Collection Account or
the Lockbox Account, as the case may be, and the subsequent transfer of any
other such amounts thereafter received with respect to any and all Mortgage
Loans. In addition, upon the Servicer's receipt of notice of termination
pursuant to this Section 7.01, the Servicer shall, promptly upon the demand, and
in any event no later than five (5) Business Days after delivery of such demand
of the Trustee, deliver to the Trustee or other successor Servicer all data
(including computerized records) necessary for the servicing of the Mortgage
Loans. In addition to delivering such monies and data, the Servicer shall use
its best efforts to effect the orderly and efficient transfer of the servicing
of the Mortgage Loans to the Trustee or other successor Servicer, including
directing Mortgagors to remit all payments in respect of the Mortgage Loans to
an account or address designated by the Trustee or such new servicer, as the
case may be.
Section 7.02. Rights Cumulative.
-----------------
20
<PAGE>
Issuer shall have the right, in its own name, to take all actions now or
hereafter existing at law, in equity or by statute to enforce its rights and
remedies hereunder and to protect the interests of Issuer, the Bank, the Trustee
and any Noteholder hereunder (including the institution and prosecution of
judicial, administrative and other proceedings and the filings of proofs of
claim and debt in connection therewith). All rights and remedies from time to
time conferred upon or reserved to Issuer, the Bank, the Trustee or any
Noteholder are cumulative, and none is intended to be exclusive of another or
any right or remedy which any such Persons may have at law or in equity. No
delay or omission in insisting upon the strict observance or performance of any
provision of this Agreement, or in exercising any right or remedy, shall be
construed as a waiver or relinquishment of such provision, nor shall it impair
such right or remedy. Every right and remedy may be exercised from time to time
and as often as deemed expedient.
Section 7.03. Directions by Trustee.
---------------------
The Trustee may direct the time, method and place of conducting any
proceeding for any remedy available to Issuer under this Agreement, such
direction to be with the consent of the Bank and/or requisite Holders to the
extent such consent is provided for elsewhere in this Agreement or the other
Documents; provided, however, that Issuer shall have the right to decline to
follow any such direction if Issuer, in accordance with an Opinion of Counsel
addressed to and delivered to each of the Bank and the Trustee, determines that
the action or proceeding so directed would involve it in personal liability
beyond Issuer's obligations under the Indenture and the Documents to which it is
a party or be unjustly prejudicial to any nonassenting Noteholder.
ARTICLE VIII
RESERVED
ARTICLE IX
TERMINATION
Section 9.01. Termination; Survival.
---------------------
All covenants, agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement. This Agreement shall
terminate upon discharge of the Indenture in accordance with its terms,
provided, however, that any obligation that either the Issuer or the Servicer
may have hereunder to indemnify any Person shall survive such termination.
21
<PAGE>
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01. Amendment.
---------
(a) This Agreement may not be amended without the prior written consent of
the Bank, the Trustee, the Class A Majority and the Class B Majority and the
Rating Agency, provided, however, that no amendment will be effective without
the signatures of the parties hereto thereto and provided, further, that the
Trustee shall grant its consent only in accordance with those same terms and
conditions that shall govern the Trustee's ability to consent pursuant to the
Indenture.
(b) It shall be necessary for the consent of the Bank, the Trustee, the
Class A Majority and the Class B Majority and the Rating Agency to approve the
particular form of any proposed amendment or consent, and it shall not be
sufficient if such consent shall approve the substance thereof only.
Section 10.02. Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions, or terms of
this Agreement shall be held invalid for any reason whatsoever, then, to the
extent permitted by law, such covenants, agreements, provisions, or terms shall
be deemed severable from the remaining covenants, agreements, provisions, or
terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or any other Document
or of the rights of the Trustee, the Holders or the Bank thereunder.
Section 10.03. Notice.
------
Any notice required or permitted to be given hereunder by any party hereto
to another Person shall be in writing and shall be (a) personally delivered, (b)
sent by overnight express carrier, or (c) sent by telecopy, to such person at
its address and/or telecopy number as set forth below, or at such other address
and/or telecopy number as such person may designate for such purpose in a notice
given to the sending party. Such notice shall be deemed to have been duly given
upon receipt.
22
<PAGE>
The Servicer: VCH Portfolio Services, Inc.
8801 Vistana Centre Drive
Orlando, Florida 32821
Attn: President
Telephone: (407) 239-3100
Telecopy: (407) 239-3198
With a Copy to: VCH Portfolio Services, Inc.
701 Brickell Avenue, Suite 2100
Miami, Florida 33131
Attn: Susan Werth, Esq.
Telephone: (305) 577-3150
Telecopy: (305) 374-7159
The Bank, Issuer
Trustee, Rating Agency
and Holders: As provided in the Indenture
Section 10.04. Binding Effect; Assignees.
-------------------------
(a) This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
Notwithstanding anything to the contrary contained herein, except as expressly
provided in this Agreement, the respective rights and obligations of Issuer and
the Servicer under this Agreement may not be assigned by Issuer or the Servicer
without the prior written consent of the Trustee, the Class A Majority, the
Class B Majority and the Bank except that the rights, title and interest of
Issuer hereunder may be pledged to the Trustee as permitted in accordance with
the terms of, and as contemplated by, the Indenture.
(b) All the covenants of Servicer and all the rights and remedies of Issuer
contained in the Documents shall bind Servicer and its permitted successors and
assigns, and shall inure to the benefit of Issuer, the Trustee, the Holders and
the Bank, and their respective permitted successors and assigns, whether so
expressed or not.
(c) Any permitted successor to, or assignee of, the Trustee under the
Indenture, shall be the successor to, or assignee of, the Trustee, respectively,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 10.05. Headings.
--------
23
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All headings are inserted for convenience only and shall not affect any
construction or interpretation of this Agreement.
Section 10.06. Non-Waiver.
----------
No delay or omission to exercise any right, power or remedy accruing to any
party or its permitted assignee upon any breach of any other party under this
Agreement shall impair any such right, power or remedy of such non-breaching
party, nor shall it be construed to be a waiver of any such right, power or
remedy for any present or future breach or default. No modification, variation,
termination, discharge, abandonment or waiver granted or consented to by Issuer
including a waiver of the time of the essence standard, shall be deemed to be an
abandonment of such rights. Any waiver, permit, consent or approval of any kind
under this Agreement, or any waiver on the part of any party of any provision or
condition of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing.
Section 10.07. Counterparts.
------------
This Agreement may be executed in one or more counterparts all of which
together shall constitute one original document.
Section 10.08. Unenforceability.
----------------
If any one or more of the provisions contained in this Agreement shall be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained in this Agreement shall
not in any way be affected or impaired thereby.
Section 10.09. Time is of the Essence.
----------------------
Time is of the essence in the Performance of the Obligations.
Section 10.10. CHOICE OF LAW: JURISDICTION: VENUE AND WAIVER OF JURY
-----------------------------------------------------
TRIAL.
- -----
THE PARTIES HERETO HEREBY IRREVOCABLY AGREE THAT ALL ACTIONS OR PROCEEDINGS
ARISING DIRECTLY, INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO
OR FROM THIS AGREEMENT SHALL BE LITIGATED, AT TRUSTEE'S SOLE DISCRETION AND
ELECTION, ONLY IN COURTS HAVING A SITUS WITHIN THE COUNTY OF NEW YORK, STATE OF
NEW YORK. THE PARTIES HERETO HEREBY CONSENT AND SUBMIT TO THE JURISDICTION OF
ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID COUNTY AND STATE. SERVICER
HEREBY IRREVOCABLY APPOINTS AND
24
<PAGE>
DESIGNATES CT CORPORATION SYSTEM, WHOSE ADDRESS IS C/O CT CORPORATION SYSTEM,
1633 BROADWAY, NEW YORK, NEW YORK 10019, AS ITS DULY AUTHORIZED AGENT FOR
SERVICE OF LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH PROCESS UPON SUCH PARTY
SHALL CONSTITUTE PERSONAL SERVICE OF PROCESS UPON SERVICER PROVIDED, THAT A COPY
OF SUCH PROCESS BE DELIVERED TO SERVICER PURSUANT TO THE PROVISIONS OF SECTION
10.03 ABOVE. IN THE EVENT SERVICE IS UNDELIVERABLE BECAUSE SUCH AGENT MOVES OR
CEASES TO DO BUSINESS IN NEW YORK, NEW YORK, OR THE TRUSTEE OR BANK WISHES TO
HAVE A DIFFERENT AGENT, SERVICER SHALL, WITHIN TEN (10) DAYS AFTER TRUSTEE'S OR
BANK'S REQUEST APPOINT A SUBSTITUTE AGENT IN NEW YORK CITY, NEW YORK ON ITS
BEHALF AND WITHIN SUCH PERIOD NOTIFY THE TRUSTEE AND THE BANK OF SUCH
APPOINTMENT. IF SUCH SUBSTITUTE AGENT IS NOT TIMELY APPOINTED, THE TRUSTEE
SHALL, IN ITS SOLE DISCRETION, HAVE THE RIGHT TO DESIGNATE A SUBSTITUTE AGENT
UPON FIVE (5) BUSINESS DAYS NOTICE TO EACH PARTY HERETO AND THE BANK. EACH
PARTY HERETO HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE
OF ANY LITIGATION BROUGHT AGAINST IT BY THE TRUSTEE, THE BANK OR ANY NOTEHOLDER
ON THE LOAN DOCUMENTS IN ACCORDANCE WITH THIS PARAGRAPH.
EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS
AGREEMENT OR ANY OF THE OTHER DOCUMENTS. THIS WAIVER IS KNOWINGLY, INTENTIONALLY
AND VOLUNTARILY MADE BY EACH PARTY HERETO, AND EACH PARTY HERETO ACKNOWLEDGES
THAT NONE OF TRUSTEE, BANK OR ANY PERSON ACTING ON BEHALF OF ANY THEREOF HAS
MADE ANY REPRESENTATIONS OF FACT TO INCLUDE THIS WAIVER OF TRIAL BY JURY OR HAS
TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE PARTIES
HERETO ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS
AGREEMENT, THAT THE PARTIES HERETO, THE TRUSTEE AND THE BANK HAVE ALREADY RELIED
ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER DOCUMENTS AND THAT
EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE
DEALINGS. THE PARTIES HERETO FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED
IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT
LEGAL COUNSEL.
THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE
PRINCIPLES
25
<PAGE>
THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA.
Section 10.11. NO LIABILITY TO PURCHASERS.
---------------------------
EXCEPT AS REQUIRED BY LAW OR THE SERVICING STANDARDS, SERVICER WILL NOT, AT
ANY TIME, USE THE NAME OF OR MAKE REFERENCE TO THE ISSUER, THE TRUSTEE, THE
NOTEHOLDERS OR THE BANK WITH RESPECT TO THE TIMESHARE PROJECTS, THE SALE OF
TIMESHARE INTERESTS OR OTHERWISE, WITHOUT THE EXPRESS WRITTEN CONSENT OF THE
BANK, THE NOTEHOLDERS OR THE TRUSTEE, SUCH CONSENT NOT TO BE UNREASONABLY
WITHHELD.
Section 10.12. Reliance by Issuer.
------------------
All representations, warranties, covenants and agreements made by the
Issuer and the Servicer herein, in the other Documents or in any other
agreement, document, instrument or certificate delivered by or on behalf of the
Issuer or the Servicer under or pursuant to the Documents shall be considered to
have been relied upon by the Bank, the Trustee and the Noteholders and shall
survive the delivery to the Trustee and the Bank of such Documents.
Section 10.13. Third Party Beneficiaries.
-------------------------
No third party shall be a beneficiary hereof other than the Bank and
Trustee (for the benefit of the Noteholders) and the Noteholders.
Section 10.14. Equitable Relief
----------------
Servicer recognizes that, in the event it fails to perform, observe or
discharge any of its obligations or liabilities under this Agreement, any remedy
at law may prove to be inadequate relief to Issuer, therefore, the parties
hereto agree that Issuer shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
Section 10.15. Waiver of Punitive Damages.
--------------------------
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT,
SERVICER AGREES THAT IT SHALL NOT SEEK ANY PUNITIVE DAMAGES FROM ISSUER, THE
BANK OR THE TRUSTEE UNDER ANY THEORY OF LIABILITY, INCLUDING ANY THEORY IN TORT.
26
<PAGE>
Section 10.16. General Interpretive Principles.
-------------------------------
For purposes of this Agreement except as otherwise expressly provided or
unless the context otherwise requires:
(a) the terms defined in this Agreement have the meanings assigned to them
in this Agreement and include the plural as well as the singular, and the use of
any gender herein shall be deemed to include the other gender;
(b) accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date hereof;
(c) references herein to "Articles", "Sections", "Subsections",
"paragraphs", and other subdivisions without reference to a document are to
designated Articles, Sections, Subsections, paragraphs and other subdivisions of
this Agreement;
(d) a reference to a Subsection without further reference to a Section is a
reference to such Subsection as contained in the same Section in which the
reference appears, and this rule shall also apply to paragraphs and other
subdivisions;
(e) the words "herein", "hereof", "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular provision;
and
(f) the term "include" or "including" shall mean without limitation by
reason of enumeration.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their respective names, personally or by their duly authorized
representatives as of the date above written.
VISTANA 1998-A TIMESHARE MORTGAGE CORP., as Issuer
By: /s/
------------------------------------------
Name: Susan Werth
Title: Senior Vice President - Law
VCH PORTFOLIO SERVICES, INC., as Servicer
By: /s/
------------------------------------------
Name: Susan Werth
Title: Senior Vice President - Law
28
<PAGE>
Exhibit "A"
Form of Servicer Report
29
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Consolidated Balance Sheet, Consolidated Statement of Operations and
Consolidated Statement of Cash Flows included in the Company's Form 10-Q for the
period ending September 30, 1998 (unaudited), and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 44,211
<SECURITIES> 0
<RECEIVABLES> 208,930
<ALLOWANCES> 17,388
<INVENTORY> 47,931
<CURRENT-ASSETS> 0
<PP&E> 39,585
<DEPRECIATION> 9,663
<TOTAL-ASSETS> 437,573
<CURRENT-LIABILITIES> 0
<BONDS> 210,644
0
0
<COMMON> 212
<OTHER-SE> 137,442
<TOTAL-LIABILITY-AND-EQUITY> 437,573
<SALES> 127,485
<TOTAL-REVENUES> 172,176
<CGS> 28,362
<TOTAL-COSTS> 149,316
<OTHER-EXPENSES> 5,200
<LOSS-PROVISION> 9,433
<INTEREST-EXPENSE> 8,925
<INCOME-PRETAX> 24,319
<INCOME-TAX> 9,241
<INCOME-CONTINUING> 15,078
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,078
<EPS-PRIMARY> .71
<EPS-DILUTED> .70
</TABLE>
